UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
Commission File Number: 0-19822
LITCHFIELD FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3023928
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
430 MAIN STREET, WILLIAMSTOWN, MA 01267
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 458-1000
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
As of August 9, 1999, there were 6,984,166 shares of common stock of
Litchfield Financial Corporation outstanding.
FORM 10-Q
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 1999
<CAPTION> INDEX
<S> <C>
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements................................. 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.................................... 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................... 23
Item 2. Changes in Securities and Use of Proceeds............ 23
Item 3. Defaults Upon Senior Securities...................... 23
Item 4. Submission of Matters to a Vote of Security Holders.. 23
Item 5. Other Information.................................... 24
Item 6. Exhibits and Reports on Form 8-K..................... 38
SIGNATURES........................................................ 40
</TABLE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LITCHFIELD FINANCIAL CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
<CAPTION> June 30, December 31,
1999 1998
-------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents...................... $ 21,983 $ 10,537
Restricted cash................................ 27,598 27,898
Loans held for sale, net ...................... 13,351 19,750
Other loans, net .............................. 219,944 191,292
Retained interests in loan sales, net ......... 32,603 28,883
Other.......................................... 25,110 15,522
-------- --------
Total assets............................. $340,589 $293,882
======== ========
LIABILITIES, COMMITMENTS AND STOCKHOLDERS' EQUITY
Liabilities:
Lines of credit............................. $ 62,012 $ 49,021
Accounts payable and other liabilities...... 8,741 9,812
Dealer/developer reserves................... 9,365 9,979
Deferred income taxes....................... 9,086 8,388
Long-term notes............................. 133,897 134,588
-------- --------
Total liabilities........................ 223,101 211,788
-------- --------
Commitments:
Litchfield Obligated Mandatorily Redeemable
Preferred Securities of Trust Subsidiary
Holding Debentures of Litchfield.......... 26,200 ---
Stockholders' equity:
Preferred stock, $.01 par value; authorized
1,000,000 shares, none issued and
outstanding............................... --- ---
Common stock, $.01 par value; authorized
12,000,000 shares, 6,983,366 shares issued
and outstanding in 1999 and 6,886,329
shares issued and outstanding in 1998..... 70 69
Additional paid in capital.................. 59,644 58,040
Accumulated other comprehensive income...... 3,352 1,250
Retained earnings........................... 28,222 22,735
-------- --------
Total stockholders' equity............... 91,288 82,094
-------- --------
Total liabilities, commitments and
stockholders' equity..................... $340,589 $293,882
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except share and per share amounts)
Unaudited
<CAPTION> Three Months Ended June 30,
1999 1998
-------- ------
<S> <C> <C>
Revenues:
Interest and fees on loans................... $8,477 $6,055
Gain on sale of loans........................ 4,262 3,452
Servicing and other income................... 533 466
------ ------
13,272 9,973
------ ------
Expenses:
Interest expense............................. 4,724 3,695
Salaries and employee benefits............... 1,438 1,147
Other operating expenses..................... 1,061 916
Provision for loan losses.................... 500 460
------ ------
7,723 6,218
------ ------
Income before income taxes and distributions on 5,549 3,755
preferred securities............................
Provision for income taxes...................... 2,137 1,446
Distributions on preferred securities (net of tax 205 ---
benefit of $128)................................ ------ ------
Net income...................................... $3,207 $2,309
====== ======
Earnings per common share amounts:
Basic ....................................... $ .46 $ .40
Diluted ..................................... $ .45 $ .38
Weighted average number of shares:
Basic ....................................... 6,908,145 5,754,018
Diluted ..................................... 7,186,471 6,117,832
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Income
(In thousands, except share and per share amounts)
Unaudited
<CAPTION> Six Months Ended June 30,
1999 1998
<S> <C>
Revenues:
Interest and fees on loans................... $16,364 $11,288
Gain on sale of loans........................ 6,879 5,679
Servicing and other income................... 1,104 959
------- -------
24,347 17,926
------- -------
Expenses:
Interest expense............................. 9,352 6,692
Salaries and employee benefits............... 2,704 2,280
Other operating expenses..................... 2,039 1,869
Provision for loan losses.................... 1,000 810
------- -------
15,095 11,651
------- -------
Income before income taxes and distributions on
preferred securities......................... 9,252 6,275
Provision for income taxes...................... 3,562 2,416
Distributions on preferred securities (net of
tax benefit of $128)......................... 205 ---
------ ------
Net income...................................... $5,485 $3,859
====== ======
Earnings per common share amounts:
Basic ....................................... $ .80 $ .68
Diluted ..................................... $ .76 $ .64
Weighted average number of shares:
Basic ....................................... 6,897,411 5,706,887
Diluted ..................................... 7,189,488 6,069,164
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statement of Stockholders' Equity
(In thousands, except share amounts)
Unaudited
<CAPTION> Accumulated
Additional Other
Common Paid In Comprehensive Retained
Stock Capital Income Earnings Total
----- ------- ------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31,1998.... $69 $58,040 $1,250 $22,735 $82,094
Issuance of 101,583
shares of common stock.... 1 1,681 --- --- 1,682
Retirement of 4,546
shares of treasury stock.. --- (77) --- --- (77)
Other comprehensive
income, net of tax....... --- --- 2,102 --- 2,102
Tax benefit from stock
options exercised........ --- --- --- 2 2
Net income................. --- --- --- 5,485 5,485
----- ------- ------ ------- --------
Balance, June 30, 1999. $70 $59,644 $3,352 $28,222 $91,288
===== ======= ====== ======= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Comprehensive Income
(In thousands)
Unaudited
<CAPTION> Three Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Net income......................................... $3,207 $2,309
Unrealized gain on retained interests in loan
sales, net of tax expense of $299 and $128 for
1999 and 1998, respectively...................... 477 204
------ ------
Comprehensive income............................... $3,684 $2,513
====== ======
</TABLE>
<TABLE>
<CAPTION> Six Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Net income......................................... $5,485 $3,859
Unrealized gain on retained interests in loan
sales, net of tax expense of $1,316 and $113 for
1999 and 1998, respectively...................... 2,102 180
------ ------
Comprehensive income............................... $7,587 $4,039
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
>
<TABLE>
LITCHFIELD FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
<CAPTION> Six Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $ 5,485 $ 3,859
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of loans..................... (6,879) (5,679)
Amortization and depreciation............. 677 484
Amortization of retained interests in loan
sales.................................. 3,605 2,905
Provision for loan losses................. 1,000 810
Deferred income taxes..................... 698 1,327
Net changes in operating assets and
liabilities:
Restricted cash........................ 300 (3,976)
Loans held for sale.................... 4,757 3,879
Retained interests in loan sales....... (4,063) (872)
Dealer/developer reserves.............. (614) (211)
Net change in other assets and
liabilities......................... (1605) 1,723
-------- -------
Net cash provided by operating activities. 3,361 4,249
-------- -------
Cash flows from investing activities:
Net originations, purchases and principal
payments on other loans.................. (60,524) (73,114)
Other loans sold............................. 31,609 25,159
Collections on retained interests in loan
sales.................................... 4,182 1,866
Capital expenditures and other assets........ (1,669) (1,157)
Investments in affiliates.................... (5,618) (235)
------- -------
Net cash used in investing activities..... (32,020) (47,481)
------- -------
Cash flows from financing activities:
Net borrowings on lines of credit............ 12,991 22,424
Payments on term note........................ --- (1,493)
Retirement of long-term notes................ (691) (291)
Proceeds from issuance of preferred
securities................................ 26,200 ---
Purchase and retirement of treasury stock.... (77) ---
Net proceeds from issuance of common stock... 1,682 17,865
------- -------
Net cash provided by financing activities. 40,105 38,505
------- -------
Net increase (decrease) in cash and cash
equivalents.............................. 11,446 (4,727)
Cash and cash equivalents, beginning of period... 10,537 19,295
------- -------
Cash and cash equivalents, end of period......... $21,983 $14,568
======= =======
Supplemental Schedule on Noncash Financing and
Investing Activities:
Exchange of loans for retained interests in
loan sales............................... $ 1,717 $ 529
Transfers from loans to real estate acquired
through foreclosure...................... $ 2,616 $ 1,005
Supplemental Cash Flow Information:
Interest paid................................ $ 9,061 $ 6,053
Income taxes paid............................ $ 3,038 $ 239
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
FORM 10-Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
A. Basis of Presentation
The accompanying unaudited consolidated interim financial statements as
of June 30, 1999 and for the three and six month periods ended June 30, 1999
and 1998, have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six month periods ended June 30, 1999, are not necessarily
indicative of the results expected for the year ending December 31, 1999.
For further information, refer to the consolidated financial statements and
notes thereto included in Litchfield Financial Corporation's annual report on
Form 10-K for the year ended December 31, 1998.
In June, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("Statement No. 133"), "Accounting
for Derivative Instruments and Hedging Activities." Statement No. 133, as
amended by Statement No. 137 issued in June 1999, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with early
adoption permitted as of the beginning of any quarter after the date of
issuance. Statement No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivatives embedded in other
contracts and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions
are met, a derivative may be specifically designated as (a) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or
an unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-denominated
forecasted transaction. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. The provisions of Statement No. 133 can not be applied
retroactively to financial statements of prior periods.
The Company plans to adopt Statement No. 133 in the fiscal quarter
beginning January 1, 2001. At the date of initial application, the Company
must recognize any freestanding derivative instruments in the balance sheet
as either assets or liabilities and measure them at fair value. The Company
shall also recognize offsetting gains and losses on hedged assets,
liabilities, and firm commitments by adjusting their carrying amounts at that
date as a cumulative effect of a change in accounting principal. Whether such
transition adjustment is reported in net income, other comprehensive income,
or allocated between both is based on the hedging relationships, if any, that
existed for that derivative instrument and were the basis for accounting
prior to the application of Statement No. 133. The Company is evaluating the
effect that the implementation of Statement No. 133 will have on its results
of operations and financial position.
B. Gain on Sale of Loans and Retained Interests in Loan Sales
Gains on sales of loans are based on the difference between the allocated
cost basis of the assets sold and the proceeds received, which includes the
fair value of any assets or liabilities that are newly created as a result of
the transaction. The previous carrying amount is allocated between the
assets sold and any retained interests based on their relative fair values at
the date of transfer. Retained interests in transferred assets
FORM 10Q
LITCHFIELD FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
consist primarily of subordinate portions of the principal balance of
transferred assets and interest only strips, which are initially recorded at
fair value.
The Company estimates fair value using discounted cash flow analysis,
since quoted market prices are not readily available. The Company's analysis
incorporates estimates that market participants would be expected to use in
their estimates of future cash flows, including assumptions about interest
rates, defaults and prepayment rates. Estimates made are based on, among
other things, the Company's past experience with similar types of financial
assets. The interest rates paid to investors range from 6.5% to 9.0%. The
prepayment rates were 17.5% for Land Loan sales and 18.0% for VOI Loan
sales. For the Hypothecation Loan sales, the prepayment rates for the
underlying collateral used were 17.5% for Land Loans and 18.0% for VOI
Loans. The Company estimates default rates to be 1.9% on Land Loans, 3.0% on
VOI Loans and 0.5% on Hypothecation Loans. In valuing its retained
interests in loan sales, the Company selects discount rates commensurate with
the duration and risks embedded in the particular assets. Specifically, the
Company uses discount rates ranging from the investor pass-through rates (for
restricted cash) to the Baa corporate bond rate plus 325 basis points (for
interest only strips and retained principal certificates) to estimate the
fair value of its retained interests.
There is no servicing asset or liability arising from loan sales, because
the Company estimates that the benefits of servicing approximate the costs to
meet its servicing responsibilities.
On a quarterly basis, the Company assess the carrying value of retained
interests in loans sold by comparing actual and assumed interest, prepayment
and default rates on a disaggregate basis reflecting factors such as
origination dates and types of loans. The Company adjusts the carrying value
of retained interests accordingly.
Since its inception, the Company has sold $613,426,000 of loans at face
value ($492,960,000 through December 31, 1998). The principal amount
remaining on the loans sold was $275,388,000 at June 30, 1999 and
$238,132,000 at December 31, 1998. The Company guarantees, through
replacement or repayment, loans in default up to a specified percentage of
loans sold. Dealer/developer guaranteed loans are secured by repurchase or
replacement guarantees in addition to, in most instances, dealer/developer
reserves.
The Company's exposure to loss on loans sold in the event of
non-performance by the consumer, the dealer/developer on its guarantee, and
the determination that the collateral is of no value was $18,553,000 at June
30, 1999 ($12,750,000 at December 31, 1998). Such amounts have not been
discounted. The Company repurchased $211,000 and $26,000 of loans under the
recourse provisions of loan sales during the three months ended June 30, 1999
and 1998, respectively. Loans repurchased during the six months ended June
30, 1999 and 1998 were $403,000 and $144,000, respectively, and $491,000
during the year ended December 31, 1998. In addition, when the Company sells
loans through securitization programs, the Company commits either to replace
or repurchase any loans that do not conform to the requirements thereof in
the operative loan sale documents. As of June 30, 1999, $25,547,000 of the
Company's cash was restricted as credit enhancements in connection with
certain securitization programs. To date, the Company has participated
$17,055,000 of A&D and Other Loans ($10,505,000 through December 31, 1998).
The Company's Serviced Portfolio is geographically diversified with
collateral and consumers located in 48 and 50 states, respectively. The
Serviced Portfolio consists of the principal amount of loans serviced by or
on behalf of the Company, except loans participated without recourse to the
Company. At June 30, 1999, 14.5% and 11.2% of the Serviced Portfolio by
collateral location was located in Texas and Florida, respectively, and 16.0%
and 14.2% of the Serviced Portfolio by borrower location were located in
Florida and Texas, respectively. At December 31, 1998, 14.7%, 10.3%, 10.2%
of the Serviced Portfolio by collateral location were located in Texas,
Florida and California, respectively, and 16.1% and 14.4% of the Serviced
Portfolio by borrower location were located in Florida and Texas,
respectively. At June 30, 1999, no other state accounted for more than 10.0%
of the total by either collateral or borrower location.
C. Allowance for Loan Losses and Estimated Recourse Obligations
An analysis of the total allowances for all loan losses and recourse
obligations follows:
<TABLE>
<CAPTION> June 30, December 31,
1999 1998
-------- ----------
<S> <C> <C>
Allowance for losses on loans held for sale... $ 178,000 $ 549,000
Allowance for losses on other loans........... 2,740,000 2,477,000
Estimated recourse obligations on retained
interests in loan sales..................... 4,627,000 3,681,000
---------- ----------
$7,545,000 $6,707,000
========== ==========
</TABLE>
D. Debt
The Company finances a portion of its liquidity needs with secured lines
of credit with eight participating institutions. Interest rates on the
lines of credit range from the Eurodollar or LIBOR rates plus 2.00% to the
prime rate plus 1.00%. The Company is not required to maintain compensating
balances or forward sales commitments under the terms of these lines of
credit.
The lines of credit mature as follows:
<TABLE>
<CAPTION> Date Amount
---------- -----------
<S> <C> <C>
October 1999 $ 40,000,000
March 2000 25,000,000
April 2000 65,000,000
May 2001 5,000,000
------------
$135,000,000
============
</TABLE>
Financial data relating to the Company's secured lines of credit is as
follows:
<TABLE>
<CAPTION> June 30, December 31,
(Dollars in thousands) 1999 1998
-------- ----------
<S> <C> <C>
Lines of credit available .......... $135,000 $116,000
Borrowings outstanding at end
of period ......................... $ 62,012 $ 49,021
Weighted average interest rate
at end of period................... 7.2% 7.6%
Maximum borrowings outstanding
at any month end................... $ 83,500 $ 73,666
Average amount outstanding
during the period.................. $36,344 $ 37,485
Weighted average interest rate
during the period (determined by
dividing interest expense by
average borrowings)................ 7.2 7.9%
</TABLE>
In July 1999, the Company renewed and amended a line of credit to
increase the line from $60,000,000 to $70,000,000 and extended the maturity
to April 2002.
As of June 30, 1999 and December 31, 1998, the Company had no unsecured
lines of credit.
The Company has an additional revolving line of credit and sale facility
as part of an asset backed commercial paper facility with a multi-seller
commercial paper issuer ("Conduit A"). In June 1998, the Company amended
the facility to increase the facility to $150,000,000, subject to certain
terms and conditions. The facility matures in June 2001.
In connection with the facility, the Company formed a wholly-owned
subsidiary, Litchfield Mortgage Securities Corporation 1994, to purchase
loans from the Company. In October 1998, Litchfield Mortgage Securities
Corporation 1994 was merged with and into Litchfield Mortgage Securities
Company 1994, LLC ("LMSC"). LMSC either pledges the loans on a revolving
line of credit with Conduit A or sells the loans to Conduit A. Conduit A
issues commercial paper or other indebtedness to fund the purchase or pledge
of loans from LMSC. Conduit A is not affiliated with the Company or its
affiliates. As of June 30, 1999 and December 31, 1998, the outstanding
balance of the sold or pledged loans securing this facility was $138,040,000
and $137,532,000, respectively. Outstanding borrowings at June 30, 1999 were
$66,000. There were no outstanding borrowings under the line of credit at
December 31, 1998. Interest is payable on the line of credit at an interest
rate based on certain commercial paper rates.
In March 1997, the Company closed an additional revolving line of credit
and sale facility of $25,000,000 with another multi-seller of commercial
paper conduit ("Conduit B"). The facility, which matures in March 2000, is
subject to certain terms and conditions, credit enhancement requirements and
loan eligibility criteria. The outstanding aggregate balance of the loans
pledged and sold under the facility at any time cannot exceed $25,000,000.
In connection with the facility, the Company formed a wholly-owned
subsidiary, Litchfield Capital Corporation 1996, to purchase loans from the
Company. In October 1998, Litchfield Capital Corporation 1996, was merged
with and into Litchfield Capital Company 1996, LLC ("LCC"). LCC either
pledges the loans on a revolving line of credit with Conduit B or sells the
loans to Conduit B. Conduit B issues commercial paper or other indebtedness
to fund the purchase or pledge of loans from LCC. Conduit B is not
affiliated with the Company or its affiliates. As of June 30, 1999 and
December 31, 1998, the outstanding aggregate balance of the loans sold or
pledged under the facility was $14,603,000 and $10,632,000, respectively.
There were no outstanding borrowings under the line of credit as of June 30,
1999 or December 31, 1998. Interest is payable on the line of credit at an
interest rate based on certain commercial paper rates.
The Company also finances a portion of its liquidity with long-term
debt. The following table shows the total long-term debt outstanding at June
30, 1999 and December 31, 1998:
<TABLE>
<CAPTION> June 30, December 31,
1999 1998
<S> <C> <C>
(Dollars in thousands)
9.3% Notes............... $ 20,000 $ 20,000
8.45% Notes due 2002..... 51,247 51,282
8.875% Notes due 2003.... 14,460 15,066
8.25% Notes due 2003..... 10,000 10,000
9.25% Notes due 2003..... 20,000 20,000
10% Notes due 2004....... 18,190 18,240
-------- --------
$133,897 $134,588
======== ========
</TABLE>
The 9.3% Notes require principal reductions of $7,500,000, $6,000,000,
$6,000,000 and $500,000 in March 2001, 2002, 2003 and 2004, respectively.
Interest is payable semiannually in arrears.
The Company shall have the option to redeem all or any portion of the
long-term notes at predetermined redemption prices. The earliest call date
of each issuance is as follows:
9.3% Notes......................... April 1998
8.45% Notes due 2002............... November 1999
8.875% Notes due 2003.............. June 1996
8.25% Notes due 2003............... November 2000
9.25% Notes due 2003............... December 2000
10% Notes due 2004................. April 1998
E. Commitments
On April 14, 1999, the Company, Litchfield Capital Trust I ("Trust I")
and Litchfield Capital Trust II, subsidiaries of the Company and statutory
business trusts created under the Business Trust Act of the State of Delaware
(collectively, the Trusts), filed a Registration Statement on Form S-3, as
amended, with the Securities and Exchange Commission relating to the
registration of $100,000,000 in aggregate principal amount of (i) trust
preferred securities of the Trusts, (ii) junior subordinated debentures of
the Company, and (iii) guarantee of preferred securities of the Trusts by the
Company. In connection with this offering, the Trusts will sell the
preferred securities to the public and common securities to the Company, use
the proceeds from those sales to buy an equivalent principal amount of junior
subordinated debentures issued by the Company and distribute the interest
payments it receives on the junior subordinated debentures to the holders of
preferred and common securities.
On May 19, 1999, Trust I issued 2,500,000 of 10% Series A Trust Preferred
Securities ("Series A Preferred Securities") to the public for $25,000,000 and
used the proceeds to buy an equivalent amount of 10% Series A Junior
Subordinated Debentures due 2029 ("Series A Debentures") from the Company. On
June 8, 1999, the underwriters exercised their option to purchase an additional
120,000 10% Series A Preferred Securities for $1,200,000 and the proceeds were
also used to buy an equivalent amount of Series A Debentures from the company.
The sole assets of the Trust I are the Series A Debentures. The Company owns all
the securities of Trust I that possess general voting rights. The Trust's
obligation under the Series A Preferred Securities are fully and unconditionally
guaranteed by the Company. Trust I will redeem all of the outstanding Series A
Preferred Securities when the Series A Debentures are paid at maturity on June
30, 2029, or otherwise become due. The Company will have the right to redeem
100% of the principal plus accrued interest and unpaid interest on or after June
30, 2004. Interest is paid on the Series A Debentures quarterly, with
corresponding quarterly distributions to the holders of the Series A Preferred
Securities.
F. Derivative Financial Instruments Held for Purposes Other than Trading
The Company entered into two interest rate swap agreements to manage its
basis exposures. The swap agreements involve the payment of interest to the
counterparty at the prime rate on a notional amount of $110,000,000 and the
receipt of interest at the commercial paper rate plus a spread of 277 basis
points on a notional amount of $80,000,000 and the LIBOR rate plus a spread of
267 basis points on notional amount of $30,000,000. The swap agreements
expire in June 2000. There is no exchange of the notional amounts upon which
the interest payments are based.
The differential to be paid or received as interest rates change is
accrued and recognized as an adjustment to interest income from the excess
servicing asset. The related amount receivable from or payable to the
counterparty is included in other assets or other liabilities. The fair
values of the swap agreements are not recognized in the financial statements.
The Company intends to keep the contracts in effect until they mature in June
2000.
The Company entered into an interest rate cap agreement with a bank in
order to manage its exposure to certain increases in interest rates. The
interest rate cap entitles the Company to receive payments, based on an
amortizing notional amount, when commercial paper rates exceed 8.0%. If
payments were to be received as a result of the cap agreement, they would be
accrued as a reduction of interest expense. The notional amount outstanding
at June 30, 1999 was $3,371,000. This agreement expires in July 2005.
The Company does not use interest rate swap agreements or other
derivative instruments for speculation. The Company is exposed to credit
loss in the event of non-performance by the swap counterparty or the cap
provider.
FORM 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking Statements
Except for the historical information contained or incorporated by
reference in this Form 10-Q, the matters discussed or incorporated by
reference herein are forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the risk factors set forth
under "Risk Factors" as well as the following: general economic and business
conditions; industry trends; changes in business strategy or development
plans; availability and quality of management; and availability, terms and
deployment of capital. Special attention should be paid to such
forward-looking statements including, but not limited to, statements relating
to (i) the Company's ability to execute its growth strategies and to realize
its growth objectives and (ii) the Company's ability to obtain sufficient
resources to finance its working capital needs and provide for its known
obligations. Refer to the Company's annual report on Form 10-K for the year
ended 1998 for a complete list of factors as discussed under "Risk Factors".
Overview
Litchfield Financial Corporation (the "Company") is a diversified finance
company that provides financing to creditworthy borrowers for assets not
typically financed by banks. The Company provides this financing by making
loans to businesses secured by consumer receivables or other assets and by
purchasing loans and tax lien certificates.
The Company purchases consumer loans (the "Purchased Loans")
consisting primarily of loans to purchasers of rural and vacation properties
("Land Loans") and vacation ownership interests popularly known as timeshare
interests ("VOI Loans"). The Company also provides financing to rural land
dealers, timeshare resort developers and other finance companies secured by
receivables ("Hypothecation Loans") and to dealers and developers for the
acquisition and development of rural land and timeshare resorts ("A&D
Loans"). In addition, the Company purchases other loans, such as consumer
home equity loans, mortgages and construction loans and tax lien
certificates, and provides financing to other businesses secured by
receivables or other assets ("Other Loans").
The Company extends Hypothecation Loans to land dealers, resort
developers and other finance companies secured by receivables. Hypothecation
Loans typically have advance rates of 75% to 90% of the current balance of
the pledged receivables and variable interest rates based on the prime rate
plus 1.5% to 4%.
The Company also purchases Land Loans and VOI Loans. Land Loans are
typically secured by one to twenty acre rural parcels. Land Loans are
secured by property located in 40 states, predominantly in the southern
United States. VOI Loans typically finance consumer purchases of ownership
interests in fully furnished vacation properties. VOI Loans are secured by
property located in 18 states, predominantly in California and Florida. The
Company requires most dealers or developers from whom it buys loans to
guarantee repayment or replacement of any loan in default. Ordinarily, the
Company retains a percentage of the purchase price as a reserve until the
loan is repaid.
The Company also makes A&D Loans to land dealers and resort developers
for the acquisition and development of rural land and timeshare resorts in
order to finance additional receivables generated by the A&D Loans. At the
time the Company makes A&D Loans, it typically receives an exclusive right to
purchase or finance the related consumer receivables generated by the sale of
the subdivided land or timeshare interests. A&D Loans typically have loan to
value ratios of 60% to 80% and variable interest rates based on the prime
rate plus 2% to 4%.
The principal sources of the Company's revenues are interest and fees on
loans, gains on sales of loans and servicing and other income. Gains on
sales of loans are based on the difference between the allocated cost basis
of the assets sold and the proceeds received, which includes the fair value
of any assets or liabilities that are newly created as a result of the
transaction. Because a significant portion of the Company's revenues is
comprised of gains realized upon sales of loans, the timing of such sales has
a significant effect on the Company's results of operations.
Results of Operations
The following table sets forth the percentage relationship to revenues,
unless otherwise indicated, of certain items included in the Company's
statements of income.
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Interest and fees on loans..... 63.9% 60.7% 67.2% 63.0%
Gain on sale of loans.......... 32.1 34.6 28.3 31.7
Servicing and other income..... 4.0 4.7 4.5 5.3
----- ----- ----- -----
100.0 100.0 100.0 100.0
Expenses
Interest expense............... 35.6 37.0 38.4 37.4
Salaries and employee benefits. 10.8 11.5 11.1 12.7
Other operating expenses....... 8.0 9.2 8.4 10.4
Provision for loan losses...... 3.8 4.6 4.1 4.5
----- ----- ----- -----
58.2 62.3 62.0 65.0
Income before income taxes......... 41.8 37.7 38.0 35.0
Provision for income taxes......... 16.1 14.5 14.6 13.5
Distributions on preferred
securities, net................... 1.5 --- 0.9 ---
----- ----- ----- -----
Net income......................... 24.2% 23.2% 22.5% 21.5%
===== ===== ===== =====
</TABLE>
Revenues increased 33.1% and 35.8% to $13,272,000 and $24,347,000 for the
three and six months ended June 30, 1999, from $9,973,000 and $17,926,000 for
the same periods in 1998. Net income for the three and six months ended June
30, 1999 increased 38.9% and 42.1% to $3,207,000 and $5,485,000 compared to
$2,309,000 and $3,859,000 for the same periods in 1998. Net income as a
percentage of revenues was 24.2% and 22.5% for the three and six months ended
June 30, 1999 compared to 23.2% and 21.5% for the three and six months ended
June 30, 1998. Loan purchases and originations grew 24.5% and 33.0% to
$118,973,000 and $216,964,000 for the three and six months ended June 30,
1999 from $95,585,000 and $163,078,000 for the same periods in 1998. The
average Serviced Portfolio increased 45.7% to $498,853,000 at June 30, 1999
from $342,422,000 at June 30, 1998.
Interest and fees on loans increased 40.0% and 45.0% to $8,477,000 and
$16,364,000 for the three and six months ended June 30, 1999 from $6,055,000 and
$11,288,000 for the same periods in 1998, primarily as the result of the higher
average balance of other loans during the 1999 period, which was only partially
offset by a decrease in the average rate. The average rate earned on the
Serviced Portfolio decreased to 11.3% at June 30, 1999 from 12.2% at June 30,
1998, primarily due to the reduction in the prime rate and the effect of the
growth in Hypothecation Loans as a percentage of the portfolio. Hypothecation
Loan yields are usually less than Land Loan or VOI Loan yields, but servicing
costs and loan losses are generally less as well.
Gain on the sale of loans increased 23.5% and 21.1% to $4,262,000 and
$6,879,000 for the three and six months ended June 30, 1999 from $3,452,000
and $5,679,000 in the same periods in 1998. The volume of loans sold
increased 34.2% and 74.9% to $67,595,000 and $120,466,000 for the three and
six months ended June 30, 1999 from $50,380,000 and $68,882,000 during the
three and six months ended June 30, 1998. The increase in the gain on sale
of loans was not proportionate to the increase in the volume of loans sold
primarily due to variations in the mix of loans sold. The yield on
Hypothecation and Other loan sales is generally lower than the yield on Land
and VOI loan sales. Land and VOI loan sales were $34,494,000 and $50,682,000
for the three and six months ended June 30, 1998 compared to $14,665,000 and
$33,167,000 for the same periods in 1998. Hypothecation and Other loans sold
were $33,101,000 and $69,784,000 for the three and six months ended June 30,
1999 compared to $35,715,000 for the three and six months ended June 30,
1998. Approximately $17,508,000 of loan sales in the three months ended June
30, 1999 consisted of loans that were repurchased from other facilities due
to clean up calls and other factors which made it more economical to
repurchase and resell loans. As a result of the repurchase, there was
recapture of unamortized gain, which reduced the overall yield on these loan
sales.
Servicing and other income increased 14.4% and 15.1% to $533,000 and
$1,104,000 for the three and six months ended June 30, 1999, from $466,000
and $959,000 for the same periods in 1998 largely due to the increase in the
other fee income and prepayment penalties from Hypothecation Loans. Although
loans serviced for others increased 25.3% to $275,388,000 as of June 30, 1999
from $219,809,000 at June 30, 1998, servicing income remained relatively
constant due to an increase in Hypothecation Loans serviced for others and a
decrease in the average servicing fee per loan.
Interest expense increased 27.8% and 39.7% to $4,724,000 and $9,352,000
during the three and six months ended June 30, 1999 from $3,695,000 and
$6,692,000 for the same periods in 1998. The increase in interest expense
primarily reflects an increase in average borrowings which was only partially
offset by lower rates. During the three and six months ended June 30, 1999,
borrowings averaged $212,032,000 and $210,169,000 at an average rate of 8.3%
and 8.3% respectively, as compared to $158,531,000 and $139,503,000 at an
average rate of 8.7% and 8.8% during the same periods in 1998. Interest
expense includes the amortization of deferred debt issuance costs.
Salaries and employee benefits increased 25.4% and 18.6% to $1,438,000
and $2,704,000 for the three and six months ended June 30, 1999 from
$1,147,000 and $2,280,000 for the same periods in 1998 because of an increase
in the number of employees in 1999, primarily related to bringing customer
service and collections in house, and to a lesser extent, an increase in
salaries. Personnel costs as a percentage of revenues decreased to 10.8% and
11.1% for the three and six months ended June 30, 1999 compared to 11.5% and
12.7% for the same periods in 1998. Also, as a percentage of the Serviced
Portfolio, personnel costs remained relatively constant at 1.2% and 1.1% for
the three and six months ended June 30, 1999 compared to 1.2% for the same
periods in 1998. Total salaries and employee benefits plus other operating
expenses as a percentage of revenues decreased to 18.8% and 19.5% for the
three and six months ended June 30, 1999 from 20.7% and 23.1% for the same
periods in 1998.
Other operating expenses increased 15.8% and 9.1% to $1,061,000 and
$2,039,000 for the three and six months ended June 30, 1999 from $916,000 and
$1,869,000 for the same periods in 1998. Other operating expenses increased
due to the growth in the Serviced Portfolio that was only partially offset by
the decrease in third party servicing expenses related to bringing customer
service and collections in-house. As a percentage of revenues, other
operating expenses decreased to 8.0% and 8.4% for the three and six months
ended June 30, 1999 compared to 9.2% and 10.4% for the corresponding periods
in 1998. As a percentage of the Serviced Portfolio, other operating expenses
decreased to 0.9% and 0.8% for the three and six months ended June 30, 1999
from 1.0% and 1.1% for the same periods in 1998.
During the three and six months ended June 30, 1999, the provision for
loan losses increased 8.7% and 23.5% to $500,000 and $1,000,000 from $460,000
and $810,000 for the same periods in 1998 primarily due to the growth of the
Serviced Portfolio.
Liquidity and Capital Resources
The Company's business requires continued access to short and long-term
sources of debt financing and equity capital. The Company's principal cash
requirements arise from loan originations, repayment of debt on maturity and
payments of operating and interest expenses. The Company's primary sources
of liquidity are loan sales, short-term borrowings under secured lines of
credit and long-term debt and equity offerings.
Since its inception, the Company has sold $613,426,000 of loans at face
value ($492,960,000 through December 31, 1998). The principal amount
remaining on the loans sold was $275,388,000 at June 30, 1999 and
$238,132,000 at December 31, 1998. In connection with certain loan sales,
the Company commits to repurchase from investors any loans that become 90
days or more past due. This obligation is subject to various terms and
conditions, including, in some instances, a limitation on the amount of loans
that may be required to be repurchased. There were approximately $18,553,000
of loans at June 30, 1999 which the Company could be required to repurchase
in the future should such loans become 90 days or more past due. The Company
repurchased $211,000 and $403,000 as compared to $26,000 and $144,000 of such
loans under the recourse provisions of loan sales during the three and six
months ended June 30, 1999 and 1998, respectively. As of June 30, 1999,
$25,547,000 of the Company's cash was restricted as credit enhancement for
certain securitization programs. To date, the Company has participated
$17,055,000 of A&D and Other Loans ($10,505,000 through December 31, 1998).
The Company funds its loan purchases in part with borrowings under
various lines of credit. Lines are paid down when the Company receives the
proceeds from the sale of the loans or when cash is otherwise available.
These lines of credit totaled $135,000,000 and $116,000,000 at June 30, 1999
and December 31, 1998, respectively. Outstanding borrowings on these lines
of credit were $62,012,000 at June 30, 1999. Interest rates on these lines
of credit range from the Eurodollar or LIBOR rate plus 2.00% to the prime
rate plus 1.00%. The Company is not required to maintain compensating
balances or forward sales commitments under the terms of these lines of
credit. In July 1999, the Company renewed and amended a line of credit to
increase the line from $60,000,000 to $70,000,000 and extend the maturity to
April 2002.
The Company also finances its loan purchases with two revolving line of
credit and sale facilities as part of asset backed commercial paper
facilities with multi-seller commercial paper issuers. Such facilities
totaled $175,000,000 at June 30, 1999 and December 31, 1998, respectively.
As of June 30, 1999 and December 31, 1998, the outstanding balances of loans
sold or pledged under these facilities were $152,643,000 and $148,164,000,
respectively. Outstanding borrowings under these lines of credit at June
30, 1999 were $66,000. There were no outstanding borrowings under these line
of credit at December 31, 1998. Interest is payable on these lines of
credit based on certain commercial paper rates.
In May 1999, Litchfield Capital Trust I issued 2,500,000 shares of 10%
Series A Trust Preferred Securities ("Series A Preferred Securities") at $10 per
share. The proceeds of the offering were $25,000,000 and were used to buy an
equivalent amount of 10% Series A Junior Subordinated Debentures ("Series A
Debentures") due 2029 issued by the Company. In connection with the
underwriters' option to purchase additional shares to cover over-allotments,
Litchfield Capital Trust I issued an additional 120,000 10% Series A Preferred
Securities in June 1999. The proceeds of these shares totaled $1,200,000 and
were also used to buy an equivalent amount of Series A Debentures issued by the
Company. The Company will have the right to redeem 100% of the principal and
accrued interest and unpaid interest on or after June 30, 2004, or otherwise
become due. Interest is paid on the Series A Debentures quarterly, with
corresponding quarterly distributions to the holders of the Series A Preferred
Securities.
In June 1998, the Company issued 1,000,000 shares of common stock at $19
per share. The net proceeds of the offering were $17,717,000 and were used
to pay down certain lines of credit. In connection with the underwriters'
option to purchase additional shares to cover over-allotments, the Company
issued an additional 166,500 shares in July 1998. Net proceeds of these
shares totaled $2,990,000 and were also used to pay down certain lines of
credit.
The Company also finances its liquidity needs with long-term debt.
Long-term debt totaled $133,897,000 at June 30, 1999 and $134,588,000 at
December 31, 1998.
The Company entered into two interest rate swap agreements. The swap
agreements involve the payment of interest to the counterparty at the prime
rate on a notional amount of $110,000,000 and the receipt of interest at the
commercial paper rate plus a spread and the LIBOR rate plus a spread on
notional amounts of $80,000,000 and $30,000,000, respectively. The swap
agreements expire in June 2000. There is no exchange of the notional amounts
upon which interest payments are based.
The Company entered into an interest rate cap agreement with a bank in
order to manage its exposure to certain increases in interest rates. The
interest rate cap entitles the Company to receive an amount, based on an
amortizing notional amount, which at June 30, 1999 was $3,371,000, when
commercial paper rates exceed 8%. This agreement expires in July 2005.
Historically, the Company has not required major capital expenditures to
support its operations.
Acquisitions
In the third quarter of 1998, the Company acquired 25% of Land Finance
Company ("Land Finance"), a broker specializing in the land business, located in
Atlanta, Georgia. At the time of the transaction, the Company received the
right to acquire additional shares of Land Finance at future dates. On April 1,
1999, the Company acquired the remaining 75% of Land Finance. All of Land
Finance's employees became employees of the Company as of that date. The Company
has accounted for this acquisition by the purchase method. The total purchase
price was $275,000, consisting of the issuance of 9,092 shares of common stock
with a fair value of $155,000 and $120,000 of expenses and assumed liabilities.
The goodwill of $225,000, resulting from the purchase, is being amortized on a
straight line basis over a period of 10 years. The results of operation of Land
Finance have been included in the Company's income statement beginning April 1,
1999.
On June 17, 1999, the Company acquired 100% of Ironwood Acceptance Company,
L.L.C., ("Ironwood LLC"), located in Scottsdale, Arizona. Ironwood LLC
purchases, services and liquidates tax lien certificates. During the fiscal
years 1997 and 1998, the Company provided Ironwood LLC with a Hypothecation Loan
for the purchase of tax lien certificates. All of Ironwood LLC's employees
became employees of the Company following the acquisition. The Company has
accounted for this acquisition by the purchase method. The total purchase price
was $15,833,000, consisting of the issuance of 91,665 shares of common stock
with a fair value of $1,519,000 and $13,523,000 of expenses and assumed
liabilities. The goodwill of $2,938,000, resulting from the purchase, is being
amortized on a straight line basis over a period of 20 years. The results of
operations of Ironwood have been included in the Company's income statement from
June 17, 1999.
Credit Quality and Allowances for Loan Losses
The Company maintains allowances for loan losses and recourse obligations
on retained interests in loan sales at levels which, in the opinion of
management, provide adequately for current and estimated future losses on
such assets. Past-due loans (loans 31 days or more past due which are not
covered by dealer/developer reserves or guarantees) as a percentage of the
Serviced Portfolio as of June 30, 1999, increased to 1.04% from .95% at
December 31, 1998. Management evaluates the adequacy of the allowances on a
quarterly basis by examining current delinquencies, the characteristics of
the accounts, the value of the underlying collateral, and general economic
conditions and trends. Management also evaluates the extent to which
dealer/developer reserves and guarantees can be expected to absorb loan
losses. When the Company does not receive guarantees on loan portfolios
purchased, it adjusts its purchase price to reflect anticipated losses and
its required yield. This purchase adjustment is recorded as an increase in
the allowance for loan losses and is used only for the respective portfolio.
A provision for loan losses is recorded in an amount deemed sufficient by
management to maintain the allowances at adequate levels. Total allowances
for loan losses and recourse obligations on retained interests in loan sales
increased to $7,545,000 at June 30, 1999 compared to $6,707,000 at December
31, 1998. The allowance ratio (the allowances for loan losses divided by the
amount of the Serviced Portfolio) at June 30, 1999 remained relatively
constant at 1.43% as compared to 1.44% at December 31, 1998.
As part of the Company's financing of Purchased Loans, arrangements are
entered into with dealers and resort developers, whereby reserves are
established to protect the Company from potential losses associated with such
loans. As part of the Company's agreement with the dealers and resort
developers, a portion of the amount payable to each dealer and resort
developer for a Purchased Loan is retained by the Company and is available to
the Company to absorb loan losses for those loans. The Company negotiates
the amount of the reserves with the dealers and developers based upon various
criteria, two of which are the financial strength of the dealer or developer
and credit risk associated with the loans being purchased. Dealer/developer
reserves amounted to $9,365,000 and $9,979,000 at June 30, 1999 and December
31, 1998, respectively. The Company generally returns any excess reserves to
the dealer/developer on a quarterly basis as the related loans are repaid by
borrowers.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. As a result, many
companies' software and computer systems may need to be upgraded or replaced
in order to comply with "Year 2000" requirements.
<PAGE>
State of Readiness. The year 2000 readiness process consists of the
following phases: (i) identification of all IT Systems and non-IT Systems;
(ii) assessment of repair or replacement requirements; (iii) repair or
replacement; (iv) testing; (v) implementation; and (vi) creation of
contingency plans in the event of year 2000 failures. The Company has
evaluated the year 2000 readiness of the information technology systems used
in its operations ("IT Systems") and it non-IT Systems, such as building
security, voice mail and other systems.
The Company has tested all computing equipment and deemed it to be Year
2000 ready. All non-computing equipment and computer systems are deemed Year
2000 ready based on manufacturer's warranty. The Company uses a third party
servicer to perform some functions, such as receipt and posting of loan
payments and other loan related activity. The third party servicer has
represented to the Company that its systems are year 2000 compliant.
In addition, the Company relies upon various vendors, governmental
agencies, utility companies, telecommunication service companies, delivery
service companies and other service providers who are outside of its
control. There is no assurance that such parties will not suffer a year 2000
business disruption, which could have a material adverse effect on the
Company's financial condition and results of operations. The Company has
inquired as to the Year 2000 readiness of vendors and customers with whom the
company has material relationships. We have requested that our business
partners address significant risks by July 1, 1999, and plan to replace any
material non-compliant business partners by October 1, 1999.
Costs. To date, the Company has not incurred any material expenditures
in connection with identifying or evaluating year 2000 compliance issues.
Most of its expenses have related to the opportunity cost of time spent by
employees of the Company evaluating year 2000 compliance matters generally.
The Company believes that internally generated funds or available cash should
be sufficient to cover the projected costs associated with any modifications
to existing software to make it year 2000 compliant. However, no assurances
can be given that such modifications can be made in a timely and cost
effective manner. Failure to make timely modifications could, in a worse
case scenario, result in the inability to process loans and loan related data
and could have a material adverse effect on the Company. At this time, the
Company does not possess all the information necessary to estimate the
potential impact of year 2000 compliance issues relating to its other
IT-Systems, non-IT Systems, its vendors, its customers and other parties.
Such impact, including the effect of a year 2000 business disruption, could
have a material adverse effect on the Company's financial condition and
results of operations.
Contingency Plan. The Company is in the process of developing a
comprehensive disaster recovery plan, which will be activated should a Year
2000 issue arise.
Inflation
Inflation has not had a significant effect on the Company's operating
results to date.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exposure to Market Risk
The Company performs an interest rate sensitivity analysis to identify the
potential interest rate exposures. Specific interest rate risks analyzed
include asset/liability mismatches, basis risk, risk caused by floors and
caps, duration mismatches and re-pricing lag in response to changes in a base
index.
A simulated earnings model is used to identify the impact of specific
interest rate movements on earnings per share for the next 12 months. The
model incorporates management's expectations about future origination levels,
origination mix, amortization rates, prepayment speeds, timing of loan sales,
timing of capital issues, extensions and/or increases in lines of credit,
pricing of originations and cost of debt and lines of credit.
The Company's objective in managing the interest rate exposures is to
maintain, at a reasonable level, the impact on earnings per share of an
immediate and sustained change of 100 basis points in interest rates in either
direction. The Company periodically reviews the interest rate risk and
various options such as capital structuring, product pricing, hedging and
spread analysis to manage the interest rate risk at reasonable levels.
As of June 30, 1999, the Company had the following estimated sensitivity
profile:
Interest rate changes (in basis points) 100 (100)
Impact on earnings per share ($0.01) $0.05
Impact on interest income and pre-tax earnings ($111,000) $635,000
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
<TABLE>
Six Months Ended
Year Ended December 31, June 30,
Statement of Income Data (1): 1998 1997 1996 1995 1994 1999 1998
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Interest and fees on loans............. $ 25,736 $ 19,374 $14,789 $ 11,392 $ 5,669 $16,364 $11,288
Gain on sale of loans.................. 10,691 8,564 7,331 5,161 4,847 6,879 5,679
Servicing and other income............. 2,379 1,753 1,576 908 459 1,104 959
------ ------ ------ ------ ----- ------ -----
Total revenues....................... 38,806 29,691 23,696 17,461 10,975 24,347 17,926
------ ------ ------ ------ ----- ------ ------
Expenses:
Interest expense....................... 14,265 10,675 7,197 6,138 3,158 9,352 6,692
Salaries and employee benefits......... 4,806 3,399 2,824 2,798 1,776 2,704 2,280
Other operating expenses............... 3,834 3,480 3,147 2,120 1,164 2,039 1,869
Provision for loan losses.............. 1,532 1,400 1,954 890 559 1,000 810
------ ------ ------ ------ ------ ------ ------
Total expenses....................... 24,437 18,954 15,122 11,946 6,657 15,095 11,651
------ ------ ------ ------ ------ ------ ------
Income before income taxes and
distributions on preferred securities.... 14,369 10,737 8,574 5,515 4,318 9,252 6,275
Provision for income taxes................ 5,537 4,134 3,301 2,066 1,619 3,562 2,416
Distributions on preferred securities,net. --- --- --- --- --- 205 ---
------ ------ ----- ------ ------ ------ ------
Income before extraordinary item.......... 8,832 6,603 5,273 3,449 2,699 5,485 3,859
Extraordinary item (2).................... (77) (220) --- --- (126) --- ---
------ ------ ------ ------ ------ ------ ------
Net income............................ $ 8,755 $6,383 $5,273 $3,449 $2,573 $5,485 $3,859
====== ====== ====== ====== ====== ====== ======
Basic per common share amounts:
Income before extraordinary item........ $ 1.41 $ 1.19 $ .97 $ .80 $ .66 $ .80 $ .68
Extraordinary item...................... (.01) (.04) --- --- (.03) --- ---
------ ------ ------ ------ ------ ------ ------
Net income per share..................... $ 1.40 $ 1.15 $ .97 $ .80 $ .63 $ .80 $ .68
====== ====== ====== ====== ====== ====== ======
Basic weighted average number of shares
outstanding............................. 6,273,638 5,572,465 5,441,636 4,315,469 4,116,684 6,897,411 5,706,887
Diluted per common share amounts:
Income before extraordinary item........ $ 1.34 $ 1.12 $ .93 $ .76 $ .63 $ .76 $ .64
Extraordinary item...................... (.01) (.04) --- --- (.03) --- ---
------ ------ ------ ------ ------ ------ ------
Net income per share.................... $ 1.33 $ 1.08 $ .93 $ .76 $ .60 $ .76 $ .64
====== ====== ====== ====== ====== ====== ======
Diluted weighted average number of shares
outstanding............................. 6,604,367 5,909,432 5,682,152 4,524,607 4,282,884 7,189,488 6,069,164
Cash dividends declared per
Common share............................ $ .07 $ .06 $ .05 $ .04 $ .03 $ --- $ ---
Other Statement of Income Data:
Income before extraordinary item as
a percentage of revenues................. 22.8% 22.2% 22.3% 19.8% 24.6% 22.5% 21.5%
Ratio of EBITDA to interest expense (3)... 2.13 2.17 2.38 2.05 2.64 2.10 2.13
Ratio of earnings to fixed charges (4).... 2.01 2.01 2.19 1.90 2.37 2.02 1.94
Return on average assets (5).............. 3.7% 3.8% 4.0% 3.7% 4.6% 3.4% 3.6%
Return on average equity (5).............. 13.2% 14.1% 13.3% 16.6% 17.2% 12.9% 13.8%
__________
</TABLE>
(1) Certain amounts in the 1994 through 1996 financial information have been
restated to conform to the 1997 through 1999 presentation.
(2) Reflects loss on early extinguishment of a portion of the 1992 Notes (as
defined herein), net of applicable tax benefit of $76,000, for 1994, of the
remainder of the 1992 Notes, net of applicable tax benefit of $138,000, for
1997, and of the term note payable, net applicable tax benefit of $48,000, for
1998.
(3) The ratio of EBITDA to interest expense is required to be calculated for
the twelve month period immediately preceding each calculation date, pursuant to
the terms of the indentures to which the Company is subject. EBITDA is defined
as earnings before deduction of taxes, depreciation, amortization of debt costs,
and interest expense (but after deduction for any extraordinary item).
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes and extraordinary items and fixed
charges. Fixed charges consist of interest charges and the amortization of debt
expense.
(5) Calculations are based on income before extraordinary item.
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION - (Continued)
(Dollars in thousands, except per share data)
<CAPTION> December 31, June. 30,
Balance Sheet Data (6): 1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total assets..........$293,882 186,790 152,689 112,459 63,487 $340,589
Loans held for sale(7) 19,750 16,366 12,260 14,380 11,094 13,351
Other loans (7)....... 191,292 86,307 79,996 33,613 15,790 219,944
Retained interests in
loan sales (7)........ 28,883 30,299 28,912 22,594 11,996 32,603
Secured debt.......... 49,021 5,387 43,727 9,836 5,823 62,012
Unsecured debt........ 134,588 105,347 46,995 47,401 29,896 133,897
Stockholders' equity.. 82,094 52,071 42,448 37,396 16,610 91,288
</TABLE>
<TABLE>
Six Months
Ended
<CAPTION> Year Ended December 31, June 30,
Other Financial Data: 1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Loans purchased and
originated (8).......$375,292 $184,660 $133,750 $121,046 $ 59,798 $216,964
Loans sold (8)........ 144,762 98,747 54,936 65,115 40,116 120,466
Loans participated (8) 3,569 6,936 --- --- --- 6,550
Serviced Portfolio (9) 466,912 304,102 242,445 176,650 105,013 529,198
Loans serviced for
others............... 238,132 179,790 129,619 111,117 72,731 275,388
Dealer/developer
reserves............. 9,979 10,655 10,628 9,644 6,575 9,365
Allowance for loan
losses (10).......... 6,707 5,877 4,528 3,715 1,264 7,545
Allowance ratio (11).. 1.44% 1.93% 1.87% 2.10% 1.20% 1.43%
Delinquency ratio(12). 0.95% 1.20% 1.34% 1.73% .93% 1.04%
Net charge-off ratio
(8)(13).............. .58% .74% .94% .67% .38% .46%
Non-performing asset
ratio (14)............ .84% 1.03% 1.57% 1.35% 1.02% 1.07%
</TABLE>
- --------------------------------------------------------------------------
(6) In 1997 the Company adopted Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Consequently, certain amounts included in
the 1994 through 1996 financial statements have been reclassified to
conform with the 1997 through 1999 presentations: "Subordinated pass
through certificates held to maturity," "Excess servicing asset" and
"Allowance for loans sold" have been reclassified as "Retained interests
in loan sales." In addition, "Loans held for investment" have been
reclassified as "Other loans."
(7) Amount indicated is net of allowance for losses and recourse obligation on
retained interests in loan sales.
(8) During the relevant period.
(9) The Serviced Portfolio consists of the principal amount of loans serviced
by or on behalf of the Company, except loans participated without recourse
to the Company.
(10) The allowance for loan losses includes estimated recourse obligations
for loans sold. See Note C to financial statements.
(11) The allowance ratio is the allowances for loan losses divided by the
amount of the Serviced Portfolio.
(12) The delinquency ratio is the amount of delinquent loans divided by the
amount of the Serviced Portfolio. Delinquent loans are those which are 31
days or more past due which are not covered by dealer/developer reserves
or guarantees and not included in other real estate owned.
(13) The net charge-off ratio is determined by dividing the amount of net
charge-offs for the period by the average Serviced Portfolio for the
period. The June 30, 1999 amount is calculated on an annualized basis.
(14) The non-performing asset ratio is determined by dividing the sum of the
amount of those loans which are 91 days or more past due and other real
estate owned by the amount of the Serviced Portfolio.
<PAGE>
BUSINESS
Overview
Litchfield Financial Corporation (the "Company") is a diversified finance
company that provides financing to creditworthy borrowers for assets not
typically financed by banks. The Company provides this financing by making
loans to businesses secured by consumer receivables or other assets and by
purchasing consumer loans.
The Company purchases consumer loans (the "Purchased Loans")
consisting primarily of loans to purchasers of rural and vacation properties
("Land Loans") and vacation ownership interests popularly known as timeshare
interests ("VOI Loans"). The Company also provides financing to rural land
dealers, timeshare resort developers and other finance companies secured by
receivables ("Hypothecation Loans") and to dealers and developers for the
acquisition and development of rural land and timeshare resorts ("A&D
Loans"). In addition, the Company purchases other loans, such as consumer
home equity loans, mortgages and construction loans and tax lien
certificates, and provides financing to other businesses secured by
receivables or other assets ("Other Loans").
The principal sources of the Company's revenues are interest and fees on
loans, gains on sales of loans and servicing and other income. Gains on
sales of loans are based on the difference between the allocated cost basis
of the assets sold and the proceeds received, which includes the fair value
of any assets or liabilities that are newly created as a result of the
transaction. Because a significant portion of the Company's revenues is
comprised of gains realized upon sales of loans, the timing of such sales has
a significant effect on the Company's results of operations.
Characteristics of the Serviced Portfolio, Loan Purchases and Originations
The following table shows the growth in the diversity of the Serviced
Portfolio from primarily Purchased Loans to a mix of Purchased Loans,
Hypothecation Loans, A&D Loans and Other Loans:
<TABLE>
<CAPTION> December 31, June 30,
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Purchased Loans............ 38.4% 56.6% 67.1% 81.6% 85.3% 35.8%
Hypothecation Loans........ 35.2 26.9 20.7 12.5 9.0 36.4
A&D Loans.................. 11.2 13.7 8.7 3.1 3.3 12.2
Other Loans................ 15.2 2.8 3.5 2.8 2.4 15.6
----- ----- ----- ----- ----- -----
Total............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
The following table shows the growth in the diversity of the Company's
originations from primarily Purchased Loans to a mix of Purchased Loans,
Hypothecation Loans, A&D Loans and Other Loans:
<TABLE>
<CAPTION> Year Ended December 31, Six Months Ended
June 30,
1998 1997 1996 1995 1994 1999 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Purchased Loans..... 14.9% 30.3% 49.9% 71.4% 67.6% 13.6% 19.8%
Hypothecation Loans. 48.6 37.1 29.6 20.9 22.2 54.1 40.7
A&D Loans........... 10.2 24.0 14.4 3.1 6.0 13.4 13.2
Other Loans......... 26.3 8.6 6.1 4.6 4.2 18.9 26.3
----- ----- ----- ----- ----- ----- -----
Total.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== =====
</TABLE>
(1) Purchased Loans
The Company provides indirect financing to consumers through a large
number of experienced land dealers and resort developers from which it
regularly purchases Land and VOI Loans. The land dealers and resort
developers make loans to consumers. The Company then purchases such loans
from the land dealers and resort developers on an individually approved basis
in accordance with its credit guidelines.
Each land dealer and resort developer from whom the Company purchases
loans is interviewed by the Company and approved by its credit committee.
Management evaluates each land dealer's and resort developer's experience,
financial statements and credit references and inspects a substantial portion
of the land dealer's and resort developer's inventory of land or VOIs prior
to approval of loan purchases.
In order to enhance the creditworthiness of loans purchased from land
dealers and resort developers, the Company typically requires land dealers
and resort developers to guarantee payment of the loans and typically retains
a portion of the amount payable by the Company to each land dealer and resort
developer on purchase of the loan. The retained portion, or reserve, is
released to the land dealer or resort developer as the related loan is repaid.
Prior to purchasing Land or VOI Loans, the Company evaluates the credit
and payment history of each borrower in accordance with its underwriting
guidelines, performs borrower interviews on a sample of loans, reviews the
documentation supporting the loans for completeness and obtains an
appropriate opinion from local legal counsel. The Company purchases only
those loans which meet its credit standards.
The Company also purchases portfolios of seasoned loans primarily from
land dealers and resort developers. The land dealers or resort developers
generally guarantee the loans sold and the Company generally withholds a
reserve as described above. Management believes that the portfolio
acquisition program is attractive to land dealers and resort developers
because it provides them with liquidity to purchase additional inventory.
The Company also purchases portfolios of seasoned loans from financial
institutions and others. Sellers generally do not guarantee such loans, but
estimated loan losses are considered in establishing the purchase price.
In evaluating such seasoned portfolios, the Company conducts its normal
review of the borrower's documentation, payment history and underlying
collateral. However, the Company may not always be able to reject individual
loans.
The Company's portfolio of Purchased Loans is secured by property located
in 41 states.
<TABLE>
<CAPTION> Principal Amount of Loans
December 31 June 30,
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Southwest................ 32% 30% 26% 16% 19% 35%
South.................... 30 31 31 31 37 29
West..................... 19 17 20 20 3 18
Mid-Atlantic............. 8 10 10 16 16 8
Northeast................ 11 12 13 17 25 10
---- ---- ---- ---- ---- ----
Total............... 100% 100% 100% 100% 100% 100%
==== ==== ==== ==== ==== ====
</TABLE>
a. Land Loans
Dealers from whom the Company purchases Land Loans are typically
closely-held firms with annual revenues of less than $3.0 million. Dealers
generally purchase large rural tracts (generally 100 or more acres) from
farmers or other owners and subdivide the property into one to twenty acre
parcels for resale to consumers. Generally the subdivided property is not
developed significantly beyond the provision of graded access roads. In
recreational areas, sales are made primarily to urban consumers who wish to
use the property for a vacation or retirement home or for recreational
purposes such as fishing, hunting or camping. In other rural areas, sales are
more commonly made to persons who will locate a manufactured home on the
parcel. During the six months ended June 30, 1999, the Company acquired
approximately $31.7 million of Land Loans. The aggregate principal amount of
Land Loans purchased from individual dealers during the six months ended June
30, 1999 varied from a low of approximately $6,300 to a high of approximately
$1.4 million. As of June 30, 1999 and December 31, 1998, the five largest
dealers accounted for approximately 17.7% and 20.6%, respectively, of the
principal amount of the Land Loans in the Serviced Portfolio. No single
dealer accounted for more than 4.7% and 5.4% at June 30, 1999 and at December
31, 1998, respectively.
As of June 30, 1999 and December 31, 1998, 32.8% and 34.3%, respectively,
of the Serviced Portfolio consisted of Land Loans. The average principal
balance of such Land Loans were approximately $13,500 and $13,100 at June 30,
1999 and December 31, 1998, respectively. The following table sets forth as
of June 30, 1999, the distribution of Land Loans in the Company's Serviced
Portfolio:
<TABLE>
<CAPTION> Percentage of Percentage of
Principal Principal Number of Number of
Principal Balance Amount Amount Loans Loans
- ----------------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Loans
Less than $10,000........$ 29,948,000 17.3% 5,720 44.6%
$10,000-$19,999.......... 62,478,000 36.0 4,374 34.1
$20,000 and greater...... 80,848,000 46.7 2,737 21.3
------------ ------ ------ -----
Total...............$173,274,000 100.0% 12,831 100.0%
============ ===== ====== =====
</TABLE>
<PAGE>
As of June 30, 1999 and December 31, 1998, the weighted average interest
rate of the Land Loans included in the Company's Serviced Portfolio was
12.0%. The weighted average remaining maturity was 12.3 and 12.0 years at
June 30, 1999 and December 31, 1998, respectively. The following table sets
forth as of June 30, 1999, the distribution of interest rates payable on the
Land Loans:
<TABLE>
Percentage of
<CAPTION> Principal Principal
Interest Rate Amount Amount
- ------------- --------- -------------
<S> <C> <C>
Less than 12.0%........................ $ 63,398,000 36.6%
12.0%-13.9%............................ 87,458,000 50.5
14.0% and greater...................... 22,418,000 12.9
------------ -----
Total............................. $173,274,000 100.0%
============ =====
</TABLE>
As of June 30, 1999 and December 31, 1998, the Company's Land Loan
borrowers resided in 50 states, the District of Columbia and nine territories
or foreign countries.
b. VOI Loans
The Company purchases VOI Loans from various resort developers. The
Company generally targets small to medium size resorts with completed
amenities and established property owners associations. These resorts
participate in programs that permit purchasers of VOIs to exchange their
timeshare intervals for timeshare intervals in other resorts around the
world. During the six months ended June 30, 1999, the Company acquired
approximately $1,606,000 of VOI Loans. As of June 30, 1999 and December 31,
1998, the five largest developers accounted for approximately 32.6% and
35.1%, respectively, of the principal amount of the VOI Loans in the Serviced
Portfolio. No single developer accounted for more than 9.1% and 9.4% at June
30, 1999 and December 31, 1998, respectively.
As of June 30, 1999 and December 31, 1998, 3.0% and 4.1%, respectively, of
the Serviced Portfolio consisted of VOI Loans. The average principal balance
of such VOI Loans was approximately $3,300 and $3,400, at June 30, 1999 and
December 31, 1998, respectively. The following table sets forth as of June
30, 1999, the distribution of VOI Loans:
<TABLE>
<CAPTION> Principal Percentage of Number of Percentage of
Amount Principal Amount Loans Number of Loans
--------- ---------------- -------- ---------------
<S> <C> <C> <C> <C>
Less than $4,000...... $ 6,691,000 41.7% 3,290 67.1%
$4,000-$5,999......... 5,387,000 33.5 1,101 22.4
$6,000 and greater.... 3,979,000 24.8 515 10.5
----------- ----- ----- -----
Total............ $16,057,000 100.0% 4,906 100.0%
=========== ===== ===== =====
</TABLE>
As of June 30, 1999 and December 31, 1998, the weighted average interest
rate of the VOI Loans included in the Company's Serviced Portfolio was 14.5%
and 14.6%, respectively, and the weighted average remaining maturity was 3.6
and 3.7 years, respectively. The following table sets forth as of June 30,
1999, the distribution of interest rates payable on the VOI Loans:
<TABLE>
<CAPTION> Percentage of
Principal
Interest Rate Principal Amount
- ------------- --------- ------
<S> <C> <C>
Less than 14.0%........................... $ 7,153,000 44.5%
14.0%-15.9%............................... 3,542,000 22.1
16.0% and greater......................... 5,362,000 33.4
----------- -----
Total................................ $16,057,000 100.0%
=========== =====
</TABLE>
As of June 30, 1999, the Company's VOI borrowers resided in 50 states,
the District of Columbia and four territories or foreign countries. As of
December 31, 1998, the Company's VOI borrowers resided in 50 states, the
District of Columbia and three territories or foreign countries.
(2) Hypothecation Loans
The Company extends Hypothecation Loans to land dealers and resort
developers and other businesses secured by receivables. The Company has
expanded its marketing of Hypothecation Loans to include loans to other
finance companies secured by other types of collateral. These loans may be
larger than the Company's average Hypothecation Loans and may provide the
Company with an option to take an equity position in the borrower. During
the six months ended June 30, 1999, the Company extended or acquired
approximately $113.8 million of Hypothecation Loans, of which $20.6 million,
or 18.1%, were secured by Land Loans, $69.0 million, or 60.6%, were secured
by VOI Loans and $24.2 million, or 21.3%, were secured by other types of
collateral such as tax lien certificates, accounts receivable and mortgages.
The Company generally extends Hypothecation Loans based on advance rates
of 75% to 90% of the eligible receivables which serve as collateral. The
Company's Hypothecation Loans are generally made at variable rates based on
the prime rate of interest plus 1.5% to 4%. As of June 30, 1999 and December
31, 1998, the Company had $192.7 million and $164.5 million of Hypothecation
Loans outstanding, none of which were 31 days or more past due. During the
three months ended March 31, 1998, the Company acquired a $17.0 million
participation interest in a Hypothecation Loan from another financial
institution. As planned, in May of 1998, the Company purchased the
underlying receivables, which the Company has reclassified as Other Loans.
The proceeds of the receivables purchased were applied to pay off the
Company's participation interest. At June 30, 1999, Hypothecation Loans
ranged in size from $2,900 to $25.5 million with an average principal balance
of $2,095,000. At December 31, 1998, Hypothecation Loans ranged in size from
less than $500 to $21.5 million with an average balance of $1,678,000. The
five largest Hypothecation Loans represented 14.8% and 15.5% of the Serviced
Portfolio at June 30, 1999 and December 31, 1998, respectively.
(3) A&D Loans
The Company also makes A&D Loans to dealers and developers for the
acquisition and development of rural and timeshare resorts in order to
finance additional receivables generated by the A&D Loans. During the six
months ended June 30, 1999, the Company made $33.0 million of A&D Loans to
land dealers and resort developers, of which $2.7 million, or 8.2%, were
secured by land and $30.3 million, or 91.8%, were secured by resorts under
development.
The Company generally makes A&D Loans to land dealers and resort
developers based on loan to value ratios of 60% to 80% at variable rates
based on the prime rate plus 2% to 4%. As of June 30, 1999 and December 31,
1998, the Company had $64.6 million and $52.3 million, respectively, of A&D
Loans outstanding, none of which were 31 days or more past due. At June 30,
1999 and December 31, 1998, A&D Loans were secured by timeshare resort
developments and rural land subdivisions in 19 states and one territory and
16 states and one territory, respectively. A&D Loans ranged in size from
$3,500 to $11.8 million with an average principal balance of $979,000 at June
30, 1999. A&D Loans ranged in size from $1,700 to $9.5 million with an
average principal balance of $780,000 at December 31, 1998. The five largest
A&D Loans represented 5.4% and 4.7%, of the Serviced Portfolio at June 30,
1999 and December 31, 1998, respectively.
(4) Other Loans
At June 30, 1999, Other Loans consisted primarily of consumer home equity,
mortgage and construction loans, other secured commercial loans and tax lien
certificates. Historically, the Company has made or acquired certain other
secured and unsecured loans as it has identified additional lending
opportunities or lines of business for possible future expansion as it did
with VOI Loans and Hypothecation Loans. In May of 1998, the Company
purchased 232 builder construction loans totaling $32.7 million, a portion of
which had previously been collateral for the Hypothecation Loan in which the
Company owned a participation interest. At June 30, 1999 and December 31,
1998, the Company had 162 and 176 of the builder construction loans totaling
$37.4 million and $33.9 million, respectively. In October 1998, the Company
began purchasing tax lien certificates. At June 30, 1999 and December 31,
1998 the Company held $33.5 million and $21.2 million, respectively, of such
certificates. The Company had $82.5 million and $71.0 million of Other
Loans, 1.60% and 1.33% of which were 91 days or more past due at June 30,
1999 and December 31, 1998, respectively. At June 30, 1999, Other Loans
ranged in size from less than $500 to $1,101,000 with an average principal
balance of $11,900. At December 31, 1998, Other Loans ranged in size from
less than $500 to $875,000 with an average principal balance of $23,200. The
five largest Other Loans represent 0.8% of the Serviced Portfolio at June 30,
1999 and December 31, 1998.
Loan Underwriting
The Company has established loan underwriting criteria and procedures
designed to reduce credit losses on its Serviced Portfolio. The loan
underwriting process includes reviewing each borrower's credit history. In
addition, the Company's underwriting staff routinely conducts telephone
interviews with a sample of borrowers. The primary focus of the Company's
underwriting is to assess the likelihood that the borrower will repay the
loan as agreed by examining the borrower's credit history through credit
reporting bureaus.
The Company's loan policy is to purchase Land and VOI Loans from $3,000 to
$50,000. On a case by case basis, the Company will also consider purchasing
such loans in excess of $50,000. As of June 30, 1999, the Company had 163
Land Loans exceeding $50,000 representing 1.3% of the number of such loans in
the Serviced Portfolio, for a total of $11.3 million. There were no VOI Loans
exceeding $50,000 as of June 30, 1999. The Company will originate
Hypothecation Loans up to $15 million and A&D Loans up to $10 million. From
time to time, the Company may have an opportunity to originate larger
Hypothecation Loans or A&D Loans in which case the Company would seek to
participate such loans with other financial institutions. As of June 30,
1999, the Company's five largest Hypothecation Loan relationships had
aggregate loan balances ranging from $9.9 million to $25.5 million and its
largest A&D Loan relationship had an aggregate loan balance of $11.8
million. Construction Loans greater than $200,000 and any other loans
greater than $100,000 must be approved by the Credit Committee which is
comprised of the Chief Executive Officer, four Executive Vice Presidents and
a Senior Vice President.
Collections and Delinquencies
Management believes that the relatively low delinquency rate for the
Serviced Portfolio is attributable primarily to the application of its
underwriting criteria, as well as to dealer guarantees and reserves withheld
from dealers and developers. No assurance can be given that these delinquency
rates can be maintained in the future.
Collection efforts are managed and delinquency information is analyzed at
the Company's headquarters. Unless circumstances otherwise dictate,
collections are generally made by mail and telephone. Collection efforts
begin when an account is seven days past due, at which time the Company sends
out a late notice. When an account is fifteen days past due, the Company
attempts to contact the borrower to determine the reason for the delinquency
and to attempt to cause the account to become current. If the status of the
account continues to deteriorate, an analysis of the account is performed by
the collection manager to determine the appropriate action. When the loan is
90 days past due in accordance with its original terms and it is determined
that the amounts cannot be collected from the dealer or developer guarantees
or reserves, the loan is generally placed on a non-accrual status and the
collection manager determines the action to be taken. The determination of
how to work out a delinquent loan is based upon many factors, including the
borrower's payment history and the reason for the current inability to make
timely payments. When a guaranteed loan becomes 60 days (90 days in some
cases) past due, in addition to the Company's collection procedures, the
Company generally obtains the assistance of the dealer or developer in
collecting the loan.
The Company extends a limited number of its loans for reasons the Company
considers acceptable such as temporary loss of employment or serious illness.
In order to qualify for a one to three month extension, the customer must
make three timely payments without any intervention from the Company. For
extensions of four to six months, the customer must make four to six timely
payments, respectively, without any intervention from the Company. The
Company will not extend a loan more than two times for an aggregate six
months over the life of the loan. The Company has extended approximately 0.8%
of its loans through June 30, 1999. The Company does not generally modify any
other loan terms such as interest rates or payment amounts.
Regulations and practices regarding the rights of the mortgagor in default
vary greatly from state to state. To the extent permitted by applicable law,
the Company collects late charges and return-check fees and records these
items as additional revenue. Only if a delinquency cannot otherwise be cured
will the Company decide that foreclosure is the appropriate course of action.
If the Company determines that purchasing a property securing a mortgage loan
will minimize the loss associated with such defaulted loan, the Company may
accept a deed in lieu of foreclosure, take legal action to collect on the
underlying note or bid at the foreclosure sale for such property.
<PAGE>
Serviced Portfolio
The following table shows the Company's delinquencies and delinquency
rates, net of dealer/developer reserves and guarantees, for the Serviced
Portfolio:
<TABLE>
Six Months Ended
<CAPTION> Year Ended December 31, June 30,
1998 1997 1996 1995 1994 1999
----------- ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Serviced
Portfolio...... $466,912,000 $304,102,000 $242,445,000 $176,650,000 $105,013,000 $529,198,000
Delinquent
loans (1)...... 4,456,000 3,642,000 3,255,000 3,062,000 981,000 5,486,000
Delinquency
as a Percentage
of Serviced
Portfolio...... .95% 1.20% 1.34% 1.73% .93% 1.04%
</TABLE>
_____
(1) Delinquent loans are those which are 31 days or more past due which are
not covered by dealer/developer reserves or guarantees and not included in
other real estate owned.
Land Loans
The following table shows the Company's delinquencies and delinquency
rates, net of dealer/developer reserves and guarantees, for Land Loans in the
Serviced Portfolio:
<TABLE>
Six Months Ended
<CAPTION> Year Ended December 31, June 30,
1998 1997 1996 1995 1994 1999
------------ ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Land Loans in
Serviced Portfolio... $160,098,000 $142,828,000 $119,370,000 $97,266,000 $90,502,000 $173,274,000
Delinquent Land
Loans (1)............ 2,728,000 2,453,000 1,920,000 1,059,000 981,000 3,092,000
Delinquency as
a Percentage of
Land Loans in
Serviced Portfolio... 1.70% 1.72% 1.61% 1.09% 1.08% 1.78%
</TABLE>
__________
(1) Delinquent loans are those which are 31 days or more past due which are
not covered by dealer/developer reserves or guarantees and not included in
other real estate owned.
VOI Loans
The following table shows the Company's delinquencies and delinquency
rates, net of dealer/developer reserves and guarantees, for VOI Loans in the
Serviced Portfolio:
<TABLE>
Six Months Ended
Year Ended December 31, June 30,
1998 1997 1996 1995 1994 1999
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
VOI Loans in
Serviced Portfolio... $19,119,000 $29,232,000 $43,284,000 $46,700,000 $2,851,000 $16,057,000
Delinquent VOI
Loans (1)........... 350,000 739,000 1,316,000 1,958,000 --- 421,000
Delinquency as a
Percentage of
VOI Loans in
Serviced Portfolio.. 1.83% 2.53% 3.04% 4.19% -- 2.62%
__________
</TABLE>
(1) Delinquent loans are those which are 31 days or more past due which are
not covered by dealer/developer reserves or guarantees and not included in
other real estate owned.
Hypothecation, A&D and Other Loans
The Company did not have any delinquent Hypothecation Loans or A&D Loans
for the years ended December 31, 1994 through December 31, 1998 or for the
six months ended June 30, 1999. The Company did not have significant amounts
of delinquent Other Loans for the years ended December 31, 1994 through
December 31, 1997. At December 31, 1998, there were $71.0 million of Other
Loans of which $1,378,000 or 1.94% were 31 days or more past due and not
covered by dealer/developer reserves or guarantees and not included in other
real estate owned. At June 30, 1999, there were $82.5 million of Other Loans
of which $1,973,000 or 2.39% were 31 days or more past due and not covered by
dealer/developer reserves or guarantees and not included in other real estate
owned.
Allowance for Loan Losses and Estimated Recourse Obligations, Net Charge-offs
and Dealer Reserves
The following is an analysis of the total allowances for all loan losses:
<TABLE>
Six Months
Ended
Year Ended December 31, June 30,
1998 1997 1996 1995 1994 1999
<S> <C> <C> <C> <C> <C> <C>
Allowance,
beginning of Period........... $5,877,000 $4,528,000 $3,715,000 $1,264,000 $1,064,000 $6,707,000
Net charge-offs of
uncollectible accounts..... (2,239,000 (2,010,000 (1,965,000) (946,000) (359,000) (1,157,000)
Provision for
loan losses.................. 1,532,000 1,400,000 1,954,000 890,000 559,000 1,000,000
Allocation of
purchase adjustment (1)...... 1,537,000 1,959,000 824,000 2,507,000 --- 995,000
---------- --------- -------- ---------- --------- ---------
Allowance, end of
period....................... $6,707,000 $5,877,000 $4,528,000 $3,715,000 $1,264,000 $7,545,000
========== ========= ========= ========= ========== ==========
</TABLE>
__________
(1) Represents allocation of purchase adjustment related to the purchase of
certain nonguaranteed loans.
The following is an analysis of net charge-offs by major loan and
collateral types experienced by the Company:
<TABLE>
Six Months
Ended
Year Ended December 31, June 30,
1998 1997 1996 1995 1994 1999
<S> <C> <C> <C> <C> <C> <C>
Land Loans............ $1,358,000 $ 986,000 $ 669,000 $ 546,000 $ 359,000 $ 784,000
VOI Loans............. 556,000 939,000 1,284,000 45,000 --- 124,000
Hypothecation Loans... --- --- --- --- --- ---
A&D Loans............. --- (2,000) (8,000) 352,000 --- ---
Other Loans........... 325,000 87,000 20,000 3,000 --- 249,000
--------- -------- --------- ---------- -------- --------
Total net charge-offs. $2,239,000 $2,010,000 $1,965,000 $946,000 $359,000 $1,157,000
========= ========= ========= ========== ======== ========
Net charge-offs as a
percentage of the average
Serviced Portfolio.... .58% .74% .94% .67% .38% .46%
</TABLE>
As part of the Company's financing of Land and VOI Loans, the Company
enters into arrangements with most land dealers and resort developers whereby
the Company retains a portion of the amount payable to a dealer when
purchasing a Land or VOI Loan to protect the Company from potential losses
associated with such loans and uses the amount retained to absorb loan
losses. The Company negotiates the amount of the reserves with the land
dealers and resort developers based upon various criteria, two of which are
the financial strength of the land dealer or resort developer and the credit
risk associated with the loans being purchased. Dealer reserves for Land
Loans were $8,219,000, $8,321,000 and $7,555,000 at December 31, 1998, 1997
and 1996, respectively, and $8,749,000 at June 30, 1999. Developer reserves
for VOI Loans were $1,760,000, $2,299,000 and $3,072,000 at December 31,
1998, 1997 and 1996, respectively, and $1,284,000 at June 30, 1999. Most
dealers and developers provide personal and, when relevant, corporate
guarantees to further protect the Company from loss.
Loan Servicing and Sales
The Company retains the right to service all the loans it purchases or
originates. Servicing includes collecting payments from borrowers, remitting
payments to investors who have purchased the loans, accounting for principal
and interest, contacting delinquent borrowers and supervising foreclosure and
bankruptcies in the event of unremedied defaults. Substantially all servicing
results from the origination and purchase of loans by the Company, and the
Company has not historically purchased loan servicing rights except in
connection with the purchase of loans. Servicing rates generally approximate
.5% to 2% of the principal balance of a loan.
Historically, the Company subcontracted the servicing of its loans to an
unaffiliated third party. In July 1998, the Company resumed certain customer
service and collection functions. The unaffiliated third party will continue
to provide certain data processing and payment processing functions. The
Company retains responsibility for servicing all loans as a master servicer.
In 1990, the Company began privately placing issues of pass-through
certificates evidencing an undivided beneficial ownership interest in pools
of mortgage loans which have been transferred to trusts. The principal and a
portion part of the interest payments on the loans transferred to the trust
are collected by the Company as the servicer of the loans, remitted to the
trust for the benefit of the investors, and then distributed by the trust to
the investors in the pass-through certificates.
As of June 30, 1999, the Company had sold or securitized a total of
approximately $613.4 million in loans at face value. In certain of the
Company's issues of pass-through certificates, credit enhancement was
achieved by dividing the issue into a senior portion which was sold to the
investors and a subordinated portion which was retained by the Company. In
certain other of the Company's private placements, credit enhancement was
achieved through cash collateral.
If borrowers default in the payment of principal or interest on the loans
underlying these issues of pass-through certificates, losses would be
absorbed first by the subordinated portion or cash collateral account
retained by the Company and might, therefore, have to be charged against the
estimated recourse obligations to the extent dealer guarantees and reserves
are not available.
The Company also has a $150.0 million revolving line of credit and sale
facility for its Land Loans as part of an asset backed commercial paper
facility with a multi-seller commercial paper conduit. The facility expires
in June 2001. As of June 30, 1999, the outstanding balance of the sold or
pledged loans securing this facility was $138.0 million. The Company has an
additional revolving line of credit and sale facility for its VOI Loans of
$25.0 million with another multi-seller commercial paper conduit. The
facility expires in March 2000. As of June 30, 1999, the outstanding
aggregate balance of the sold loans under the facility was $14.6 million.
Marketing and Advertising
The Company markets its program to rural land dealers and resort
developers through brokers, referrals, dealer and developer solicitation, and
targeted direct mail. The Company employs three marketing executives based in
Lakewood, Colorado, five marketing executives based in Williamstown,
Massachusetts, two marketing executives based in Hoover, Alabama, three
marketing executives based in Scottsdale, Arizona and one marketing executive
based in Atlanta, Georgia. In the last five years the Company has closed
loans with over 350 different dealers and developers.
Management believes that the Company benefits from name recognition as a
result of its referral, advertising and other marketing efforts. Referrals
have been the strongest source of new business for the Company and are
generated in the states in which the Company operates by dealers, brokers,
attorneys and financial institutions. Management and marketing
representatives also attend trade shows to improve awareness and
understanding of the Company's programs.
Regulation
The Company is licensed as a lender, mortgage banker or mortgage broker in
20 of the states in which it operates, and in those states its operations are
subject to supervision by state authorities (typically state banking or
consumer credit authorities). Expansion into other states may be dependent
upon a finding of financial responsibility, character and fitness of the
Company and various other matters. The Company is generally subject to state
regulations, examination and reporting requirements, and licenses are
revocable for cause. The Company is subject to state usury laws in all of the
states in which it operates.
The consumer loans purchased or financed by the Company are subject to the
Truth-in-Lending Act. The Truth-in-Lending Act contains disclosure
requirements designed to provide consumers with uniform, understandable
information with respect to the terms and conditions of loans and credit
transactions in order to give them the ability to compare credit terms.
Failure to comply with the requirements of the Truth-in-Lending Act may give
rise to a limited right of rescission on the part of the borrower. The
Company believes that its purchase or financing activities are in substantial
compliance in all material respects with the Truth-in-Lending Act.
Origination of the loans also requires compliance with the Equal Credit
Opportunity Act of 1974, as amended ("ECOA"), which prohibits creditors from
discriminating against applicants on the basis of race, color, sex, age or
marital status. Regulation B promulgated under ECOA restricts creditors from
obtaining certain types of information from loan applicants. It also requires
certain disclosures by the lender regarding consumer rights and requires
lenders to advise applicants of the reasons for any credit denial. In
instances where the applicant is denied credit or the interest rate charged
increases as a result of information obtained from a consumer credit agency,
another statute, the Fair Credit Reporting Act of 1970, as amended, requires
the lenders to supply the applicant with a name and address of the reporting
agency.
Competition
The finance business is highly competitive, with competition occurring
primarily on the basis of customer service and the term and interest rate of
the loans. Traditional competitors in the finance business include commercial
banks, credit unions, thrift institutions, industrial banks and other finance
companies, many of which have considerably greater financial, technical and
marketing resources than the Company. There can be no assurance that the
Company will not face increased competition from existing or new financial
institutions or finance companies. In addition, the Company may enter new
lines of business that may be highly competitive and may have competitors
with greater financial resources than the Company.
The Company believes that it competes on the basis of providing
competitive rates and prompt, efficient and complete service, and by
emphasizing customer service on a timely basis to attract borrowers whose
needs are not met by traditional financial institutions.
Employees
As of June 30, 1999, the Company had 125 full-time equivalent employees.
None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its relations with its employees to be good.
Facilities
The Company owns a leasehold interest in approximately 26,000 square feet
of office space in Williamstown, Massachusetts, which is used as the
Company's headquarters. The initial ten year lease term expires in May 2007
and is renewable at the Company's option for two additional ten year
periods. The initial land lease provides for an annual rental of $20,000.
The Company also occupies an aggregate of approximately 5,100 square feet of
office space in Lakewood, Colorado, pursuant to a lease expiring in January
2001, with an option to renew until 2004, providing for an annual rental of
approximately $56,000, including utilities and exterior maintenance
expenses. A subsidiary of the Company occupies an aggregate of approximately
2,710 square feet of office space in Scottsdale, Arizona, pursuant to a lease
expiring September 2000, providing for an annual rental of approximately
$46,000. A subsidiary of the Company occupies an aggregate of approximately
6,100 square feet of office space in Hoover, Alabama, pursuant to a lease
expiring in December 1999, providing for an annual rental of approximately
$88,000. A subsidiary of the Company occupies an aggregate of approximately
1,001 square feet of office space in Atlanta, Georgia, pursuant to a lease
expiring in December 2000, providing for an annual rental of approximately
$14,500.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed herewith:
1.1 Underwriting Agreement dated May 13, 1999 between the Company, Tucker
Anthony Cleary Gull and Ferris, Baker Watts Incorporated.
2.1 Agreement and Plan of Merger dated June 16, 1999 among Litchfield
Financial Corporation, Stamford Asset Recovery Corporation, Ironwood
Acceptance Company, LLC and the members of the Company.
2.2 Agreement and Plan of Merger dated April 1, 1999 among Litchfield
Financial Corporation, Stamford Business Credit Corporation and Land
Finance Corporation.
4.12 Junior Subordinated Indenture dated as of May 19,1999 between the
Company and The Bank of New York.
4.13 Supplemental Indenture No. 1 dated as of May 19, 1999 between the
Company and The Bank of New York.
4.14 Amended and Restated Declaration of Trust of Litchfield Capital Trust
I dated as of May 19, 1999 by and between John J. Malloy, Heather A.
Sica, Ronald E. Rabidou, The Bank of New York, The Bank of New York
(Delaware), the Company and the holders, from time to time, of
undivided beneficial interests in the assets of Litchfield Capital
Trust I.
4.15 Amendment No. 1 to the Amended and Restated Declaration of Trust
of Litchfield Capital Trust I dated as of May 19, 1999 by an
between John J. Malloy, Heather A. Sica, Ronald E. Rabidou,
The Bank of New York, The Bank of New York (Delaware), the Company
and the holders, from time to time, of undivided beneficial
interests in the assets of Litchfield Capital Trust I.
4.16 Guarantee Agreement dated as of May 19, 1999 between the Company and
The Bank of New York.
4.17 Guarantee Agreement dated as of June 8, 1999 between the Company and
The Bank of New York.
10.193 Amendment No. 1 to the Indenture of Trust dated as of March 1,
1999, between Litchfield Hypothecation Corporation 1997-B and
The Chase Manhattan Bank.
10.194 Amendment No. 2 to the Indenture of Trust dated as of June 1, 1999,
between Litchfield Hypothecation Corporation 1997-B and The
Chase Manhattan Bank.
10.195 Amendment No. 3 to the Indenture of Trust dated as of March 1,
1999, between Litchfield Hypothecation Corporation 1998-A and
The Chase Manhattan Bank.
10.196 Amendment No. 4 to the Indenture of Trust dated as of June 1, 1999,
between Litchfield Hypothecation Corporation 1998-A and The
Chase Manhattan Bank.
10.197 Loan and Security Agreement dated as of May 28, 1999, between the
Company and MetroWest Bank.
10.198 Note Purchase Agreement dated as of June 28, 1999, among the
Company, Litchfield Hypothecation Corporation 97-B and Union
Bank.
10.199 Limited Guarantee dated as of June 1, 1999, between the Company and
Union Bank.
10.200 Note Purchase Agreement dated as of June 28, 1999, among the
Company, Litchfield Hypothecation Corporation 98-A and
BankBoston.
10.201 Limited Guarantee dated as of June 1, 1999, between the Company and
BankBoston.
10.202 Receivables Purchase Agreement dated as of June 30, 1999, between
the Company and First Massachusetts Bank.
10.203 Collateral Agent Agreement dated as of June 30, 1999, among The
Chase Manhattan Bank, First Massachusetts Bank and the
Company.
11.1 Statement re: computation of earnings per share
27.1 Financial Data Schedule
Reports on Form 8-K
Form 8-K filed June 25, 1999 regarding the acquisition of
Ironwood Acceptance Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITCHFIELD FINANCIAL CORPORATION
DATE: August 13, 1999 /s/ Richard A. Stratton
RICHARD A. STRATTON
Chief Executive Officer,
President and Director
DATE: August 13, 1999 /s/ Ronald E. Rabidou
RONALD E. RABIDOU
Chief Financial Officer, Executive
Vice President and Treasurer
Exhibit 1.1
LITCHFIELD CAPITAL TRUST I
10% Series A Trust Issued Preferred Securities
(liquidation amount $10 per preferred security)
guaranteed by
LITCHFIELD FINANCIAL CORPORATION
------------------------------------------------
UNDERWRITING AGREEMENT
May 13, 1999
TUCKER ANTHONY CLEARY GULL FERRIS, BAKER WATTS INCORPORATED c/o Tucker Anthony
Cleary Gull One Beacon Street Boston, Massachusetts 02108
Ladies and Gentlemen:
Litchfield Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), and Litchfield Financial
Corporation, a Massachusetts corporation (the "Company"), on its own behalf and
as depositor and sponsor of the Trust and as guarantor, propose, subject to the
terms and conditions stated herein, that the Trust issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") for whom you are
acting as the representatives (the "Representatives") an aggregate of 2,500,000
(the "Firm Securities") and, at the election of the Underwriters, up to an
additional 375,000 (the "Optional Securities"), of 10% Series A Trust Issued
Preferred Securities (liquidation amount $10 per preferred security),
representing preferred undivided beneficial interests in the assets of the
Trust, guaranteed on a subordinated basis by the Company as to the payment of
distributions, and as to payments on liquidation or redemption, to the extent
set forth in a guarantee agreement (the "Guarantee") between the Company and The
Bank of New York, as trustee (the "Guarantee Trustee"). The Firm Securities and
the Optional Securities that the Underwriters elect to purchase pursuant to
Section 2 hereof are referred to collectively as the "Preferred Securities." The
Trust is to purchase, with the proceeds of the sale of the Preferred Securities
and up to 77,320 of its 10% Series A Trust Common Securities (liquidation amount
$10 per Common Security) (not including 11,598 if the underwriters exercise
their over-allotment option) (the "Common Securities," and, collectively with
the Preferred Securities, the "Trust Securities"), $25,773,200 aggregate
principal amount (or $29,639,180 aggregate principal amount assuming full
exercise by the Underwriters of the over-allotment option described herein) of
10% Series A Junior Subordinated Debentures due 2029 (the "Subordinated
Debentures") of the
1
Company, to be issued pursuant to an Indenture (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Indenture Trustee").
The Company will be the holder of 100% of the Common Securities. The
Trust will be subject to the terms of an Amended and Restated Declaration of
Trust (the "Trust Agreement"), among the Company, as Depositor, The Bank of New
York, as Property Trustee ("Property Trustee"), The Bank of New York (Delaware),
as Delaware Trustee (the "Delaware Trustee") and three individual trustees who
are employees or officers of or affiliated with the Company (the "Regular
Trustees"), and the holders from time to time, of undivided beneficial interests
in the assets of the Trust. The Property Trustee, the Delaware Trustee and the
Regular Trustees are collectively referred to herein as the "Trustees."
1. Representations and Warranties of the Trust and the Company. Each of
the Trust and the Company represents and warrants to, and agrees with, the
Underwriters that:
a. The Trust and the Company have filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), a registration statement on Form S-3 (Registration Nos.
333-76285, 333-76285-01 and 333-76285-02), including the related preliminary
prospectus relating to the offering of the Preferred Securities, the
Subordinated Debentures and the Guarantee, have filed such amendments thereto as
may have been required as of the date hereof, and will file such additional
amendments as may hereafter be required. Copies of such registration statement
and any amendments, including any post- effective amendments, and all forms of
the related prospectuses contained therein and any supplements thereto, have
been delivered to the Underwriters. Such registration statement, including the
prospectus, prospectus supplement, Part II, all financial schedules and exhibits
thereto, and all information deemed to be a part of such Registration Statement
pursuant to Rule 430A under the Securities Act, at the time when it shall become
effective, together with any registration statement filed by the Trust pursuant
to Rule 462(b) of the Securities Act, is herein referred to as the "Registration
Statement," and the prospectus and prospectus supplement included as part of the
Registration Statement on file with the Commission that discloses all the
information that was omitted from the prospectus on the effective date pursuant
to Rule 430A of the Rules and Regulations (as defined below) and in the form
filed pursuant to Rule 424(b) under the Securities Act is herein referred to as
the "Final Prospectus." The prospectus and prospectus supplement included as
part of the Registration Statement on the date when the Registration Statement
became effective is referred to herein as the "Effective Prospectus." Any
prospectus and prospectus supplement included in the Registration Statement and
in any amendment thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus." For purposes of
this Agreement, "Rules and Regulations" mean the rules and regulations
promulgated by the Commission under either the Securities Act or the
2
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
b. The Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus, and each Preliminary Prospectus, at the time of
filing thereof, complied with the requirements of the Securities Act and the
Rules and Regulations, and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that the foregoing does not
apply to statements or omissions made in reliance upon and in conformity with
written information furnished to the Company or the Trust by the Underwriters
specifically for use therein (it being understood that the only information so
provided is certain information included in the second, eighth and eleventh
paragraphs under the caption "Underwriting" in the Final Prospectus). When the
Registration Statement becomes effective and at all times subsequent thereto up
to and including the First Closing Date (as hereinafter defined), (i) the
Registration Statement, the Effective Prospectus and Final Prospectus and any
amendments or supplements thereto will contain all statements which are required
to be stated therein in accordance with the Securities Act, the Exchange Act and
the Rules and Regulations and will comply with the requirements of the
Securities Act, the Exchange Act and the Rules and Regulations, and (ii) neither
the Registration Statement, the Effective Prospectus nor the Final Prospectus
nor any amendment or supplement thereto will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading; except that the foregoing does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company or the Trust by the Underwriters
specifically for use therein (it being understood that the only information so
provided is certain information included in the second, eighth and eleventh
paragraphs under the caption "Underwriting" in the Final Prospectus).
c. The Company and each subsidiary of the Company (as used herein, the term
"subsidiary" includes any corporation, joint venture or partnership in which the
Company or any subsidiary of the Company has a 50% or greater ownership
interest) is duly organized and validly existing and in good standing under the
laws of the respective jurisdictions of their organization or incorporation, as
the case may be, with full power and authority (corporate, partnership and
other, as the case may be) to own their properties and conduct their businesses
as now conducted and are duly qualified or authorized to do business and are in
good standing in all jurisdictions wherein the nature of their business or the
character of property owned or leased may require them to be qualified or
authorized to
3
do business, except for jurisdictions in which the failure to so qualify would
not have a material adverse effect on the Company and its subsidiaries taken as
a whole. The Company and its subsidiaries hold all licenses, consents and
approvals, and have satisfied all eligibility and other similar requirements
imposed by federal and state regulatory bodies, administrative agencies or other
governmental bodies, agencies or officials, in each case as material to the
conduct of the respective businesses in which they are engaged in the Effective
Prospectus and the Final Prospectus.
d. The outstanding stock of each of the Company's corporate subsidiaries is
duly authorized, validly issued, fully paid and nonassessable. All of the
outstanding stock of each of the Company's corporate subsidiaries owned
beneficially and of record by the Company is owned clear of any lien,
encumbrance, pledge, equity or claim of any kind. Neither the Company nor any of
its subsidiaries is a partner or joint venturer in any partnership or joint
venture.
e. The Trust has been duly created and is validly existing as a statutory
business trust in good standing under the Business Trust Act of the State of
Delaware (the "Delaware Business Trust Act") with the trust power and authority
to own property and conduct its business as described in the Registration
Statement, Effective Prospectus and Final Prospectus and has conducted and will
conduct no business other than the transactions contemplated by this Agreement
and described in the Registration Statement, Effective Prospectus and Final
Prospectus; the Trust is not a party to or bound by any agreement or instrument
other than this Agreement, the Trust Agreement and the agreements and
instruments contemplated by the Trust Agreement and described in the
Registration Statement; based on expected operations and current law, the Trust
is not and will not be classified as an association taxable as a corporation for
United States federal income tax purposes; and the Trust is not a party to or
subject to any action, suit or proceeding of any nature;
f. The Preferred Securities have been duly and validly authorized by the
Trust, and, when issued and delivered to the Underwriters against payment
therefor as provided herein, will be duly and validly issued and, subject to the
terms of the Trust Agreement, fully paid and non-assessable undivided beneficial
interests in the assets of the Trust and will conform to the description thereof
contained in the Registration Statement, Effective Prospectus and Final
Prospectus and will be in substantially the form previously delivered to you;
the issuance of the Preferred Securities is not subject to preemptive or other
similar rights; the Preferred Securities will have the rights set forth in the
Trust Agreement, and the terms of the Preferred Securities are valid and binding
on the Trust; the holders of the Preferred Securities (the "Securityholders")
will be entitled to the same limitation of personal liability
4
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware;
g. The Common Securities have been duly and validly authorized by the Trust
and upon delivery by the Trust to the Company against payment therefor as
described in the Registration Statement, Effective Prospectus and Final
Prospectus, will be duly and validly issued undivided beneficial interests in
the assets of the Trust and will conform to the description thereof contained in
the Registration Statement, Effective Prospectus and Final Prospectus; the
issuance of the Common Securities is not subject to preemptive or other similar
rights; and at the First Closing Date (as defined in Section 2c hereof), all of
the issued and outstanding Common Securities of the Trust will be directly owned
by the Company free and clear of any Lien (as defined below); and the Trust
Securities are the only interests authorized to be issued by the Trust;
h. This Agreement has been duly authorized, executed and delivered by the
Company and the Trust and constitutes a valid and binding agreement of each of
the Company and the Trust, enforceable against the Company and the Trust in
accordance with their terms. No consent, approval, authorization or order of
any court or governmental agency or body or third party is required for the
performance of this Agreement by the Company or the Trust or the consummation by
the Company or the Trust of the transactions contemplated hereby or under the
Guarantor Agreements (as defined herein), except such as have been obtained and
such as may be required by the National Association of Securities Dealers, Inc.
("NASD") or under the Securities Act, or state securities or Blue Sky laws in
connection with the purchase and distribution of the Preferred Securities, the
Guarantee and the Subordinated Debentures. The Company's performance of this
Agreement and the Guarantor Agreements, and by the Trust to the extent the Trust
is a party to such agreements, and the consummation of the transactions
contemplated hereby and thereby, and the issuance and sale of the Trust
Securities by the Trust, will not result in a breach or violation of, or
conflict with, any of the terms and provisions of, or constitute a material
default under, the Trust Agreement, any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which the Company or any of
its subsidiaries or the Trust is a party or to which the Company or any of its
subsidiaries or the Trust or any of their respective properties is subject, the
Articles of Organization or bylaws of the Company or any of its subsidiaries or
any statute or any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to the Company, or any subsidiary or any
of their respective properties. Neither the Company nor any subsidiary is (i) in
violation of its Articles of Organization, (ii) in violation of any partnership
agreement or joint venture agreement, as the case may be, (iii) in violation of
its bylaws or any law, administrative rule or regulation or arbitrators' or
5
administrative or court decree, judgment or order or (iv) in violation of or
default (there being no existing state of facts which with notice or lapse of
time or both would constitute a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, deed of trust, mortgage, loan agreement, note, lease, agreement or
other instrument or permit to which it is a party or by which it or any of its
properties is or may be bound.
i. The Guarantee, the Subordinated Debentures, the Trust Agreement and the
Indenture (collectively, the "Guarantor Agreements") have each been duly
authorized and, when executed and delivered by the Company, will constitute
valid and legally binding obligations of the Company, enforceable in accordance
with their respective terms, except to the extent (A) that enforcement thereof
may be limited by (1) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to the rights of creditors generally, and (2) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity); and (B) with respect to the Indenture, the waiver contained in Section
6.06 of the Indenture may be deemed unenforceable. Each of the Preferred
Guarantee, the Trust Agreement and the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended.
j. The Subordinated Debentures are entitled to the benefits provided by the
Indenture; each of the Guarantor Agreements will conform to the descriptions
thereof in the Registration Statement and will be in substantially the form
previously delivered to you.
k. The documents that are incorporated by reference in the Registration
Statement, Effective Prospectus and Final Prospectus or from which information
is so incorporated by reference, when they become effective or were filed with
the Commission, as the case may be, complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and the
Rules and Regulations of the Commission thereunder.
l. The Company has full legal right, power and authority to authorize the
offering of the Subordinated Debentures and the Guarantee, to execute, deliver
and perform this Agreement and to issue, sell and deliver the Subordinated
Debentures and the Guarantee.
m. The Trust has full legal right, power and authority to authorize the
offering of the Preferred Securities, to execute, deliver and perform this
Agreement and to sell and deliver the Preferred Securities to the Underwriters
as provided herein.
6
n. The capitalization of the Company as of December 31, 1998 is as set
forth under the caption "Capitalization" in the Effective Prospectus and the
Final Prospectus, and the Guarantee, the Subordinated Debentures and the
Preferred Securities conform to the descriptions thereof in the Effective
Prospectus and the Final Prospectus. All the issued shares of capital stock of
the Company have been duly authorized and validly issued, are fully paid and
nonassessable. None of the issued shares of capital stock of the Company have
been issued in violation of any preemptive or similar rights. No holder of any
security of the Company has or will have any right to require the registration
of such security by virtue of any transaction contemplated by this agreement.
The Preferred Securities have been duly authorized by the Trust Agreement and
are duly and validly issued and, subject to the qualifications set forth herein,
fully paid and non-assessable undivided beneficial interests in the assets of
the Trust and will entitle the Securityholders to the benefits provided by the
Trust Agreement (subject to the terms of the Trust Agreement). The
Securityholders, as beneficial owners of the Trust, will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. The Underwriters will receive good and marketable title to the
Preferred Securities to be issued and delivered hereunder, free and clear of all
liens, encumbrances, claims, security interests, restrictions, stockholders'
agreements and voting trusts whatsoever.
o. All offers and sales of the Company's securities prior to the date
hereof were at all relevant times duly registered or exempt from the
registration requirements of the Securities Act and were duly registered or the
subject of an available exemption from the registration requirements of the
applicable state securities or Blue Sky laws, or if not registered in compliance
with the applicable federal and state securities laws, any actions arising from
such failure to register any such securities are barred by applicable statute of
limitations.
p. The consolidated financial statements and the related notes of the
Company, incorporated by reference in the Registration Statement, the Effective
Prospectus and the Final Prospectus present fairly the financial position,
results of operations and changes in financial position and cash flow of the
Company and its subsidiaries, at the dates and for the periods to which they
relate and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
other financial statements and schedules incorporated by reference in or as
schedules to the Registration Statement conform to the requirements of the
Securities Act, the Exchange Act and the Rules and Regulations and present
fairly the information presented therein for the periods shown. The financial
and statistical data set forth in the Effective Prospectus and the Final
Prospectus under the captions "Use of Proceeds,"
7
and "Summary Financial Information of Litchfield" fairly presents the
information set forth therein on the basis stated in the Effective Prospectus
and the Final Prospectus. Ernst & Young LLP, whose reports appear in the
Effective Prospectus and the Final Prospectus, are independent accountants as
required by the Securities Act and the Rules and Regulations.
q. Subsequent to March 31, 1999, neither the Company nor any subsidiary nor
the Trust has sustained any material loss or interference with its business or
properties from fire, flood, hurricane, earthquake, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which is not disclosed in the Effective
Prospectus and the Final Prospectus; and subsequent to the respective dates as
of which information is given in the Registration Statement, the Effective
Prospectus and the Final Prospectus, (i) neither the Company nor any of its
subsidiaries nor the Trust has incurred any material liabilities or obligations,
direct or contingent, or entered into any material transactions not in the
ordinary course of business, and (ii) there has not been any change in the
capital stock, partnership interests, joint venture interests, long-term debt or
obligations under capital leases of the Company and its subsidiaries, or any
issuance of options, warrants or rights to purchase the capital stock of the
Company, or any adverse change, or any development involving a prospective
adverse change in the management, business, prospects, financial position, net
worth or results of operations of the Company or its subsidiaries, taken as a
whole, or the Trust except in each case as described in or contemplated by the
Effective Prospectus and the Final Prospectus.
r. Except as described in the Effective Prospectus and the Final
Prospectus, there is not pending, or to the knowledge of the Company threatened,
any action, suit, proceeding, inquiry or investigation, to which the Company,
any of its subsidiaries or any of their officers or directors is a party, or to
which the property of the Company or any subsidiary is subject, before or
brought by any court or governmental agency or body, wherein an unfavorable
decision, ruling or finding could prevent or materially hinder the consummation
of this Agreement or result in a material adverse change in the business
condition (financial or other), prospects, financial position, net worth or
results of operations of the Company or its subsidiaries.
s. There are no contracts or other documents required by the Securities Act
or by the Rules and Regulations to be described in the Registration Statement,
the Effective Prospectus or the Final Prospectus or to be filed as exhibits to
the Registration Statement which have not been described or filed as required.
8
t. Except as described in the Effective Prospectus and the Final
Prospectus, the Company and each of its subsidiaries have good and marketable
title to all real and material personal property owned by them, free and clear
of all liens, charges, encumbrances or defects except those reflected in the
financial statements hereinabove described. The real and personal property and
buildings referred to in the Effective Prospectus and the Final Prospectus which
are leased from others by the Company are held under valid, subsisting and
enforceable leases. The Company or its subsidiaries owns or leases all such
properties as are necessary to its operations as now conducted.
u. The Company's system of internal accounting controls taken as a whole is
sufficient to meet the broad objectives of internal accounting control insofar
as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the Company's
financial statements; and, except as disclosed in the Effective Prospectus and
the Final Prospectus, neither the Company nor any of its subsidiaries nor any
employee or agent of the Company or any subsidiary has made any payment of funds
of the Company or any subsidiary or received or retained any funds in violation
of any law, rule or regulation.
v. The Company and its subsidiaries have filed all federal, state and local
income, excise and franchise tax returns required to be filed through the date
hereof and have paid all taxes shown as due therefrom; and there is no tax
deficiency that has been, nor does the Company or any subsidiary have knowledge
of any tax deficiency which is likely to be, asserted against the Company or its
subsidiaries, which if determined adversely could materially and adversely
affect the earnings, assets, affairs, business prospects or condition (financial
or other) of the Company or its subsidiaries.
w. The Company and its subsidiaries operate their respective businesses in
conformity in all material respects with all applicable statutes, common laws,
ordinances, decrees, orders, rules and regulations of governmental bodies. The
Company and its subsidiaries have all licenses, approvals or consents to operate
their respective businesses in all locations in which such businesses are
currently being operated, and the Company and its subsidiaries are not aware of
any existing or imminent matter which may adversely impact their operations or
business prospects other than as specifically disclosed in the Effective
Prospectus and the Final Prospectus. The Company has not engaged in any
activity, whether alone or in concert with one of its customers, creating the
potential for exposure to material civil or criminal monetary liability or other
material sanctions under federal or state laws regulating consumer credit
transactions, debt collection practices or land sales practices.
9
x. Neither the Company nor any of its subsidiaries have failed to file with
the applicable regulatory authorities any statement, report, information or form
required by any applicable law, regulation or order where the failure to file
the same would have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all such filings or submissions were in material
compliance with applicable laws when filed and no deficiencies have been
asserted by any regulatory commission, agency or authority with respect to such
filings or submissions. Neither the Company nor any of its subsidiaries have
failed to maintain in full force and effect any license or permit necessary or
proper for the conduct of its business, or received any notification that any
revocation or limitation thereof is threatened or pending, and, except as
disclosed in the Effective Prospectus and the Final Prospectus, there is not
pending any change under any law, regulation, license or permit which could
materially adversely affect its business, operations, property or business
prospects. Neither the Company nor any of its subsidiaries have received any
notice of violation of or been threatened with a charge of violating and are not
under investigation with respect to a possible violation of any provision of any
law, regulation or order.
y. No labor dispute exists with the Company's employees or with employees
of its subsidiaries or is imminent which could materially adversely affect the
Company or any of its subsidiaries. The Company is not aware of any existing or
imminent labor disturbance by its employees or by any employees of its
subsidiaries which could be expected to materially adversely affect the
condition (financial or otherwise), results of operations, properties, affairs,
management, business affairs or business prospects of the Company or any of its
subsidiaries.
z. Except as disclosed in the Effective Prospectus and the Final
Prospectus, the Company and its subsidiaries own or possess, or can acquire on
reasonable terms, the licenses, copyrights, trademarks, service marks and trade
names presently employed by them in connection with the businesses now operated
by them, and neither the Company nor any of its subsidiaries have received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, alone or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company or its subsidiaries.
aa. Neither the Company nor any of its subsidiaries, nor any of the
directors, officers, employees or agents of the Company and its subsidiaries
have taken and will not take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might be expected to
constitute, stabilization or manipulation of the price of any security of the
10
Company in connection with the offering, the sale or resale of the Preferred
Securities.
bb. The Company and each of its subsidiaries are insured by insurers of
reorganized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and the Company has no reason to believe that it or any of its
subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue their respective businesses at a comparable
cost.
cc. The Company is not, and will not become as a result of the offering and
sale of the Trust Securities and Subordinated Debentures, an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
dd. The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"), and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
ee. The Preferred Securities have been approved for listing on the Nasdaq
National Market subject to notice of issuance.
2. Purchase, Sale and Delivery of the Preferred Securities.
a. On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Trust and the Company agree that the Trust shall issue and sell to
the Underwriters, and the Underwriters, severally and not jointly, agree to
purchase at a purchase price of $10 per Preferred Security, the number of Firm
Securities set forth opposite the Underwriters' names in Schedule I hereto.
11
b. The Trust and the Company also grant to the Underwriters an option to
purchase, solely for the purpose of covering over-allotments in the sale of Firm
Securities, all or any portion of the Optional Securities at the purchase price
per Preferred Security set forth above. The option granted hereby may be
exercised as to all or any part of the Optional Securities at any time within 30
days after the date the Registration Statement becomes effective. The
Underwriters shall not be under any obligation to purchase any Optional
Securities prior to the exercise of such option. The option granted hereby may
be exercised by the Underwriters giving written notice to the Company setting
forth the number of Optional Securities to be purchased and the date and time
for delivery of and payment for such Optional Securities and stating that the
Optional Securities referred to therein are to be used for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Securities. If such notice is given prior to the First Closing Date (as
defined herein), the date set forth therein for such delivery and payment shall
not be earlier than two full business days thereafter or the First Closing Date,
whichever occurs later. If such notice is given on or after the First Closing
Date, the date set forth therein for such delivery and payment shall not be
earlier than three full business days thereafter. In either event, the date so
set forth shall not be more than 15 full business days after the date of such
notice. The date and time set forth in such notice is herein called the "Option
Closing Date." Upon exercise of the option, the Company shall become obligated
to sell to the Underwriters, and, subject to the terms and conditions herein set
forth, the Underwriters shall become obligated to purchase, for the account of
each Underwriter, from the Company, severally and not jointly, the number of
Optional Securities specified in such notice. Optional Securities shall be
purchased for the account of the Underwriters in proportion to the number of
Firm Securities set forth opposite the Underwriter's name in Schedule I hereto,
except that the purchase obligations of the Underwriters shall be adjusted so
that the Underwriters shall not be obligated to purchase fractional Optional
Securities.
c. A global certificate or certificates in definitive form for the Firm
Securities which the Underwriters have agreed to purchase hereunder shall be
delivered by or on behalf of the Trust to the Underwriters, through the
facilities of DTC, for the accounts of the Underwriters against payment by the
Underwriters or on their behalf of the purchase price therefor by same day funds
to an account designated by the Trust, such time of delivery against payment
being herein referred to as the "First Closing Date." The First Closing Date and
the Option Closing Date are herein individually referred to as the "Closing
Date" and collectively referred to as the "Closing Dates." A global certificate
or certificates in definitive form for the Optional Securities which the
Underwriters shall have agreed to purchase hereunder shall be similarly
delivered by or on behalf of the Trust on the Option Closing Date against
payment by the Underwriters or on its
12
behalf of the purchase price in the manner set forth above. The global
certificate or certificates in definitive form for the Preferred Securities will
be in good delivery form and in such denominations and registered in such names
as Tucker Anthony Cleary Gull may request not less than 48 hours prior to the
First Closing Date or the Option Closing Date, as the case may be. Such
certificate or certificates will be made available for checking at the office of
DTC or its designated custodian, at least 24 hours prior to the First Closing
Date or the Option Closing Date, as the case may be. The Preferred Securities to
be purchased by the Underwriters hereunder will be represented by one or more
global Preferred Securities in book-entry form which will be deposited by or on
behalf of the Trust with DTC or its designated custodian.
d. As compensation to the Underwriters for their commitments hereunder, and
in view of the fact that the proceeds of the sale of the Preferred Securities
will be used by the Trust to purchase the Subordinated Debentures of the Company
at each Closing Date, the Company will pay to the Underwriters an amount equal
to $.40 per Preferred Security for the Preferred Securities to be delivered by
the Company at such Closing Date.
3. Offering by the Underwriters. After the Registration Statement
becomes effective, the Underwriters propose to offer for sale to the public the
Firm Securities and any Optional Securities which may be sold at the price and
upon the terms set forth in the Final Prospectus.
4. Covenants of the Company. Each of the Company and the Trust, jointly
and severally, covenants and agrees with the Underwriters:
a. To comply with the provisions of and make all requisite filings with the
Commission pursuant to Rules 424(b), 430A and 462(b) of the Rules and
Regulations and to notify the Underwriters promptly (in writing, if requested)
of all such filings; to notify the Underwriters promptly of any request by the
Commission for any amendment of or supplement to the Registration Statement, the
Effective Prospectus or the Final Prospectus or for additional information; to
prepare and file with the Commission, promptly upon the request of the
Underwriters, any amendments of or supplements to the Registration Statement,
the Effective Prospectus or the Final Prospectus which, in the Underwriters's
reasonable opinion, may be necessary or advisable in connection with the
distribution of the Preferred Securities; and the Company and Trust shall not
file any amendment of or supplement to the Registration Statement, the Effective
Prospectus or the Final Prospectus which is not approved by the Underwriters
after reasonable notice thereof; to advise the Underwriters promptly of the
issuance by the Commission or any jurisdiction or other regulatory body of any
stop order or other order suspending the effectiveness of the Registration
Statement, suspending or preventing the use of any Preliminary Prospectus, the
Effective Prospectus or the Final Prospectus or
13
suspending the qualification of the Preferred Securities for offering or sale in
any jurisdiction, or of the institution of any proceedings for any such purpose;
and to use its best efforts to prevent the issuance of any stop order or other
such order and, should a stop order or other such order be issued, to obtain as
soon as possible the lifting thereof.
b. To take or cause to be taken all necessary action and furnish to
whomever the Underwriters direct such information as may be reasonably required
in qualifying the Preferred Securities, the Subordinated Debentures and the
Guarantee for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Underwriters may designate and will continue such
qualifications in effect for as long as may be reasonably necessary to complete
the distribution. The Company and the Trust shall not be required to qualify as
a foreign corporation or trust or (except for the sole purpose of complying with
Blue Sky filing requirements) to file a general consent to service of process in
any jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation or trust.
c. Within the time during which a Final Prospectus relating to the
Preferred Securities, the Subordinated Debentures and the Guarantee is required
to be delivered under the Securities Act, to comply with all requirements
imposed upon it by the Securities Act, as now and hereafter amended, and by the
Rules and Regulations, as from time to time in force, so far as is necessary to
permit the continuance of sales of or dealings in the Preferred Securities, the
Subordinated Debentures and the Guarantee as contemplated by the provisions
hereof and the Final Prospectus. If during such period any event occurs as a
result of which the Final Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend the
Registration Statement or supplement the Final Prospectus to comply with the
Securities Act, the Company and Trust shall promptly notify the Underwriters and
shall amend the Registration Statement or supplement the Final Prospectus (at
the expense of the Company) so as to correct such statement or omission or
effect such compliance.
d. To furnish without charge to the Underwriters and make available to the
Underwriters copies of the Registration Statement (four of which shall be signed
and shall be accompanied by all exhibits, including any which are incorporated
by reference, which have not previously been furnished), each Preliminary
Prospectus, the Effective Prospectus and the Final Prospectus, and all
amendments and supplements thereto, including any prospectus or supplement
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters
14
may reasonably request. The Company and Trust will deliver to the Underwriters a
copy of each document incorporated by reference in the Effective Prospectus and
the Final Prospectus which has not previously been furnished.
e. To (i) deliver to the Underwriters at such office or offices as the
Underwriters may designate as many copies of the Preliminary Prospectus and
Final Prospectus as the Underwriters may reasonably request, and (ii) for a
period of not more than nine months after the Registration Statement becomes
effective, send to the Underwriters as many additional copies of the Final
Prospectus and any supplement thereto as the Underwriters may reasonably
request.
f. To make generally available to its security holders, in the manner
contemplated by Rule 158(b) under the Securities Act as promptly as practicable
and in any event no later than 90 days after the end of its fiscal quarter in
which the first anniversary of the effective date of the Registration Statement
occurs, an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement.
g. At any time when the Company or the Trust is not subject to Section
13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of
Preferred Securities or Subordinated Debentures, to furnish at the Company's or
the Trust's expense, as appropriate, upon request, to holders of Preferred
Securities or Subordinated Debentures and prospective purchasers of such
securities information (the "Additional Issuer Information") satisfying the
requirements of subsection (d)(4)(i) of Rule 144A under the Securities Act.
h. To furnish to the holders of the Preferred Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the date of the Registration Statement (unless such quarter is the fourth
fiscal quarter, in which case beginning with the second fiscal quarter ending
after the date of the Registration Statement)), consolidated summary financial
information of the Company and its subsidiaries for such quarter in reasonable
detail.
i. During a period of five years from the date of the Registration
Statement, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements 15
furnished to or filed with the Commission or any securities exchange on which
the Preferred Securities or any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission).
j. In the case of the Company, to issue the Guarantee concurrently
with the issue and sale of the Preferred Securities as contemplated herein.
k. To apply the net proceeds from the sale of the Preferred
Securities, in the case of the Trust, and the Subordinated Debentures, in the
case of the Company, as set forth under the caption "Use of Proceeds" in the
Final Prospectus.
l. From time to time, after the effective date of the Registration
Statement to file with the Commission such reports as are required by the
Securities Act, the Exchange Act and the Rules and Regulations, and shall also
file with state securities commissions in states where the Preferred Securities
have been sold by the Underwriters (as the Underwriters shall have advised the
Company in writing) such reports as are required to be filed by the securities
acts and the regulations of those states.
m. During the period beginning from the date hereof and continuing for
a period of 180 days after the date of the Effective Prospectus, not to offer,
issue, sell, contract to sell, grant any option (other than the grant of options
by the Company pursuant to plans in effect on the date hereof) for the sale of,
or otherwise dispose of ("Transfer"), directly or indirectly, (a) any trust
certificates or other securities of the Trust (other than the Preferred
Securities and the Common Securities), (b) any preferred stock or any other
security of the Company or its affiliates that is substantially similar to the
Preferred Securities, or (c) any other securities which are convertible into, or
exercisable or exchangeable for, any of (a) and (b) above, without the prior
consent of Tucker Anthony for a period of 180 days after the date of the
Effective Prospectus.
n. To not take, directly or indirectly, any action designed to
cause or result in, or which might constitute or be expected to constitute,
stabilization or manipulation of the price of any security of the Company in
connection with the offering, the sale or resale of the Preferred Securities,
the Guarantee or the Subordinated Debentures.
5. Expenses. The Company agrees with the Underwriters that whether or
not the transactions contemplated by this Agreement are consummated or this
Agreement becomes effective or is terminated, the Company will pay all fees and
expenses incident to the performance
16
of the obligations of the Company and the Trust hereunder, including, but not
limited to, (i) the fees, disbursements and expenses of the Trust's and the
Company's counsel and accountants in connection with the issue of the Preferred
Securities and all other expenses in connection with the preparation, printing
and filing of the Registration Statement and any amendments and supplements
thereto and the mailing and delivering of copies thereof to the Underwriters;
(ii) the cost of printing or producing this Agreement, the Indenture, the Trust
Agreement, the Guarantee, any Blue Sky and legal investment memorandum, any
closing documents (including any compilations thereto) and any other documents
in connection with the offering, purchase, sale and delivery of the Preferred
Securities; (iii) the fees, disbursements and expenses of Hutchins, Wheeler &
Dittmar, special tax counsel to the Trust; (iv) the cost of preparing the
Preferred Securities and the Subordinated Debentures; (v) the fees and expenses
of the Trustees and any other agent thereof and the fees and disbursements of
their counsel, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky surveys; and (vi) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Preferred Securities by them, and any
advertising expenses connected with any offers they may make. The Company shall
not in any event be liable to the Underwriters for the loss of anticipated
profits from the transactions covered by this Agreement.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Securities and Optional Securities
shall be subject, in their discretion, to the accuracy of the representations
and warranties of the Company and the Trust herein as of the date hereof and as
of the Closing Date as if made on and as of the Closing Date, to the accuracy of
the statements of the Company's officers made pursuant to the provisions hereof,
to the performance by the Company and the Trust of all of their covenants and
agreements hereunder and to the following additional conditions:
a. All filings required by Rules 424, 430A and 462 of the Rules
and Regulations shall have been made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened or, to the knowledge of the Company, the Trust or the
Underwriters, shall be contemplated by the Commission; any request of
the Commission for additional information (to be included in the
Registration Statement or the Final Prospectus or otherwise) shall
have been complied with to the Underwriters' satisfaction; and the
NASD, upon review of the terms of the public offering of the Preferred
Securities, shall not have objected to such offering, such terms or
the Underwriters' participation in the same.
b. No Underwriter shall have advised the Company and the Trust
that the Registration Statement, Preliminary Prospectus, the Effective
Prospectus or Final Prospectus, or any amendment or any supplement
thereto, contains an untrue statement of fact which, in the
Representatives' reasonable judgment, is material, or omits to state a
fact which, in the Representatives'
17
judgment, is material and is required to be stated therein or
necessary to make the statements therein not misleading, and the
Company and the Trust shall not have cured such untrue statement of
fact or stated a statement of fact required to be stated therein.
c. The Underwriters shall have received an opinion, dated the
Closing Date, from Hutchins, Wheeler & Dittmar, A Professional
Corporation ("Hutchins, Wheeler & Dittmar"), counsel for the Company,
substantially to the effect that:
(1) The Company is validly existing in good
standing as a corporation under the laws of
the Commonwealth of Massachusetts, with
corporate power and authority to own its
properties and conduct its business as now
conducted, and is duly qualified to do
business as a foreign corporation in good
standing in all other jurisdictions where
the failure to so qualify would have a
material adverse effect upon the Company and
its subsidiaries taken as a whole. To the
best knowledge of such counsel, the Company
holds all licenses, certificates, permits,
franchises and authorizations from
governmental authorities which are material
to the conduct of its business in all
locations in which such business is
currently being conducted.
(2) Each of the Company's subsidiaries is
validly existing and in good standing as a
corporation under the laws of the state of
its incorporation or organization, as the
case may be, with power and authority to own
its properties and conduct its business as
now conducted, and is duly qualified or
authorized to do business and is in good
standing in all other jurisdictions where
the failure to so qualify would have a
material adverse effect upon the business of
the Company and its subsidiaries taken as a
whole. The outstanding stock of each of the
Company's subsidiaries is duly authorized,
validly issued, fully paid and
nonassessable. To the best knowledge of such
counsel, all of the outstanding stock of
each of the corporate subsidiaries owned
beneficially and of record by the Company is
owned free and clear of all liens,
encumbrances, equities and claims. To the
best knowledge of such counsel, no options
or warrants or other rights to purchase,
agreements or other obligations to issue or
other rights to convert any obligations into
any shares of capital stock or of ownership
interests in any of the Company's
subsidiaries are outstanding. To the best
knowledge of such counsel, each of the
Company's subsidiaries holds all licenses,
certificates, permits, franchises and
authorizations from governmental authorities
which are material to the conduct of its
business in all locations in which such
business is currently being conducted.
18
(3) The Company has full legal right, power and
authority to enter into this Agreement and
the Guarantor Agreements, and this Agreement
and the Guarantor Agreements, upon due
execution, authentication and delivery, have
been duly authorized, executed, and
delivered by the Company. This Agreement and
the Guarantor Agreements constitute valid
and legally binding obligations of the
Company enforceable against the Company in
accordance with their terms, except to the
extent that (A) enforcement thereof may be
limited by (1) bankruptcy, insolvency,
fraudulent transfer, rehabilitation,
conservation, reorganization, moratorium or
other similar laws now or hereafter in
effect relating to the rights of creditors
generally, and (2) general principles of
equity (regardless of whether enforceability
is considered in a proceeding at law or in
equity); (B) with respect to the Indenture,
the waiver contained in Section 6.06 of the
Indenture may be deemed unenforceable, and
(C) with respect to this Agreement, the
enforceability of indemnification and
contribution provisions may be limited by
federal and state securities laws and the
policies underlying such laws. The
Subordinated Debentures are entitled to the
benefits provided by the Indenture.
(4) No consent, approval, authorization or order
of any court or governmental agency or body
or third party is required for the
performance of this Agreement or the
Guarantor Agreements and or the consummation
by the Company of the transactions
contemplated hereby and thereby, except such
as have been obtained under the Securities
Act and such as may be required by the NASD
and under state securities or Blue Sky laws
in connection with the purchase and
distribution of the Preferred Securities,
the Guarantee and the Subordinated
Debentures. The performance of this
Agreement and the Guarantor Agreements and
the consummation of the transactions
contemplated hereby and thereby will not
conflict with or result in a breach or
violation of any of the terms or provisions
of, or constitute a default by the Company
under, any indenture, mortgage, deed of
trust, loan agreement, lease or other
agreement or instrument known to such
counsel to which the Company is a party or
to which the Company or its properties is
subject, the Articles of Organization or
bylaws of the Company, any statute, or any
judgment, decree, order, rule or regulation
known to such counsel of any court or
governmental agency or body applicable to
the Company or any of its subsidiaries or
their properties.
(5) Except as described in the Final Prospectus,
there is not pending, or to the best
knowledge of such counsel threatened, any
action, suit, proceeding, inquiry or
investigation, to which the Company or any
of its subsidiaries is a party, or to which
the property of the Company or any of its
subsidiaries is subject, before or brought
by
19
any court or governmental agency or body,
which, if determined adversely to the
Company or any of its subsidiaries, could
result in any material adverse change in the
business, financial position, net worth or
results of operations, or could materially
adversely affect the properties or assets,
of the Company or any of its subsidiaries.
(6) To the best knowledge of such counsel, no
default exists, and no event has occurred
which with notice or after the lapse of time
to cure or both, would constitute a default,
in the due performance and observance of any
term, covenant or condition of any
indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or
instrument to which the Company or any of
its subsidiaries is a party or to which they
or their properties are subject, or of the
Articles of Organization or bylaws of the
Company or any of its subsidiaries.
(7) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor
any of its subsidiaries is in violation of
any law, ordinance, administrative or
governmental rule or regulation applicable
to the Company or any of its subsidiaries
and material to the Company and its
subsidiaries taken as a whole or any decree
of any court or governmental agency or body
having jurisdiction over the Company or any
of its subsidiaries.
(8) The Registration Statement and all post
effective amendments thereto have become
effective under the Securities Act, and, to
the best knowledge of such counsel, no stop
order suspending the effectiveness of the
Registration Statement has been issued and
no proceedings for that purpose have been
instituted or are threatened, pending or
contemplated by the Commission. All filings
required by Rule 424 and Rule 430A of the
Rules and Regulations have been made; the
Registration Statement, the Effective
Prospectus and Final Prospectus, and any
amendments or supplements thereto (except
for the financial statements and schedules
included therein as to which such counsel
need express no opinion), as of their
respective effective or issue dates,
complied as to form in all material respects
with the requirements of the Securities Act
and the Rules and Regulations; the
descriptions in the Registration Statement,
the Effective Prospectus and the Final
Prospectus of statutes, regulations, legal
and governmental proceedings, and contracts
and other documents are accurate in all
material respects and present fairly the
information required to be stated; and such
counsel does not know of any pending or
threatened legal or governmental
proceedings, statutes or regulations
required to be described in the Final
Prospectus which are not described as
required nor of any contracts or documents
of a character required to be described in
the
20
Registration Statement or the Final
Prospectus or to be filed as exhibits to the
Registration Statement which are not
described and filed as required.
In addition to the matters set forth above, such
opinion shall also include a statement to the effect
that nothing has come to the attention of such
counsel which leads them to believe that the
Registration Statement, the Effective Prospectus and
the Final Prospectus or any amendment or supplement
thereto contains an untrue statement of a material
fact or omits to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading (except that such counsel need
express no view as to financial statements, schedules
and other financial information included therein).
To the extent that matters discussed above are addressed in the
legal opinions of the same date of Orrick Herrington & Sutcliffe,
Thomas P. McHugh, Esq. and John J. Malloy, Esq. (copies of which are
concurrently delivered to the Underwriters), the opinion of Hutchins,
Wheeler & Dittmar may be given in reliance on, and subject to any
limitations in, such opinions.
d. Richards, Layton & Finger, P.A., special Delaware counsel
for the Trust, shall have furnished to you their written opinion, dated
the Closing Date, in form and substance satisfactory to you, to the
effect that:
i. The Trust has been duly created and is validly
existing in good standing as a business trust under the
Delaware Business Trust Act, and all filings required under
the laws of the State of Delaware with respect to the creation
and valid existence of the Trust as a business trust have been
made;
ii. Under the Delaware Business Trust Act and the
Trust Agreement, the Trust has the trust power and authority
to own property and conduct its business, all as described in
the Effective Prospectus.
iii. Each of this Agreement and the Trust Agreement
constitutes a valid and legally binding obligation of the
Company and the Trustees, and is enforceable against the
Company and the Trustees, in accordance with its terms,
subject, as to enforcement, to the effect upon the declaration
of (i) bankruptcy, insolvency, reorganization, moratorium,
receivership, liquidation, fraudulent transfer and conveyance,
and other similar laws relating to or affecting the rights and
remedies of creditors generally, (ii) principles of equity,
including applicable law relating to fiduciary duties
(regardless of whether considered and applied in a proceeding
in equity or at law), and (iii) the effect of applicable
public policy on the enforceability of provisions relating to
indemnification or contribution.
21
iv. Under the Delaware Business Trust Act and the
Trust Agreement, the Trust has the trust power and authority
to (a) execute and deliver, and to perform its obligations
under, the Underwriting Agreement and (b) issue and perform
its obligations under the Trust Securities.
v. Under the Delaware Business Trust Act and the
Trust Agreement, the execution and delivery by the Trust of
the Underwriting Agreement, and the performance by the Trust
of its obligations thereunder, have been duly authorized by
all necessary trust action on the part of the Trust.
vi. Under the Trust Agreement and the Delaware
Business Trust Act, the Underwriting Agreement may be duly
executed on behalf of the Trust by the Sponsor.
vii. The Preferred Securities have been duly
authorized by the Trust Agreement and are duly and validly
issued and, subject to the qualifications set forth herein,
fully paid and non-assessable undivided beneficial interests
in the assets of the Trust and will entitle the
Securityholders to the benefits provided by the Trust
Agreement (subject to the terms of the Trust Agreement). The
Securityholders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
viii. The Common Securities have been duly authorized
by the Trust Agreement and are validly issued and fully paid
undivided beneficial interests in the assets of the Trust.
ix. Under the Delaware Business Trust Act and the
Trust Agreement, the issuance of the Trust Securities is not
subject to preemptive rights.
x. The issuance and sale by the Trust of the Trust
Securities, the execution, delivery and performance by the
Trust of the Underwriting Agreement, and the consummation by
the Trust of the transactions contemplated by the Underwriting
Agreement and the Trust Agreement and the compliance by the
Trust with its obligations thereunder do not violate (a) any
provisions of the Certificate of Trust of the Trust, dated as
of April 12, 1999, or the Trust Agreement, or (b) any
applicable Delaware law or administrative regulation.
xi. With respect to statements made in the Final
Prospectus under the caption "The Trusts" and in the
prospectus supplement under "Litchfield Capital Trust I,"
insofar as such statements are statements of Delaware law,
such statements are fairly presented.
xii. No authorization, approval, consent or order of
any Delaware court or Delaware governmental authority or
Delaware agency is required to be obtained by the Trust solely
in connection with the sale of the Trust Securities.
22
xiii. The Securityholders (other than those
Securityholders who reside or are domiciled in the State of
Delaware) will have no liability for income taxes imposed by
the State of Delaware solely as a result of their
participation in the Trust, and the Trust will not be liable
for any income tax imposed by the State of Delaware.
e. Hutchins, Wheeler & Dittmar, counsel to the Trust and the
Company in relation to the classification of the Trust for United
States federal income tax purposes, shall have furnished their written
opinion to the effect that the statements made in the Effective
Prospectus or Final Prospectus under the caption "Certain Federal
Income Tax Consequences" are a fair and accurate summary of certain of
the United States federal income tax issues relating to the purchase,
ownership and the disposition of the Preferred Securities.
f. The Underwriters shall have received an opinion or
opinions, dated the Closing Date, of Bass, Berry & Sims PLC, counsel
for the Underwriters, with respect to this Agreement, the Subordinated
Debentures, the Indenture, the Trust Agreement and the Registration
Statement, Effective Prospectus and the Final Prospectus, and such
other related matters as the Underwriters may require, and the Company
and Trust shall have furnished to such counsel such documents as they
may reasonably request for the purpose of enabling them to pass upon
such matters. Such counsel may rely on Hutchins, Wheeler & Dittmar,
Thomas P. McHugh, Esq., and John J. Malloy, Esq. as to matters of
Massachusetts law and on Richards, Layton & Finger, P.A. as to matters
of Delaware law.
g. The Underwriters shall have received from Ernst & Young LLP, a
letter dated the date hereof and, at the Closing Date, a second letter
dated the Closing Date, in form and substance satisfactory to the
Underwriters, stating that they are independent public accountants
with respect to the Company and its subsidiaries within the meaning of
the Securities Act and the applicable Rules and Regulations, and to
the effect that:
(1) In their opinion, the financial statements
and schedules examined by them and included
in or incorporated by reference in the
Registration Statement comply as to form in
all material respects with the applicable
accounting requirements of the Securities
Act and the published Rules and Regulations
and are presented in accordance with
generally accepted accounting principles;
and they have made a review in accordance
with standards established by the American
Institute of Certified Public Accountants of
the consolidated interim financial
statements, selected financial data, and/or
condensed financial statements derived from
audited financial statements of the Company;
(2) On the basis of a reading of the latest
available unaudited interim consolidated
financial statements of the Company and its
subsidiaries, a reading of the minute books
of the Company and its
23
subsidiaries, inquiries of management of the
Company responsible for financial and
accounting matters and other specified
procedures, all of which have been agreed to
by the Underwriters, nothing came to their
attention that caused them to believe that:
(a) the unaudited financial statements included or incorporated
by reference in the Registration Statement do not comply as to form in
all material respects with the accounting requirements of the federal
securities laws and the related published rules and regulations
thereunder or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with the basis
for the audited financial statements contained in the Registration
Statement;
(b) any other unaudited financial statement data included or
incorporated by reference in the Final Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which data was derived and any such unaudited data
were not determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited financial statements
included or incorporated by reference in the Prospectus;
(c) at a specified date not more than five days prior to the date
of delivery of such respective letter, there was any change in the
consolidated capital stock, decline in stockholders' equity or
increase in long-term debt of the Company and its subsi diaries, or
other items specified by the Underwriters, in each case as compared
with amounts shown in the latest balance sheets included or
incorporated by reference in the Final Prospectus, except in each case
for changes, decreases or increases which the Final Prospectus
discloses have occurred or may occur or which are described in such
letters; and
(d) for the period from the closing date of the latest
consolidated statements of income included or incorporated by
reference in the Effective Prospectus and the Final Prospectus to a
specified date not more than five days prior to the date of delivery
of such respective letter, there were any decreases in total revenues
or net income of the Company, or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the corresponding period
of the preceding year, except in each case for decreases which the
Final
24
Prospectus discloses have occurred or may occur or which are
described in such letter.
They have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial information specified by the Underwriters which are
derived from the general accounting records of the Company and its
subsidiaries, which appear in the Effective Prospectus and the Final
Prospectus and have compared and agreed such amounts, percentages and
financial information with the accounting records of the Company and
its subsidiaries or to analyses and schedules prepared by the Company
and its subsidiaries from its detailed accounting records.
In the event that the letters to be delivered referred to above
set forth any such changes, decreases or increases, it shall be a
further condition to the obligations of the Underwriters that the
Underwriters shall have determined, after discussions with officers of
the Company responsible for financial and accounting matters and with
Ernst & Young LLP, that such changes, decreases or increases as are
set forth in such letters do not reflect a material adverse change in
the stockholders' equity or long-term debt of the Company as compared
with the amounts shown in the latest consolidated balance sheets of
the Company included in the Final Prospectus, or a material adverse
change in total revenues or net income, of the Company, in each case
as compared with the corresponding period of the prior year.
h. The Trust Agreement, the Guarantee and the Indenture shall
have been executed and delivered, in each case in a form reasonably
satisfactory to you.
i. Subsequent to the respective dates as of which information is
given in the Registration Statement, and except as stated therein,
neither the Company nor the Trust have sustained any material loss or
interference with their business or properties from fire, flood,
hurricane, earthquake, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any court or
governmental action, order or decree, or become a party to or the
subject of any litigation which is material to the Company or the
Trust, nor shall there have been any material adverse change, or any
development involving a prospective material adverse change, in the
business, properties, key personnel, capitalization, net worth,
results of operations or condition (financial or other) of the Company
or the Trust, which loss, interference, litigation or change, in the
judgment of the Underwriters shall render it unadvisable to commence
or continue the offering or the delivery of the Preferred Securities
on the terms and in the manner contemplated in this Agreement and in
the Registration Statement.
25
j. All such opinions, certificates, letters and documents
delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory to Tucker Anthony and
their counsel. The Company shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters and documents
in such quantities as the Underwriters shall reasonably request.
k. There shall have been furnished to the Underwriters a
certificate, dated the Closing Date and addressed to the Underwriters,
signed by the Chief Executive Officer and by the Chief Financial
Officer of the Company and the trustees of the Trust to the effect
that:
(1) the representations and warranties of the
Company and Trust in Section 1 of this
Agreement are true and correct, as if made
at and as of the Closing Date, and each of
the Company and Trust have complied with all
the agreements and satisfied all the
conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(2) no stop order suspending the effectiveness
of the Registration Statement has been
issued, and no proceedings for that purpose
have been initiated or are pending, or to
their knowledge, threatened under the
Securities Act;
(3) all filings required by Rules 424, 430A and
462 of the Rules and Regulations have been
made;
(4) they have carefully examined the
Registration Statement, the Effective
Prospectus and the Final Prospectus, and any
amendments or supplements thereto, and such
documents do not include any untrue
statement of a material fact or omit to
state any material fact required to be
stated therein or necessary to make the
statements therein not misleading; and
(5) since the effective date of the Registration
Statement, there has occurred no event
required to be set forth in an amendment or
supplement to the Registration Statement,
the Effective Prospectus or the Final
Prospectus which has not been so set forth.
The obligation of the Underwriters to purchase and pay for the Optional
Securities shall be subject, in their discretion, to each of the foregoing
conditions to purchase the Firm Securities, except that all references to the
"Closing Date" shall be deemed to refer to the Option Closing Date, if it shall
be a date other than the First Closing Date.
26
7. Condition of the Company's and the Trust's Obligations. The
obligations hereunder of the Company and the Trust are subject to the condition
set forth in Section 6(a) hereof.
8. Indemnification and Contribution.
a. The Company and the Trust, jointly and severally, agree to
indemnify and hold harmless the Underwriters, and each person, if any,
who controls the Underwriters within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which the Underwriters or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based in whole or in part upon (i) any inaccuracy in the
representations and warranties of the Company or the Trust contained
herein, (ii) any failure of the Company or the Trust to perform its or
their obligations hereunder or under law or (iii) any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Effective
Prospectus or Final Prospectus, or any amendment or supplement
thereto, or in any Blue Sky application or other written information
furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Preferred Securities under the
securities laws thereof (a "Blue Sky Application"), or arise out of or
are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Effective
Prospectus or Final Prospectus or any amendment or supplement thereto
or any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse the Underwriters and each such controlling person
for any legal or other expenses reasonably incurred by the
Underwriters or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that neither
the Company nor the Trust will be liable in any such case to the
extent that any such loss, claim, damage, or liability arises out of
or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, the
Preliminary Prospectus, the Effective Prospectus or Final Prospectus
or such amendment or such supplement or any Blue Sky Application in
reliance upon and in conformity with written information furnished to
the Company or the Trust by the Underwriters specifically for use
therein (it being understood that the only information so provided is
the information included in the second, eighth and eleventh paragraphs
under the caption "Underwriting" in any Preliminary Prospectus and the
Final Prospectus and the Effective Prospectus).
b. The Underwriters will indemnify and hold harmless the Trust
and the Company, each of its directors, each of its officers who
signed the Registration
27
Statement and each person, if any, who controls the Company within
the meaning of the Securities Act, and each Regular Trustee or any other
person who controls the Trust within the meaning of the Securities Act,
against any losses, claims, damages or liabilities to which the Company or
Trust or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or Final Prospectus, or any amendment
or supplement thereto, or any Blue Sky Application, or arise out of or are
based upon the omission or the alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Effective
Prospectus or Final Prospectus or any amendment or supplement thereto or
any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company and the
Trust by the Underwriters specifically for use therein (it being understood
that the only information so provided is the information included in the
second, eighth and eleventh paragraphs under the caption "Underwriting" in
any Preliminary Prospectus and in the Effective Prospectus and the Final
Prospectus);
c. Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, including
governmental proceedings, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under
this Section 8 notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 8. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party; and after notice from the indemnifying party to
such indemnified party of its election to so assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation except
that the indemnified party shall have the right to employ separate
counsel if, in its reasonable judgment, it is advisable for the
indemnified party to be represented by separate counsel, and in that
event the fees and expenses of separate counsel shall be paid by the
28
indemnifying party. Neither the Company nor the Trust will, without prior
written consent of the Underwriters, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding (or related cause of action or portion thereof) in respect of
which indemnification may be sought hereunder (whether or not the
Underwriters are a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of
the Underwriters from all liability arising out of such claim, action, suit
or proceeding (or related cause of action or portion thereof).
d. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding part of this Section 8 is for any reason held to be
unavailable to the Underwriters, the Company, or the Trust as
insufficient to hold harmless an indemnified party, then the Company
and the Trust shall contribute to the damages paid by the
Underwriters, and the Underwriters shall contribute to the damages
paid by the Company and the Trust provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties
are entitled, there shall be considered the relative benefits received
by each party from the offering of the Preferred Securities (taking
into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, and
any other equitable considerations appropriate under the
circumstances. The Company, the Trust and the Underwriters agree that
it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. The Underwriters or
any person controlling the Underwriters shall not be obligated to make
contribution hereunder which in the aggregate exceeds the amounts paid
to the Underwriters as compensation for their commitments to purchase
Preferred Securities under this Agreement, less the aggregate amount
of any damages which the Underwriters and their controlling persons
have otherwise been required to pay in respect of the same or any
similar claim. For purposes of this Section, each person, if any, who
controls the Underwriters within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as the
Underwriters, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act, shall have the same rights to contribution as the
Company, and each Regular Trustee and each person who controls the
Trust within the meaning of Section 15 of the Securities Act, shall
have the same right to contribution as the Trust.
29
e. The obligations of the Company and the Trust under this
Section 8 shall be in addition to any liability which the Company may
otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls the Underwriters within the
meaning of the Securities Act; and the obligations of the Underwriters
under this Section 8 shall be in addition to any liability which the
Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of
the Securities Act, and to each person who controls the Trust within
the meaning of the Securities Act.
9. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Trust, the
Company, its officers and the Underwriters set forth in this Agreement or made
by or on behalf of them, respectively, pursuant to this Agreement shall remain
in full force and effect, regardless of (i) any investigation made by or on
behalf of the Company, any of its officers or directors, the Underwriters or any
controlling person, the Trust or any Regular Trustee or controlling person of
the Trust (ii) any termination of this Agreement and (iii) delivery of and
payment for the Preferred Securities.
10. Effective Date. This Agreement, after due execution, shall become
effective at whichever of the following times shall first occur: (i) execution
and delivery of this Agreement by the parties hereto or (ii) at such time after
the Registration Statement has become effective as the Underwriters shall
release the Firm Securities for sale to the public; provided, however, that the
provisions of Sections 5, 8, 9 and 10 hereof shall at all times be effective.
For purposes of this Section 10, the Firm Securities shall be deemed to have
been so released upon the release by the Underwriters for publication, at any
time after the Registration Statement has become effective, of any newspaper
advertisement relating to the Firm Securities or upon the release by the
Underwriters of telegrams offering the Firm Securities for sale to securities
dealers, whichever may occur first.
11. Termination.
a. The Company's obligations under this Agreement may be
terminated by the Company by notice to the Underwriters (i) at any
time before it becomes effective in accordance with Section 10 hereof,
or (ii) in the event that the condition set forth in Section 7 shall
not have been satisfied at or prior to the First Closing Date.
b. This Agreement may be terminated by the Underwriters by notice
to the Company and the Trust (i) at any time before it becomes
effective in accordance with Section 10 hereof; (ii) in the event that
at or prior to the First Closing Date the Company or the Trust shall
have failed, refused or been unable to perform any agreement on the
part of the Company or the Trust to be performed hereunder or any
other condition to the obligations of the Underwriters hereunder is
not fulfilled; (iii) if at or prior to the Closing Date trading in
securities on the New York Stock Exchange, the American
30
Stock Exchange or the over-the-counter market shall have been suspended
or materially limited or minimum or maximum prices shall have been
established on either of such Exchanges or such market, or a banking
moratorium shall have been declared by Federal or state authorities; (iv)
if at or prior to the Closing Date trading in securities of the Company
shall have been suspended; or (v) if there shall have been such a material
change in general economic, political or financial conditions or if the
effect of international conditions on the financial markets in the United
States shall be such as, in the Underwriters' reasonable judgment, makes it
inadvisable to commence or continue the offering of the Preferred
Securities at the offering price to the public set forth on the cover page
of the Prospectus or to proceed with the delivery of the Securities.
c. Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party other than
as provided in Sections 5 and 8 hereof.
12. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriters, shall be mailed or delivered or telegraphed and
confirmed in writing to Tucker Anthony Cleary Gull, One Beacon Street, Boston,
Massachusetts 02108, Attn: Gregory W. Benning, or if sent to the Company or the
Trust shall be mailed, delivered or telegraphed and confirmed in writing to the
Company or the Trust at 430 Main Street, Williamstown, Massachusetts 01267,
Attn: Richard A. Stratton.
13. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Company and the Trust and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Company, the Trust and the Underwriters and
for the benefit of no other person except that (i) the representations and
warranties of the Company and the Trust contained in this Agreement shall also
be for the benefit of any person or persons who control the Underwriters within
the meaning of Section 15 of the Securities Act, and (ii) the indemnities by the
Underwriters shall also be for the benefit of the directors of the Company,
officers of the Company who have signed the Registration Statement and any
person or persons who control the Company within the meaning of Section 15 of
the Securities Act and the Regular Trustees and any person or persons who
control the Trust within the meaning of Section 15 of the Securities Act. No
purchaser of Preferred Securities from the Underwriters will be deemed a
successor because of such purchase. The validity and interpretation of this
Agreement shall be governed by the laws of the State of Massachusetts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
14. No Liability of Property Trustee, Delaware Trustee or Guarantee
Trustee.
31
It is understood and agreed by the parties hereto that (a)
each of the representations, undertakings and agreements herein made on the part
of the Trust is made and intended not as representations, warranties, covenants,
undertakings and agreements of any Trustee of the Trust, including, without
limitation, The Bank of New York, as Guarantee Trustee or Property Trustee, or
The Bank of New York (Delaware), as Delaware Trustee, in their individual
capacity, but is made and intended for the purpose of binding only the Trust,
and (b) under no circumstances shall any Trustee, including The Bank of New York
as Guarantee Trustee or Property Trustee or The Bank of New York (Delaware) as
Delaware Trustee be personally liable for any breach or failure of any
obligation, representation, warranty, or covenant made or undertaken by the
Trust under this Agreement except, if such breach or failure is due to any gross
negligence or wilful misconduct of the Trustee.
If the foregoing is in accordance with your understanding of our
agreement, please indicate your acceptance thereof in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between the Company, the Trust and the Underwriters.
Very truly yours,
LITCHFIELD FINANCIAL CORPORATION
By:
Name:
Title:
LITCHFIELD CAPITAL TRUST I
By: Litchfield Financial Corporation, as sponsor
By:
Name:
Title:
32
Confirmed and accepted as of the date first above written.
TUCKER ANTHONY CLEARY GULL
FERRIS, BAKER WATTS INCORPORATED
For themselves and as Representatives of the several Underwriters
By: Tucker Anthony Cleary Gull
By:_______________________________
Name:
Title:
By: Ferris, Baker Watts Incorporated
By:_______________________________
Name:
Title:
33
SCHEDULE I
UNDERWRITERS
<TABLE>
Number of
Firm Securities
Underwriters to Be Purchased
- ---------------------------------------------------------------------------- ---------------------------
<S> <C>
Tucker Anthony Cleary Gull.................................................. 1,666,667
Ferris, Baker Watts Incorporated............................................ 833,333
Total Firm Securities to be Purchased.................. 2,500,000
===========================
</TABLE>
34
Exhibit 2.1
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LITCHFIELD FINANCIAL CORPORATION
STAMFORD ASSET RECOVERY CORPORATION
IRONWOOD ACCEPTANCE COMPANY, LLC
AND
THE MEMBERS OF
IRONWOOD ACCEPTANCE COMPANY, LLC
DATED
JUNE 16, 1999
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 16, 1999 by and among
Litchfield Financial Corporation (the "Parent"), a corporation organized
under the laws of the Commonwealth of Massachusetts, Stamford Asset Recovery
Corporation ("Acquisition"), a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of the Parent, Ironwood
Acceptance Company, LLC, a limited liability company organized under the laws
of the State of Arizona (the "Company"), and the members of the Company, (the
"Members").
WHEREAS, the Boards of Directors of the Parent and Acquisition and the
Board of Managers of the Company have approved the merger of the Company with
and into the Acquisition (the "Merger"), pursuant to which Acquisition will
be the surviving corporation and the members of the Company immediately prior
to such merger (the "Members") will be entitled to receive the consideration
provided for in this Agreement, all upon the terms and subject to the
conditions set forth herein;
WHEREAS, as a condition and inducement to the Parent's willingness to
enter into this Agreement, all of the Members have, concurrently with the
execution of this Agreement, executed and delivered to the Parent written
consents approving this Agreement, the Merger and the other transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to
be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section
1.2), and subject to and upon the terms and conditions of this Agreement, the
Arizona Limited Liability Company Act (the "ALLCA") and the Delaware General
Corporation Law (the "DGCL"), the Company shall be merged with and into
Acquisition, the separate existence of the Company shall cease, and
Acquisition shall continue as the surviving corporation. Acquisition as the
surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Article X and subject to the satisfaction or waiver of the conditions set
forth in Articles VIII and IX, the consummation of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within two
business days) after satisfaction or waiver of the conditions set forth in
Articles VIII and IX, at the offices of Hutchins, Wheeler & Dittmar, A
Professional Corporation, 101 Federal Street, Boston, Massachusetts, unless
another date, time or place is agreed to in writing by the Company and the
Parent. The date of such Closing is referred to herein as the "Closing Date."
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Articles VIII and IX, the parties
hereto shall cause the Merger to be consummated by filing agreements,
certificates or articles of merger, as the case may be, as contemplated by
the ALLCA and the DGCL in the forms of Exhibit A-1 and Exhibit A-2 hereto
(collectively, the "Certificate of Merger"), together with any required
related certificates, with the Arizona Corporation Commission and the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of the ALLCA and the DGCL
(the time of such filings being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the ALLCA and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined by
the Parent prior to the Effective Time, at the Effective Time, the
Certificate of Incorporation of Acquisition, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the DGCL
and Certificate of Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior to
the Effective Time, the By-Laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, or record or otherwise, in the
Surviving Corporation, its right, title or interest in or to any of the
rights, properties or assets of Acquisition or the Company acquired or to be
acquired by reason of, or as a result of, the Merger, or otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors shall be authorized to execute and deliver, in the
name and on behalf of Acquisition or the Company, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of
Acquisition or the Company, all such other acts and things necessary or
desirable to vest, perfect or confirm any and all right, title or interest
in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(e)
hereof, the consideration payable in the Merger to holders of membership
interests in the Company (the"Membership Units"), shall consist of (i) an
aggregate of $790,653.75 payable in cash by wire transfer of immediately
available funds to the Members on a pro rata basis based on the number of
Fully Diluted Shares (as defined below) held by each Member, and (ii) an
aggregate of 91,665 shares of the Common Stock, par value $.01 per share, of
the Parent (the "Parent Common Stock"), such shares of the Parent Common
Stock to be issuable at the Closing in accordance with the terms of this
Agreement.
2.2 Conversion of Shares.
(a) Conversion of Shares. Each Membership Unit issued and
outstanding as of the Effective Time (other than shares owned by holders who
have properly exercised their rights of appraisal within the meaning of the
ALLCA ("Dissenting Shares")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into (i)
the right to receive from the Parent $263.55 and (ii) that number of shares
of the Parent Common Stock as shall be obtained by dividing 91,665 (total
number of Parent Shares to be issued) by the number of Fully Diluted Shares
(as hereinafter defined) with the resulting quotient being carried to five
decimal places (the "Merger Consideration"). "Fully Diluted Shares" shall be
equal to the total number of outstanding Membership Units calculated on a
fully diluted, fully converted basis as though all convertible debt and
equity securities and options (whether vested or unvested) and warrants had
been converted or exercised. The Exchange Ratio shall not change as a result
of fluctuations in the market price of the Parent Common Stock between the
date of this Agreement and the Effective Time. The aggregate number of
shares of the Parent Common Stock issued pursuant to this Section 2.2(a)
shall be referred to in this Agreement as the "Merger Shares." On the
Closing Date, the Company will deliver to the Parent a certificate certifying
the cash proceeds received by the Company from the exercise of stock options.
(b) Treasury Shares. Each Membership Unit held in the Company's
treasury as of the Effective Time, if any, shall, by virtue of the Merger, be
canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, all outstanding options
to purchase Membership Units (each a "Stock Option"), whether vested or
unvested, shall be deemed assumed by the Parent and deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Stock Option prior to the Effective Time (including terms and conditions
relating to such Stock Option's term, exercisability, vesting schedule and
status as an "incentive stock option" under Section 422 of the Code), the
number (rounded down to the nearest whole number) of shares of the Parent
Common Stock equal to the aggregate of that number of shares of the Parent
Common Stock (based on the Exchange Ratio) as the holder of such Stock Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such Option in full immediately prior to the Effective Time (not
taking into account whether or not such Option was in fact exercisable). The
exercise price for such Stock Options shall be the price per share equal to
(x) the aggregate exercise price for Membership Units otherwise purchasable
pursuant to such Stock Option divided by (y) the number of shares of the
Parent Common Stock deemed purchasable pursuant to such Stock Option (the
exercise price per share, so determined, being rounded up to the nearest full
cent). No payment shall be made for fractional shares. The aggregate number
of shares of the Parent Common Stock issuable upon the exercise of Options
assumed by the Parent pursuant to this Section 2.2(c) shall be referred to in
this Agreement as the "Option Shares." Any adjustment to an incentive stock
option made under this Section 2.2(c) shall comply with Section 424(a) of the
Code.
(d) Acquisition Shares. Each share of common stock, par value
$.01 per share, of Acquisition issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, automatically be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation, as such
shares of common stock are constituted immediately following the Effective
Time.
(e) Dissenting Shares. Any Dissenting Shares shall be converted
into the right to receive from the Surviving Corporation such consideration
as may be determined to be due with respect to each such Dissenting Share
pursuant to the ALLCA; provided, however, Membership Units that are
Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the ALLCA, shall
be deemed to be converted, as of the Effective Time of the Merger, into the
right to receive the Merger Consideration in accordance with the procedures
specified in Section 2.3. The Company shall give the Parent (i) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to the ALLCA received by
the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the ALLCA. The
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of the Parent,
settle or offer to settle any such demands. It is understood and agreed that
the obligation to make any payment under the ALLCA shall be exclusively that
of the Surviving Corporation and that the Parent shall be under no obligation
to perform and discharge any such obligation or to reimburse or make any
contribution to the capital of the Surviving Corporation to enable it to
perform and discharge any such obligation.
2.3 Exchange of Certificates.
(a) At the Closing, certificates (the "Certificates") representing
all of the issued and outstanding Membership Units together with stock powers
executed in blank shall be surrendered for cancellation and termination in
the Merger. At the Effective Time, each Certificate shall be canceled in
exchange for a certificate representing the number of whole shares of the
Parent Common Stock (other than the Escrow Shares, as defined below) into
which the Membership Units evidenced by the Certificates so surrendered shall
have been converted pursuant to Section 2.2(a) of this Agreement. Such
certificates representing shares of the Parent Common Stock will be delivered
to the Members as soon as practicable but no later than five (5) business
days after the Closing. Until surrendered, each outstanding Certificate which
prior to the Effective Time represented Membership Units shall be deemed for
all corporate purposes to evidence ownership of the number of whole shares of
the Parent Common Stock into which the Membership Units have been converted
but shall, subject to applicable appraisal rights under the ABCA and ALLCA
and Section 2.2(e), have no other rights. Subject to appraisal rights under
the ABCA and ALLCA and Section 2.2(e), from and after the Effective Time, the
holders of Membership Units shall cease to have any rights in respect of such
units and their rights shall be solely in respect of the Parent Common Stock
into which the Membership Units have been converted.
(b) If any shares of the Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to
the issuance of such shares that (i) the Certificate(s) so surrendered shall
be transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and
(iii) the person requesting such transfer shall pay the Parent, or its
exchange agent, any transfer or other taxes payable by reason of the
foregoing or establish to the reasonable satisfaction of the Parent that such
taxes have been paid or are not required to be paid. Notwithstanding the
foregoing, neither the Parent nor the Company shall be liable to a holder of
Membership Units for shares of the Parent or the Company issuable to such
holder pursuant to the provisions of Section 2.2(a) of this Agreement that
are delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Parent shall
issue in exchange for such lost, stolen or destroyed Certificate the shares
of the Parent Common Stock issuable in exchange therefor pursuant to the
provisions of Section 2.2(a) of this Agreement. The Board of Directors of
the Parent may in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
provide to the Parent, at the Parent's option, either a performance bond or
an indemnity agreement against any claim that may be made against the Parent
with respect to the Certificate alleged to have been lost, stolen or
destroyed.
2.4 No Fractional Securities. No fractional shares of the Parent
Common Stock shall be issuable by the Parent upon the conversion of
Membership Units in the Merger pursuant to Section 2.2(a) hereof. In lieu of
any such fractional shares, each holder of Membership Units who would
otherwise have been entitled to receive a fraction of a share of the Parent
Common Stock shall be entitled to receive instead an amount in cash equal to
such fraction multiplied by the Closing Market Price. For purposes of this
Agreement, the term "Closing Market Price" shall mean the last quoted sale
price for shares of the Parent Common Stock on The Nasdaq National Market the
day preceding the Effective Time.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers of Membership Units thereafter on the records of
the Company.
2.6 No Further Ownership Rights in Membership Units. The Merger Shares
delivered upon the surrender for exchange of Membership Units in accordance
with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation
of Membership Units which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, certificates for Membership Units are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
2.7 Adjustment Event. If, between the date hereof and the Effective
Time, the issued and outstanding shares of the Parent Common Stock shall have
been combined, split, reclassified or otherwise changed into a different
number of shares or a different class of shares, an appropriate adjustment to
the Exchange Ratio shall be made to fully reflect such change in such manner
as is reasonably acceptable to the Parent and the Company.
2.8 Escrow. At the Effective Time, the Parent will deposit on behalf
of the Members (pro rata as to each Member) in escrow all certificates
representing the Merger Shares received by the Members, registered in the
name of Arizona Escrow & Financial Corporation, as Escrow Agent
(collectively, the "Escrow Shares"). The Escrow Shares shall be held as
security for the indemnification obligations under Article XI and shall be
distributed fifty percent (50%) on the first anniversary of the Closing and
fifty percent (50%) on the second anniversary of the Closing, or as otherwise
provided pursuant to the provisions of an Escrow Agreement (the "Escrow
Agreement") in the form of Exhibit B attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE MEMBERS
The Company and the Members jointly and severally represent and warrant
to the Parent and Acquisition as set forth below, subject to the exceptions
set forth in the disclosure schedules attached hereto (the "Disclosure
Schedules"), the section numbers and letters of which correspond to the
section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall,
should the existence of the information be relevant to any other section of
the Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is reasonably apparent in the section of
the Disclosure Schedules on which such information is disclosed. The
disclosure of any information shall not be deemed to constitute an
acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Company in
this Agreement or that it is material, nor shall such information be deemed
to establish a standard of materiality
3.1 Company Organization. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Arizona. The Company has no Subsidiaries (as that term is
hereinafter defined) except for Palo Verde Trading Company, LLC which is a
wholly owned direct subsidiary of the Company. The Company has all requisite
power and authority to own, operate and lease the properties and assets it
now owns, operates and leases and to carry on its business as presently
conducted. The Company is duly qualified to transact business as a foreign
company and in good standing in the jurisdictions set forth in Schedule 3.1,
which are the only jurisdictions where such qualification is required by
reason of the nature of the properties and assets currently owned, operated
or leased by the Company or the business currently conducted by it, except
for such jurisdictions where the failure to be so qualified would not have a
Company Material Adverse Effect (as defined below). The Company has
previously delivered to the Parent complete and correct copies of its
Articles of Organization (certified by the secretary of state of the
jurisdiction in which it was formed as of a recent date) and its Operating
Agreement (certified by the Secretary of the Company as of a recent date).
Except as set forth in Schedule 3.1, neither the Articles of Organization nor
the Operating Agreement of the Company have been amended since the respective
dates of certification thereof, nor has any action been taken for the purpose
of effecting any amendment of such instruments. The term "Company Material
Adverse Effect" means, for purposes of this Agreement, any change, event or
effect that is, or that would be, materially adverse to the business,
operations, assets, liabilities, financial condition or results of operations
of the Company, taken as a whole.
3.2 Authorization. The Company has full limited liability company
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Board of Managers and Members of the Company, and
no other action on the part of the Company is necessary to approve and
authorize the execution and delivery of this Agreement or (subject to the
filing of the Articles of Merger or Certificate of Merger pursuant to the
ALLCA and the DGCL respectively) the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations. Subject to the filing of
the Certificate of Merger with the Arizona Corporation Commission and the
Secretary of State of the State of Delaware and compliance with applicable
federal and state securities laws, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not: (i) violate or conflict with any provision of the Certificate of
Organization or Operating Agreement of the Company, (ii) breach, violate or
constitute an event of default (or an event which with the lapse of time or
the giving of notice or both would constitute an event of default) under,
give rise to any right of termination, cancellation, modification or
acceleration under, or require any consent or the giving of any notice under,
any note, bond, indenture, mortgage, security agreement, lease, license,
franchise, permit, agreement or other instrument or obligation to which the
Company is a party, or by which the Company or any of its properties or
assets may be bound, or result in the creation of any lien, claim or
encumbrance or other right of any third party of any kind whatsoever upon the
properties or assets of the Company pursuant to the terms of any such
instrument or obligation, other than any breach, violation, default,
termination, cancellation, modification or acceleration which would not have
a Company Material Adverse Effect, (iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any Federal, state, local or
foreign court or governmental or regulatory body, agency or authority
applicable to the Company or by which any of its properties or assets may be
bound except for such violations and conflicts which would not have a Company
Material Adverse Effect or (iv) require, on the part of the Company, any
filing or registration with, or permit, license, exemption, consent,
authorization or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, other than any filing,
registration, permit, license, exemption, consent, authorization, approval or
notice which if not obtained would not have a Company Material Adverse Effect.
3.4 Capitalization.
(a) The authorized membership interests of the Company consists of
3,000 Membership Units, of which 3,000 Membership Units are issued and
outstanding. Schedule 3.4(a) sets forth a complete and correct list of the
record and beneficial ownership of the issued and outstanding Membership
Units. Except as set forth on Schedule 3.4(a), all of the issued and
outstanding Membership Units were duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of any
preemptive rights or Federal or state securities laws. Except as disclosed
in Schedule 3.4(a) hereto, the Company has never repurchased or redeemed any
Membership Units, and there are no amounts owed or which may be owed to any
person by the Company as a result of any repurchase or redemption of its
Membership Units. Except as disclosed in Schedule 3.4(a) hereto, there are
no agreements, arrangements or understandings to which the Company is a party
or by which it is bound to redeem or repurchase any Membership Units. Except
as set forth in Schedule 3.4(a), there are no outstanding options, warrants
or other rights to purchase, or any securities convertible into or
exchangeable for, Membership Units of the Company, and there are no
agreements, arrangements or understandings to which the Company is a party or
by which it is bound pursuant to which the Company is or may be required to
issue additional Membership Units.
(b) The Company does not own, directly or indirectly, any equity
securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any
general or limited partnership or unincorporated joint venture (a
"Subsidiary") except for Palo Verde Trading Company, LLC, a direct wholly
owned subsidiary of the Company.
3.5 Financial Statements; Business Information. (a) Attached hereto
as Schedule 3.5(a) are (i) the audited balance sheet of the Company as of
December 31, 1998 and the statements of income for the year then ended, and
(ii) the unaudited balance sheets of the Company as of May 31, 1999 and the
statements of income of the Company for the fiscal year or period then ended
(hereinafter collectively referred to as the "Financial Statements"). The
Financial Statements (i) have been prepared from the books and records of the
Company, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied during the periods covered
thereby, and (iii) present fairly in all material respects the financial
condition and results of operations of the Company as at the dates, and for
the periods, stated therein, except that the interim Financial Statements are
subject to normal year-end adjustments which will not be individually or in
the aggregate material in amount or effect and do not include footnotes.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth or
reserved against in the balance sheet of the Company dated as of May 31,
1999, included in the Financial Statements (the "Balance Sheet") and (ii) for
obligations incurred since May 31, 1999 in the ordinary course of business,
do not individually or in the aggregate exceed $10,000 (except for accrued
and unpaid interest payable to the Parent since May 31, 1999), the Company
does not have any material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7, since December 31, 1998, the Company has carried on its
business in all material respects in the ordinary course and consistent with
past practice. Except as set forth on Schedule 3.7 hereto, since December
31, 1998, the Company has not: (i) incurred any material obligation or
liability (whether absolute, accrued, contingent or otherwise) except in the
ordinary course of business and consistent with past practice; (ii)
experienced any Company Material Adverse Effect; (iii) made any change in
any accounting principle or practice or in its methods of applying any such
principle or practice; (iv) suffered any material damage, destruction or
loss, whether or not covered by insurance, affecting its properties, assets
or business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or
canceled or compromised any debts or waived any claims or rights of a
material nature; (vii) issued any additional Membership Units or any rights,
options or warrants to purchase, or securities convertible into or
exchangeable for, its Membership Units; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
its Membership Units; (ix) repurchased or redeemed any Membership Units; (x)
granted any general or specific increase in the compensation payable or to
become payable to any of their Employees (as that term is hereinafter
defined) or any bonus or service award or other like benefit, or instituted,
increased, augmented or improved any Benefit Plan (as that term is
hereinafter defined); or (xi) entered into any agreement to do any of the
foregoing.
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8, there
are no suits, actions, claims or proceedings (including, without limitation,
arbitral or administrative proceedings) or, to the knowledge of the Company
or the Members, investigations pending or, to the knowledge of the Company or
the Members, threatened against the Company or its properties, assets or
business or, to the best knowledge of the Company or the Members in their
capacity as such, pending or threatened against any of the officers,
directors, employees, agents or consultants of the Company in connection with
the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending against the Company, or, to the best
knowledge of the Company or the Members, threatened against the Company
challenging the validity or propriety of the transactions contemplated by
this Agreement. There is no judgment, order, injunction, decree or award
(whether issued by a court, an arbitrator or an administrative agency) to
which the Company is a party, or involving the Company's properties, assets
or business, which is unsatisfied or which requires continuing compliance
therewith by the Company.
3.9 Taxes.
(a) Except as set forth in Schedule 3.9, the Company has duly and
timely filed, all Tax returns and other filings in respect of Taxes (as that
term is hereinafter defined) required to be filed by it prior to May 31,
1999, and has in a timely manner paid all Taxes which are (or will be) due
for all periods ending on or before May 31, 1999, whether or not shown on
such returns. All such Tax returns have been, accurately and completely
prepared in all material respects in compliance with all laws, rules and
regulations.
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the knowledge of the Company
or the Members, threatened against the Company by any governmental authority
for the assessment or collection of Taxes, no claim for the assessment or
collection of Taxes has been asserted against the Company, and there are no
matters under discussion by the Company with any governmental authority
regarding claims for the assessment or collection of Taxes. Any Taxes that
have been claimed or imposed as a result of any examinations of any tax
return of the Company by any governmental authority are being contested in
good faith and have been disclosed in writing to the Parent. Except as set
forth in Schedule 3.9, there are no agreements or applications by the Company
for an extension of time for the assessment or payment of any Taxes nor any
waiver of the statute of limitations in respect of Taxes. There are no Tax
liens on any of the assets of the Company, except for liens for Taxes not yet
due or payable.
(c) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean and include any and all United States, state, local, foreign or
other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind, deficiencies, fees or other
governmental charges, including, without limitation, any installment payment
for taxes and contributions or other amounts determined with respect to
compensation paid to directors, officers, employees or independent
contractors from time to time imposed by or required to be paid to any
governmental authority (including penalties and additions to tax thereon,
penalties for failure to file a return or report, and interest on any of the
foregoing).
(d) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent
contractor of the Company that, considered individually or considered
collectively with any other such agreement, plan or arrangement, will, or
could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
of the Code or that would be subject to an excise tax under Section 4999 of
the Code.
(e) The Company is not and has never been a party to or bound by
any tax indemnity agreement, tax sharing agreement, tax allocation agreement
or similar agreement or arrangement and the Company does not have any
liability for Taxes of any person (other than the Company) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law).
(f) The Company has withheld amounts from its employees and other
persons required to be withheld under the tax, social security, unemployment
and other withholding provisions of all federal, state, local and foreign
laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own,
including the properties reflected on the Balance Sheet or acquired after the
date thereof (other than properties and assets sold or otherwise disposed of
in the ordinary course of business and consistent with past practice since
December 31, 1998), free and clear of any claims, liens, pledges, security
interests or encumbrances of any kind whatsoever (other than (i) purchase
money security interests and common law vendor's liens, in each case for
goods purchased on open account in the ordinary course of business and having
a fair market value of less than $10,000 in each individual case), (ii) liens
for Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, that are not material in character, amount or extent
and that do not materially detract from the value, or materially interfere
with the use of, the property subject thereto or affected thereby.
(b) Except as set forth on Schedule 3.10(b), the Company does not
own any real property or any interest in real property.
(c) Schedule 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company with a book value as of May 31, 1999, in each
case of $10,000 or more. All such personal property is in suitable operating
condition (ordinary and reasonable wear and tear excepted), is physically
located in or about one of the Company's places of business and is owned by
the Company or is leased by the Company under one of the leases set forth in
Schedule 3.10(d). Except as disclosed in Schedule 3.10(c), none of such
personal property is subject to any agreement or commitment for its use by
any person other than the Company. The maintenance and operation of such
personal property has been in material conformance with all applicable laws
and regulations except for such non-conformance as would not have a Company
Material Adverse Effect. There are no assets leased by the Company or
required for the operation of the business of the Company that are owned,
directly or indirectly, by any Related Person (as that term is hereinafter
defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of all
real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct
copies of each lease (and any amendments or supplements thereto) listed in
Schedule 3.10(d). Except as set forth in Schedule 3.10(d), (i) each such
lease is valid and binding and in full force and effect; except to the extent
that applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights may affect such validity
or enforceability, (ii) neither the Company nor (to the knowledge of the
Company or the Members) any other party is in default under any such lease,
and no event has occurred which constitutes, or with the lapse of time or the
giving of notice or both would constitute, a default by the Company or (to
the knowledge of the Company or the Members) a default by any other party
under such lease; (iii) to the knowledge of the Company or the Members, there
are no disputes or disagreements between the Company and any other party with
respect to any such lease; and (iv) the lessor under each such lease has
consented or been given notice (or prior to the Closing shall have consented
or been given notice), where such consent or the giving of such notice is
necessary, sufficient that such lease shall remain in full force and effect
following the consummation of the transactions contemplated by this Agreement
without requiring modification in the rights or obligations of the lessee
under any such lease.
(e) Schedule 3.10(e) sets forth a complete list of all
indebtedness of the Company in respect of borrowed money, including without
limitation all amounts guaranteed by the Company and capital leases entered
into by the Company.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) Schedule 3.11 sets forth a complete and current list of all registered
copyrights, copyright registrations and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, or other intellectual
property rights (collectively, "Intellectual Property Rights") owned or
licensed by the Company. All Intellectual Property Rights purported to be
owned by the Company held by any employee, officer or consultant are owned by
the Company by operation of law or have been validly assigned to the
Company. The Intellectual Property Rights are sufficient in all material
respects to carry on the business of the Company as presently conducted. The
Company has exclusive ownership of or license to use all Intellectual
Property Rights identified in Schedule 3.11 as owned or licensed by the
Company or has obtained any licenses, releases or assignments reasonably
necessary to use all third parties' Intellectual Property Rights in works
embodied in the Company's products. The present business activities or
products of the Company do not infringe any Intellectual Property Rights of
others. Except as set forth in Schedule 3.11, the Company has not received
any notice or other claim from any person asserting that any of the Company's
present activities infringe in any material respect or may infringe any
Intellectual Property Rights of such person.
The Company has taken all reasonable measures to protect and preserve
the security and confidentiality of its trade secrets and other confidential
information. To the knowledge of the Company and the Members, all trade
secrets and other confidential information of the Company are not part of the
public domain or knowledge, nor, to the knowledge of the Company and the
Members, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence
for the Company. To the knowledge of the Company and the Members, no
employee or consultant of the Company has used any trade secrets or other
confidential information of any other person in the course of their work for
the Company.
The Company is the exclusive owner of all right, title and interest
in its Intellectual Property Rights as purported to be owned by the Company,
and to the Company's and the Members' knowledge, such Intellectual Property
Rights are valid and in full force and effect. No university, government
agency (whether federal or state) or other organization which sponsored
research and development conducted by the Company or has any claim of right
to or ownership of or other encumbrance upon the Intellectual Property Rights
of the Company. The Company is not aware of any infringement by others of
its copyrights or other Intellectual Property Rights in any of its products,
technology or services, or any violation of the confidentiality of any of its
proprietary information. To the Company's and the Members' knowledge, the
Company is not making unlawful use of any confidential information or trade
secrets of any past or present employees of the Company.
Neither the Company nor, to the knowledge of the Company and the
Members, any of the Company's employees, have any agreements or arrangements
with former employers of such employees relating to confidential information
or trade secrets of such employers or are bound by any consulting agreement
relating to confidential information or trade secrets of another entity that
are being violated by such persons. The activities of the Company's
employees on behalf of the Company do not violate in any material respects
any agreements or arrangements known to the Company which any such employees
have with former employers or any other entity to whom such employees may
have rendered consulting services. For the purposes of this Section 3.11,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software
user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates, marketing materials created by the Company,
inventions, trade dress, logos and designs.
(b) The Company has all franchises, permits, licenses and other
rights and privileges reasonably necessary to permit it to own its property
and to conduct its business as it is presently conducted.
(c) To the knowledge of the Company and the Members, except as set
forth in Schedule 3.11(c), the management information systems (including all
computer hardware and software) owned, licensed or otherwise used by the
Company will not perform differently or experience any material malfunctions
or usage problems due to the change in the calendar year from 1999 to the
year 2000.
3.12 Contracts. (a) Except as set forth in Schedule 3.12(a) (or in
Schedule 3.4, Schedule 3.10(d), Schedule 3.11, or Schedule 3.13(a)), the
Company is not a party to, or subject to:
(i) any contract, arrangement or understanding, or series of
related contracts, arrangements or understandings, which involves annual
expenditures or receipts by the Company of more than $25,000;
(ii) any note, indenture, credit facility, mortgage, security
agreement or other contract, arrangement or understanding relating to or
evidencing indebtedness for money borrowed or a security interest or mortgage
in the assets of the Company;
(iii)any guaranty issued by the Company;
(iv) any contract, arrangement or understanding relating to
the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating to
the acquisition, transfer, distribution, use, development, sharing or license
of any technology or Intellectual Property Rights other than licenses granted
in the ordinary course of business with a term of less than one year;
(vi) any contract, arrangement or understanding granting to
any person the right to use any property or property right of the Company
other than licenses granted in the ordinary course of business with a term of
less than one year;
(vii)any contract, arrangement or understanding restricting
the Company's or any Subsidiary's right to (A) engage in any business
activity or compete with any business, or (B) develop or distribute any
technology;
(viii) any contract, arrangement or understanding relating
to the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company is
required to pay more than $25,000 per year;
(ix) any contract, arrangement or understanding with a Related
Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or obligation to enter
into any contract or arrangement of the nature described in subsections (i)
through (vi) of this subsection 3.12(a).
(b) The Company has previously made available for inspection and
copying to the Parent complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each contract (and any
amendments or supplements thereto) listed on Schedule 3.12(a). Except as set
forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a) is in
full force and effect; (ii) neither the Company nor (to the knowledge of the
Company or the Members) any other party is in default under any material
contract, and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default by the
Company or (to the knowledge of the Company or the Members) a default by any
other party under such contract; (iii) to the knowledge of the Company or the
Members, there are no disputes or disagreements between the Company and any
other party with respect to any material contract; and (iv) each other party
to each material contract has consented or been given notice (or prior to the
Closing shall have consented or been given notice), where such consent or the
giving of such notice is necessary, sufficient that such contract shall
remain in full force and effect following the consummation of the
transactions contemplated by this Agreement without modification in the
rights or obligations of the Company thereunder.
(c) Except as set forth and described in Schedule 3.12(d), the
Company has not issued any warranty or any agreement or commitment to
indemnify any person other than in the ordinary course of business.
3.13 Employees; Employee Benefits.
(a) Schedule 3.13(a) sets forth the names of all current employees
of the Company (the "Employees") and such Employee's job title, the location
of employment of such Employee, such Employee's current salary, the amount of
any bonuses or other compensation paid since December 31, 1998 to such
Employee, the date of employment of such Employee and the accrued vacation
time of such Employee. Schedule 3.13(a) hereto sets forth a true and correct
statement of the liability, if any, of the Company for accrued but unused
sick pay. Except as set forth on Schedule 3.13(a), there are no outstanding
loans from the Company to any officer, director, employee, agent or
consultant of the Company, or to any other Related Person. Schedule 3.13(a)
hereto sets forth a complete and correct description of all severance
policies of the Company. Complete and correct copies of all written
agreements with Employees and all employment policies, and all amendments and
supplements thereto, have previously been delivered or made available to the
Parent, and a list of all such agreements and policies is set forth on
Schedule 3.13(a). None of the Employees has, to the knowledge of the Company
or the Members, indicated a desire to terminate his or her employment, or any
intention to terminate his or her employment upon a sale of, or business
combination relating to, the Company or in connection with the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.13(a),
since December 31, 1998, the Company has not (i) increased the salary or
other compensation payable or to become payable to or for the benefit of any
of the Employees, (ii) increased the term or tenure of employment for any
Employee, except in the ordinary course of business consistent with past
practice, (iii) increased the amounts payable to any of the Employees upon
the termination of any such person's employment or (iv) adopted, increased,
augmented or improved benefits granted to or for the benefit of any of the
Employees under any Benefit Plan.
(b) Except as disclosed on Schedule 3.13(b), the Company has
complied in all material respects with Title VII of the Civil Rights Act of
1964, as amended, the Age Discrimination in Employment Act, as amended, the
Fair Labor Standards Act, as amended, the Immigration Reform and Control Act
of 1986, and all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, the withholding and payment of taxes from
compensation, discriminatory practices with respect to employment and
discharge, or otherwise relating to the conduct of employers with respect to
Employees or potential employees, and there have been no claims made or, to
the knowledge of the Company or the Members, threatened thereunder against
the Company arising out of, relating to or alleging any violation of any of
the foregoing. Except as disclosed in Schedule 3.13(b), there are no
material controversies, strikes, work stoppages, picketing or disputes
pending or, to the knowledge of the Company or the Members, threatened
between the Company and any of the Employees or Former Employees; no labor
union or other collective bargaining unit represents or has ever represented
any of the Employees, including any "leased employees" (within the meaning of
Section 414(n) of the Code); no organizational effort by any labor union or
other collective bargaining unit currently is under way or, to the knowledge
of the Company or the Members, threatened with respect to any Employees; and
the consent of no labor union or other collective bargaining unit is required
to consummate the transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material defined
benefit and defined contribution plan, stock ownership plan, employment or
consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased
employees" (within the meaning of Section 414(n) of the Code), vacation pay,
sickness, disability or death benefit plan (whether provided through
insurance, on a funded or unfunded basis or otherwise), employee stock
option, stock appreciation rights or stock purchase plan, severance pay plan,
arrangement or practice, employee relations policy, practice or arrangement,
and each other employee benefit plan, program or arrangement, including,
without limitation, each "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which has been maintained by the Company for the benefit
of or relating to any of the Employees or to any Former Employees or their
dependents, survivors or beneficiaries, whether or not legally binding,
whether written or oral or whether express or implied, all of which are
hereinafter referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d), each Benefit Plan
which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to meet the requirements of Section 401(a) of
the Code meets such requirements; the trust, if any, forming part of such
plan is exempt from U.S. federal income tax under Section 501(a) of the Code;
a favorable determination letter has been issued by the Internal Revenue
Service (the "IRS") with respect to each plan and trust and each amendment
thereto; and nothing has occurred since the date of such determination letter
that would adversely affect the qualification of such plan; no Benefit Plan
is a "voluntary employees beneficiary association" (within the meaning of
section 501(c)(9) of the Code) and there have been no other "welfare benefit
funds" (within the meaning of Section 419 of the Code) relating to Employees
or Former Employees; no event or condition exists with respect to any Benefit
Plan that could subject the Company to any material Tax under Section 4980B
of the Code. With respect to each Benefit Plan, the Company has heretofore
delivered or made available to the Parent complete and correct copies of the
following documents, where applicable and to the extent available: (i) the
most recent annual report (Form 5500 series), together with schedules, as
required, filed with the IRS, and any financial statements and opinion
required by Section 103(a)(3) of ERISA, (ii) the most recent determination
letter issued by the IRS, (iii) the most recent summary plan description and
all modifications, as well as all other descriptions distributed to Employees
or set forth in any manuals or other documents, (iv) the text of the Benefit
Plan and of any trust, insurance or annuity contracts maintained in
connection therewith and (v) the most recent actuarial report, if any,
relating to the Benefit Plan.
(e) There has been and will be no "excess parachute payment" (as
that term is defined in Section 280G(b)(1) of the Code) to any of the
Employees as a result of the consummation of the transactions contemplated
hereby.
3.14 Compliance with Applicable Law. The Company is not in violation
in any material respect of any applicable safety, health, environmental or
other law, statute, ordinance, code, rule, regulation, judgment, order,
injunction, writ or decree of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority having, asserting or
claiming jurisdiction over it or over any part of its business, operations,
properties or assets, except for any violation that would not have a Company
Material Adverse Effect or result in a fine or penalty in excess of $5,000
individually or in the aggregate. The Company has not received any notice
alleging any such violation, nor to the knowledge of the Company or any
Member, is there any inquiry, investigation or proceedings relating thereto.
3.15 Ability to Conduct the Business. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it
(or any of its properties or assets) is bound, that will prevent the use by
the Surviving Corporation, after the Effective Time, of the properties and
assets owned by, the business conducted by or the services rendered by the
Company on the date hereof, in each case on substantially the same basis as
the same are used, owned, conducted or rendered on the date hereof. The
Company has in force, and is in compliance with, in all material respects,
all material governmental permits, licenses, exemptions, consents,
authorizations and approvals used in or required for the conduct of their
business as presently conducted, all of which shall continue in full force
and effect, without requirement of any filing or the giving of any notice and
without modification thereof, following the consummation of the transactions
contemplated hereby. The Company has not received any notice of, and to the
knowledge of the Company or the Members, there are no inquiries, proceedings
or investigations relating to or which could result in the revocation or
modification of any such permit, license, exemption, consent, authorization
or approval.
3.16 Consultants, Sales Representatives and Other Agents. Schedule 3.16
hereto sets forth a complete and correct list of the names and addresses of
each consultant, sales representative or other agent (other than any such
person performing solely clerical functions) currently engaged by the Company
who is not an employee of the Company and who has received compensation in
excess of $25,000 in respect of the five months ended May 31, 1999, the
commission rates or other compensation applicable with respect to each such
person and the amount of commissions or other compensation earned by each
such person for the five months ended May 31, 1999. Except as described on
Schedule 3.16, complete and correct copies of all current agreements between
the Company and any such person have previously been delivered or made
available by the Company to the Parent.
3.17 Tax Liens. All tax liens of the Company reflected on the Balance
Sheet (i) arose from bona fide transactions in the ordinary course of
business and consistent with past practice, and (ii) except as set forth on
Schedule 3.17, are owned by the Company free and clear of any claim, security
interest, lien or other encumbrance, and (iii) are accurately and fairly
reflected on the Balance Sheet, or, with respect to accounts receivable of
the Company created after May 31, 1999, are accurately and fairly reflected
in the books and records of the Company. Except as described on Schedule
3.17, the reserves for bad debts reflected on the Balance Sheet are adequate
and were calculated in accordance with generally accepted accounting
principles consistent with past practice.
3.18 Insurance. Schedule 3.18 hereto is a true and complete list of all
insurance policies carried by the Company with respect to its business,
together with, in respect of each such policy, the name of the insurer, the
number of the policy, the annual policy premium payable therefor, the limits
of coverage, the deductible amount (if any), the expiration date thereof and
each pending claim thereunder. Complete and correct copies of each
certificate of insurance have previously been delivered or made available by
the Company to the Parent. All such policies are in full force and effect.
All premiums due thereon have been paid in a timely manner.
3.19 Bank Accounts; Powers of Attorney. Schedule 3.19 sets forth a
complete and correct list showing:
(i) all bank accounts of the Company, together with, with
respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and the
approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of attorney from
the Company and a summary statement of the terms thereof.
3.20 Minute Books, etc. The minute books, stock certificate book and
stock ledger of the Company are complete and correct in all material
respects. The minute books of the Company contain accurate and complete
records of all meetings or written consents to action of the Board of
Managers and Members of the Company and accurately reflect all corporate
actions of the Company which are required by law to be passed upon by the
Board of Managers or Members of the Company.
3.21 Related Person Indebtedness and Contracts. Schedule 3.21 sets
forth a complete and correct summary of all contracts, commitments,
arrangements and understandings not described elsewhere in this Agreement
between the Company and any of the following (collectively, "Related
Persons"): (i) the Members; (ii) the spouses and children of any of the
Members (collectively, "near relatives"); (iii) any trust for the benefit of
any of the Members or any of their respective near relatives; or (iv) any
corporation, partnership, joint venture or other entity or enterprise owned
or controlled by any of the Members or by any of their respective near
relatives.
3.22 Brokers; Payments. Except as set forth on Schedule 3.22, no
broker, investment banker, financial advisor or other person is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any Member.
The Company has suspended or terminated, and has the legal right to terminate
or suspend, all negotiations and discussions of Acquisition Transactions (as
defined in Section 6.4) with parties other than the Parent. No valid claim
exists against the Company or, based on any action by the Company, against
the Surviving Corporation or the Parent for payment of any "topping,"
"break-up" or "bust-up" fee or any similar compensation or payment arrangement
as a result of the transactions contemplated hereby.
3.23 Company Action. The Board of Managers of the Company, by unanimous
written consent or at a meeting duly called and held, has (i) determined that
the Merger is fair and in the best interests of the Company and its Members,
(ii) approved the Merger and this Agreement in accordance with the provisions
of the ALLCA, and (iii) directed that this Agreement and the Merger be
submitted to the Company Members for their approval and resolved to recommend
that the Company's Members vote in favor of the approval of this Agreement
and the Merger. The Members of the Company have approved the Merger and this
Agreement in accordance with the provisions of the ALLCA.
3.24 Year 2000 Matters. The management information systems (including
all computer hardware and software) owned, licensed or otherwise used by the
Company will not perform differently and experience any material malfunctions
or usage problems due to the change in the calendar year from 1999 to the
year 2000.
3.25 Disclosure. No representation or warranty by the Company or the
Members contained in this Agreement and no statement contained in any of the
Disclosure Schedules delivered or to be delivered pursuant to this Agreement
by the Company contains or will contain, when considered together as a whole,
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
4.1 Authorization etc. The Members represent and warrant to the Parent
and Acquisition as follows:
(i) the Members are the sole and exclusive record and
beneficial owners of the of the Company's Membership Units set forth opposite
their name in Schedule 3.4 hereto, free and clear of any claims, liens,
pledges, options, rights of first refusal or other encumbrances or
restrictions of any nature whatsoever (other than restrictions on transfer
imposed under applicable securities laws), and, except as set forth on
Schedule 3.4 hereto, there are no agreements, arrangements or understandings
to which the Members are parties (other than this Agreement) involving the
purchase, sale or other acquisition or disposition of Membership Units owned
by such Members;
(ii)such Members shall (A) concurrently with such Members'
execution and delivery of this Agreement, execute and deliver to the Parent a
written consent in which such Members voted all Membership Units owned by
such Members in favor of the Merger and the adoption of this Agreement by the
Company, (B) at the Effective Time, deliver or cause to be delivered to the
Parent certificates representing all Membership Units owned by such Members,
each such certificate to be duly endorsed for transfer and free and clear of
any claims, liens, pledges, options, rights of first refusal or other
encumbrances or restrictions of any nature whatsoever (other than
restrictions imposed under applicable securities laws);
(iii) such Members have all necessary legal capacity,
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and this Agreement
constitutes a valid and binding obligation of such Members enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors, rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in law or in equity; and
(iv)the execution and delivery of this Agreement by such
Members and the consummation of the transactions contemplated hereby will not
(A) violate or conflict with any provision of any partnership agreement or
other constitutional documents of any such Members that is constituted as a
general or limited partnership, (B) breach, violate or constitute an event of
default (or an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to any right of
termination, cancellation, modification or acceleration under or require any
consent or the giving of any notice under, any note, bond, indenture,
mortgage, security agreement, lease, license, franchise, permit, agreement or
other instrument or obligation to which such Members are a party, or by which
such Members or the Membership Units held by such Members may be bound, or
result in the creation of any material lien, claim or encumbrance or other
right of any third party of any kind whatsoever upon the properties or assets
of such Members pursuant to the terms of any such instrument or obligation,
which breach, violation or event of default would have a material adverse
effect on such Members' ability to perform such Members' obligations
hereunder, or (C) to such Members' knowledge, violate or conflict with any
law, statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any court or governmental or
regulatory body, agency or authority applicable to such Members or by which
such the Membership Units held by such Members may be bound.
4.2 The Parent Common Stock.
The Members acknowledge, represent and warrant to the Parent and
Acquisition as follows:
(i) The Members understands that the shares of the Parent
Common Stock to be issued to the Members in the Merger will not have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities law by reason of specific exemptions under the
provisions thereof which depend in part upon the other representations and
warranties made by the Members in this Agreement. The Members understand
that the Parent is relying upon the Members' representation and warranties
contained in this Section 4.2 for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(ii) The Members have such knowledge, skill and experience in
business, financial and investment matters so that the Members are capable of
evaluating the merits and risks of an investment in the Parent Common Stock
pursuant to the transactions contemplated by this Agreement or to the extent
that the Members have deemed it appropriate to do so, the Members have relied
upon appropriate professional advice regarding the tax, legal and financial
merits and consequences of an investment in the Parent Common Stock pursuant
to the transactions contemplated by this Agreement.
(iii)The Members have made, either alone or together with the
Members' advisors, such independent investigation of the Parent, its
management and related matters as the Members deem to be, or such advisors
have advised to be, necessary or advisable in connection with an investment
in the Parent Common Stock through the transactions contemplated by this
Agreement; and the Members and advisors have received all information and
data that the Members and such advisors believe to be necessary in order to
reach an informed decision as to the advisability of an investment in the
Parent Common Stock pursuant to the transactions contemplated by this
Agreement.
(iv) The Members have reviewed the Members' financial
condition and commitments, alone and together with the Members' advisors,
and, based on such review, the Members are satisfied that (A) the each Member
has adequate means of providing for such Members' financial needs and
possible contingencies and has assets or sources of income which, taken
together, are more than sufficient so that he could bear the risk of loss of
the Members' entire investment in the Parent Common Stock, (B) such Member
has no present or contemplated future need to dispose of all or any portion
of the Parent Common Stock to satisfy any existing or contemplated
undertaking, need or indebtedness, and (C) such Member is capable of bearing
the economic risk of an investment in the Parent Common Stock for the
indefinite future. The Members shall furnish any additional information
about the Members reasonably requested by the Parent to assure the compliance
of this transaction with applicable federal and state securities laws.
(v) The Members understand that the shares of the Parent
Common Stock to be received by the Members in the transactions contemplated
hereby will be "restricted securities" under applicable federal securities
laws and that the Securities Act and the rules of the Securities and Exchange
Commission (the "SEC") promulgated thereunder provide in substance that the
Members may dispose of such shares only pursuant to an effective registration
statement under the Securities Act or an exemption from registration if
available. The Members further understand that, except as provided in
Article XII, the Parent has no obligation or intention to register the sale
of any of the shares of the Parent Common stock to be received by the Members
in the transactions contemplated hereby, or take any other action so as to
permit sales pursuant to, the Securities Act. Accordingly, except as
provided in Article XII, the Members understand that the Members may dispose
of such shares only in transactions which are of a type exempt from
registration under the Securities Act, including (without limitation) a
"private placement," in which event the transferee will acquire such shares as
"restricted securities" and subject to the same limitations as in the hands
of the Members. The Members further understand that applicable state
securities laws may impose additional constraints upon the sale of
securities. As a consequence, the Members understand that the Members may
have to bear the economic risk of an investment in the Parent Common Stock to
be received by the Members pursuant to the transactions contemplated hereby
for an indefinite period of time.
(vi) The Members are acquiring shares of the Parent Common
Stock pursuant to the transactions contemplated hereby for investment only
and not with a view to or intention of or in connection with any resale or
distribution of such shares or any interest therein.
(vii)The certificate(s) evidencing the shares of the Parent
Common Stock to be issued pursuant to the transactions contemplated hereby
shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
or any state securities laws and may not be sold or
transferred in the absence of such registration or an
exemption therefrom under the Securities Act of 1933, as
amended, and applicable state securities laws."
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition jointly and severally represent and warrant
to the Company that:
5.1 Corporate Organization. Each of the Parent and Acquisition is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of the Parent and Acquisition
has all requisite corporate power and authority to own, operate and lease the
properties and assets it now owns, operates and leases and to carry on its
business as now being conducted. The Parent and Acquisition are each duly
qualified to transact business as a foreign corporation and are each in good
standing in the jurisdictions set forth opposite their respective names in
Schedule 5.1, which are the only jurisdictions where such qualification is
required by reason of the nature of the properties and assets currently
owned, operated or leased by the Parent or Acquisition or the business
currently conducted by them, except for such jurisdictions where the failure
to be so qualified would not have a Parent Material Adverse Effect (as
defined below). Acquisition is a corporation newly formed by the Parent for
the sole purpose of consummating the transactions contemplated by this
Agreement and has not conducted any business other than as expressly set
forth in or contemplated by this Agreement. The Parent has previously
delivered to the Company complete and correct copies of (i) its Articles of
Organization (certified by the Secretary of State of Massachusetts as of a
recent date) and its By-Laws (certified by the Secretary of the Parent as of
a recent date) and (ii) the Certificate of Incorporation of Acquisition and
all amendments thereto to the date hereof (certified by the Secretary of
State of the State of Delaware as of a recent date) and the By-Laws of
Acquisition (certified by the secretary of Acquisition as of a recent date).
Neither the Certificate of Incorporation nor the By-Laws of the Parent or
Acquisition has been amended since the respective dates of certification
thereof, nor has any action been taken for the purpose of effecting any
amendment of such instruments. The term "Parent Material Adverse Effect"
means for purposes of this Agreement, any change, event or effect that is, or
would be, materially adverse to the business, operation, assets, liabilities,
financial condition or results of operations of the Parent and Acquisition,
taken as a whole.
5.2 Authorization. Each of the Parent and Acquisition has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly approved by the Boards of Directors of the Parent and
Acquisition and by the Parent as the sole shareholder of Acquisition, and no
other corporate proceedings on the part of the Parent or Acquisition are
necessary to approve and authorize the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Parent and Acquisition
and constitutes the valid and binding agreement of the Parent and
Acquisition, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or in law).
5.3 Consents and Approvals; No Violations. Subject to (a) the filing
of Articles of Merger and a Certificate of Merger with the Arizona
Corporation Commission and the Secretary of State of the State of Delaware
respectively and (b) compliance with applicable federal and state securities
laws, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not: (i) violate or conflict with
any provisions of the Certificate of Incorporation or By-Laws of the Parent
or Acquisition; (ii) breach, violate or constitute an event of default (or an
event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or
the giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument
or obligation to which the Parent or Acquisition is a party, or by which any
of them or any of their respective properties or assets may be bound, or
result in the creation of any lien, claim or encumbrance of any kind
whatsoever upon the properties or assets of the Parent or Acquisition
pursuant to the terms of any such instrument or obligation, other than any
breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Parent Material Adverse Effect; (iii)
violate or conflict with any law, statute, ordinance, code, rule, regulation,
judgment, order, writ, injunction or decree or other instrument of any
Federal, state, local or foreign court or governmental or regulatory body,
agency or authority applicable to the Parent or Acquisition or by which any
of their respective properties or assets may be bound, except for such
violations or conflicts which would not have a Parent Material Adverse
Effect; or (iv) require, on the part of the Parent or Acquisition, any filing
or registration with, or permit, license, exemption, consent, authorization
or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority other than any filing, registration,
permit, license, exemption, consent, authorization, approval or notice which
if not obtained or made would not have a Parent Material Adverse Effect.
5.4 Capitalization. (a) The authorized capital stock of the Parent
consists of 12,000,000 shares of the Parent Common Stock, of which 6,886,939
shares were issued and outstanding as of March 31, 1999 and 1,000,000 shares
of Preferred Stock, none of which are issued or outstanding. All of the
issued and outstanding shares of the Parent Common Stock are (and all shares
of the Parent Common Stock to be issued in connection with the Merger, when
issued in accordance with this Agreement, shall be) duly authorized, validly
issued, fully paid and nonassessable, and none of such shares has been issued
in violation of any applicable preemptive rights. There are no agreements or
commitments to which the Parent is a party or by which it is bound for the
redemption or repurchase of any shares of its capital stock. Except for
options issued under the Parent's stock option plan (the "Stock Option
Plan"), there are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of the Parent, and (except as contemplated by this Agreement
and except with respect to options issued under the Stock Option Plan) there
are no agreements or commitments to which the Parent is a party or by which
it is bound pursuant to which the Parent is or may become obligated to issue
additional shares of its capital stock.
(b) The authorized capital stock of Acquisition consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of
record by the Parent. There are no outstanding options, warrants or other
rights to purchase, or securities convertible into or exchangeable for,
shares of the capital stock of Acquisition, and there are no agreements or
commitments to which Acquisition is a party or by which it is bound pursuant
to which Acquisition is or may become obligated to issue additional shares of
its capital stock.
5.5 Absence of Certain Changes. Except as set forth in Schedule 5.5,
since December 31, 1998, the Parent has carried on its business in the
ordinary course and consistent with past practice. Except as set forth on
Schedule 5.5 hereto, since December 31, 1998, the Parent has not: (i)
incurred any material obligation or liability (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with past practice; (ii) experienced any Parent Material Adverse
Effect; (iii) made any change in any accounting principle or practice or in
its methods of applying any such principle or practice; (iv) suffered any
material damage, destruction or loss, whether or not covered by insurance,
affecting its properties, assets or business; (v) mortgaged, pledged or
subjected to any lien, charge or other encumbrance, or granted to third
parties any rights in, any of its assets, tangible or intangible; (vi) sold
or transferred any of its assets, except in the ordinary course of business
and consistent with past practice, or canceled or compromised any debts or
waived any claims or rights of a material nature; (vii) issued any additional
shares of capital stock or any rights, options or warrants to purchase, or
securities convertible into or exchangeable for, shares of its capital stock
other than options to purchase shares of the Parent Common Stock granted
under its employee stock plans, shares of the Parent Common Stock issued upon
exercise of employee stock options and shares of the Parent Common Stock
issued upon the exercise of outstanding warrants; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
shares of its capital stock; (ix) repurchased or redeemed any shares of its
capital stock; (x) granted any general or specific increase in the
compensation payable or to become payable to any of its executive officers or
any bonus or service award or other like benefit such persons; or (xi)
entered into any agreement to do any of the foregoing.
5.6 Litigation. Except as set forth in Schedule 5.6 hereto, there are
no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
knowledge of the Parent, threatened against the Parent or its properties,
assets or business or, to the knowledge of the Parent, pending or threatened
against any of the officers, directors, employees, agents or consultants of
the Parent in connection with the business of the Parent. There are no such
suits, actions, claims, proceedings or investigations pending, or, to the
knowledge of the Parent, threatened challenging the validity or propriety of
the transactions contemplated by this Agreement. There is no judgment,
order, injunction, decree or award (whether issued by a court, an arbitrator
or an administrative agency) to which the Parent is a party, or involving the
Parent's properties, assets or business, which is unsatisfied or which
requires continuing compliance therewith by the Parent.
5.7 Compliance with Applicable Law. Except as set forth in Schedule
5.7 the Parent is not in violation of any applicable safety, health,
environmental or other law, statute, ordinance, code, rule, regulation,
judgment, order, injunction, writ or decree of any Federal, state, local or
foreign court or governmental or regulatory body, agency or authority having,
asserting or claiming jurisdiction over it or over any part of its business,
operations, properties or assets, except where any such violation would not
have a Parent Material Adverse Effect. The Parent has not received any
notice alleging any such violation, nor to the knowledge of the Parent, is
there any inquiry, investigation or proceedings relating thereto.
5.8 Disclosure. No representation or warranty by the Parent or
Acquisition contained in this Agreement and no statement contained in any of
the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement contains or will contain, when considered together as a whole, any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained therein not
misleading.
5.9 The Parent Action. The Board of Directors of the Parent, by
unanimous written consent or at a meeting duly called and held, has approved
the Merger and this Agreement in accordance with the provisions of the DGCL.
5.10 Contracts. The Parent has filed as exhibits to the SEC Filings all
agreements which are required by Rule 601 of Regulation S-K promulgated under
the Securities Act to be filed with the SEC as material agreements.
5.11 Brokers Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Parent.
ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME
6.1 Conduct of Business of the Company. During the period commencing
on the date hereof and continuing until the Effective Time, the Company and
the Members agree that the Company, except as otherwise expressly
contemplated by this Agreement or agreed to in writing by the Parent:
(a) will carry on its business only in the ordinary course and
consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital
stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any Membership Units;
(d) will not amend its Certificate of Organization or Operating
Agreement;
(e) will not issue, or agree to issue, any Membership Units, or
any options, warrants or other rights to acquire Membership Units, or any
securities convertible into or exchangeable for shares of its Membership
Units;
(f) will not combine, split or otherwise reclassify any of its
Membership Units;
(g) will not form a Subsidiary;
(h) will use its commercially reasonable best efforts to preserve
intact its present business organization, keep available the services of its
officers and key employees and preserve its relationships with clients and
others having business dealings with it to the end that its goodwill and
ongoing business shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually in
excess of $5,000 or in the aggregate in excess of $15,000, (ii) enter into
any Agreement involving individually in excess of $5,000, (iii) enter into or
terminate any lease of, or purchase or sell, any real property, (iv) enter
into any leases of personal property involving individually in excess of
$5,000 annually or in the aggregate in excess of $15,000 annually, (v) incur
or guarantee any additional indebtedness for borrowed money, (vi) create or
permit to become effective any security interest, mortgage, lien, charge or
other encumbrance on its properties or assets, or (vii) enter into any
agreement to do any of the foregoing;
(j) will not adopt or amend any Benefit Plan for the benefit of
Employees, or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable
to its Employees or accelerate, amend or change the period of exercisability
or the vesting schedule of options granted under any stock option plan or
agreements except as specifically required by the terms of such plans or
agreements, or enter into any agreement to do any of the foregoing;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or
threat of (to the extent that such threat comes to the knowledge of the
Company, or any of the Members), any claim, action, suit, proceeding or
investigation against, relating to or involving the Company or any of its
Subsidiaries or any of their directors, officers, employees, agents or
consultants in connection with their businesses or the transactions
contemplated hereby that could reasonably be expected to have a Company
Material Adverse Effect;
(m) will use its commercially reasonable efforts to maintain in
full force and effect all insurance policies maintained by the Company on the
date hereof; and
(n) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of
the Company, or acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets in excess of $10,000 in the aggregate other
than tax liens acquired in the ordinary course of business in excess of
$10,000 in the aggregate.
6.2 Other Negotiations. Neither the
Company nor the Members will (nor will they permit any of their respective
officers, directors, employees, agents, partners and affiliates on their
behalf to) take any action to solicit, initiate, seek, encourage or support
any inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any corporation, partnership, person or
other entity or group (other than the Parent) regarding any acquisition of
the Company, any merger or consolidation with or involving the Company, or
any acquisition of any material portion of the stock or assets of the
Company, or any equity or debt financing of the Company or any material
license of Intellectual Property Rights (any of the foregoing being referred
to in this Agreement as an "Acquisition Transaction") or enter into an
agreement concerning any Acquisition Transaction with any party other than
the Parent. If between the date of this Agreement and the termination of
this Agreement pursuant to Article X, the Company receives from a third party
any offer to negotiate or consummate an Acquisition Transaction, the Company
shall (i) notify the Parent immediately (orally and in writing) of such
offer, including the identity of such party and the terms of any proposal
therein, and (ii) notify such third party of the Company's obligations under
this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Properties and Records. The Company and the Parent will
provide each other and their respective accountants, counsel and other
authorized advisors, with reasonable access, during business hours, to their
premises and properties and their books and records (including, without
limitation, contracts, leases, insurance policies, litigation files, minute
books, accounts, working papers and tax returns filed and in preparation) and
will cause its officers to furnish to each other and their respective
authorized advisors such additional financial, tax and operating data and
other information pertaining to their respective businesses as the Company or
the Parent, as the case may be, shall from time to time reasonably request.
All of such data and information shall be kept confidential by the Parent and
the Company until the consummation of the Merger.
7.2 Transfer of Shares. The Members agree that they (i) shall not
dispose of or in any way encumber their Membership Units prior to the
consummation of the transactions contemplated hereby, (ii) shall take no
action inconsistent with the approval and consummation of said transactions
and (iii) at the Closing shall surrender the certificates representing all
Membership Units owned by them, duly endorsed for transfer.
7.3 Reasonable Efforts; etc. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use his/its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including obtaining any consents, authorizations, exemptions
and approvals from, and making all filings with, any governmental or
regulatory authority, agency or body which are necessary in connection with
the transactions contemplated by this Agreement.
7.4 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of the occurrence of any
event which will or may result in the failure to satisfy any of the
conditions specified in Article VIII or Article IX hereof.
7.5 Fees and Expenses. The parties hereto shall bear and pay all of
their own fees, costs and expenses relating to the transactions contemplated
by this Agreement, including, without limitation, the fees and expenses of
their respective counsel, accountants, brokers and financial advisors, except
that the Members shall be responsible for all fees, costs and expenses
incurred by the Company (except for expense incurred in connection with the
audit performed in connection with the Closing), which shall be borne by the
Surviving Corporation, in connection with this Agreement and the transactions
contemplated hereby and such fees, costs and expenses shall be deemed
expenses of the Members and paid by the Members.
7.6 Affiliates' Letters. Concurrently with the execution of the
Agreement, all persons who are "affiliates" of the Company or Parent for
purposes of Rule 145 under the Securities Act, agree to deliver to the
Company, a signed, written Agreement, in the form attached as Exhibit C
hereto.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION
The obligation of the Parent and Acquisition to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which
may be waived in writing by the Parent and Acquisition in their sole
discretion):
8.1 Representations and Warranties True. The representations and
warranties of the Company and the Members which are contained in this
Agreement, or contained in any Schedule or certificate delivered or to be
delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, and
at the Closing the Company shall have delivered to the Parent and Acquisition
a certificate (signed on behalf of the Company by the Chief Executive Officer
of the Company) to that effect with respect to all such representations and
warranties made by the Company, and the Members shall have executed and
delivered to the Parent and Acquisition a certificate to that effect with
respect to all such representations and warranties made by the Members.
8.2 Performance. The Company and the Members shall have performed and
complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by them on or
prior to the Closing Date, and at the Closing the Company shall have
delivered to the Parent and Acquisition a certificate (duly executed on
behalf of the Company by the Chief Executive Officer of the Company) to that
effect with respect to all such obligations required to have been performed
or complied with by the Company on or before the Closing Date, and the
Members shall have executed and delivered to the Parent and Acquisition a
certificate to that effect with respect to all such obligations required to
have been performed or complied with by the Members on or before the Closing
Date.
8.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority), and no investigation by any governmental or regulatory body,
agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Company which would
have a material adverse effect on the transactions contemplated hereby or on
the business of the Company taken as a whole.
8.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by the Company or any Member in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 3.3) shall have been obtained and shall be in
full force and effect.
8.5 Additional Agreements. The Parent shall have the following
agreements:
(i) the Employment and Non-Competition Agreement in the form of
Exhibit D hereto, duly executed by Peter Reardon;
(ii) the Escrow Agreement annexed as Exhibit B hereto, duly
executed by the Members; and
(iii)An executed Affiliate Letter in the form annexed as Exhibit C
hereto duly executed by each person who is an affiliate (as such term is
defined in Rule 145 of the Securities Act).
8.6 Opinion of Company Counsel. The Company shall have delivered to
the Parent an opinion of counsel for the Company, in substantially the form
attached as Exhibit E hereto.
8.7 Delivery of Certificates for Cancellation. The share certificates
representing all of the issued and outstanding Membership Units as of the
Closing Date, duly endorsed in blank, shall have been surrendered for
cancellation.
8.8 Appraisal Rights. The holders of 100% of the issued and
outstanding Membership Units shall have voted in favor of the approval of the
Merger and the transactions contemplated hereby and no holders of Membership
Units shall have demanded appraisal rights in respect of the Merger.
8.9 Articles/Certificate of Merger. The Company shall have executed
and delivered to the Parent counterparts of the Articles of Merger and
Certificate of Merger to be filed with the Arizona Corporation Commission and
the Secretary of State of the State of Delaware, as required, in connection
with the Merger.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE MEMBERS
The obligation of the Company and the Members to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which may be waived in writing by the -Company and the
Members in their sole discretion):
9.1 Representations and Warranties True. The representations and
warranties of each of the Parent and Acquisition contained in this Agreement,
or contained in any Schedule, certificate or other instrument or document
delivered or to be delivered pursuant to this Agreement, shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, and
at the Closing each of the Parent and Acquisition shall have delivered to the
Company and the Members a certificate (signed on its behalf by its President
and its Chief Financial Officer) to that effect with respect to all such
representations and warranties made by such entity.
9.2 Performance. Each of the Parent and Acquisition shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by
them on or prior to the Closing Date, and at the Closing each of the Parent
and Acquisition shall have delivered to the Company and the Members a
certificate, signed on its behalf by its President and its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
9.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority) and no investigation by any governmental or regulatory body,
agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Parent or the Parent
Subsidiaries which would have a material adverse effect on the transactions
contemplated hereby or on the business of the Parent and the Parent
Subsidiaries taken as a whole.
9.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by the Parent or Acquisition in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 5.3) shall have been obtained and shall be in
full force and effect.
9.5 Additional Agreements. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to
execute and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements;
(i) the Employment and Non-Competition Agreement referred to in
Section 8.7(i) hereof;
(ii) the Escrow Agreement referred to in Section 8.7(ii) hereof,
together with counterparts signed by the escrow agent named therein;
9.6 Opinion of Counsel for the Parent. The Parent shall have delivered
to the Company an opinion of Counsel for the Parent in substantially the form
annexed as Exhibit F hereto.
9.7 Articles/Certificate of Merger. The Parent and Acquisition shall
have executed and delivered to the Company counterparts of the Articles of
Merger and Certificate of Merger to be filed with the Arizona Corporation
Commission and the Secretary of the State of the State of Delaware, as
required, in connection with the Merger.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual written consent of the Company and the Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any statute,
rule, regulation, ruling, writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and all appeals and means of appeal therefrom have been exhausted; or
(ii) if the Effective Time shall not have occurred on or
before June 30, 1999; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(b)(ii) shall not be available to any
party whose (or whose affiliate(s)') breach of any representation or warranty
or failure to perform or comply with any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to occur
on or before such date; or
(c) by the Company, if any of the conditions specified in Article
IX have not been met or waived prior to such time as such condition can no
longer be satisfied; or
(d) by the Parent, if any of the conditions specified in Article
VIII shall not have been met or waived prior to such time as such condition
can no longer be satisfied.
10.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition) their respective officers or directors,
except for Section 12.6 and the last sentence of Section 7.1, which shall
remain in full force and effect, and except that nothing herein shall relieve
any party from liability for a breach of this Agreement prior to the
termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnity Obligations. Subject to Section 11.4 hereof, the Members
hereby jointly and severally agree to indemnify and hold the Parent harmless
from, and to reimburse the Parent for, any Indemnity Claims (as that term is
hereinafter defined) arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Indemnity Claim" shall
mean any and all actual losses, damages, deficiencies, liabilities,
obligations, actions, claims, suits, proceedings, demands, assessments,
judgments, recoveries, fees, costs and expenses (including, without
limitation, all out-of-pocket expenses, reasonable investigation expenses and
reasonable fees and disbursements of accountants and counsel), in each case
only to the extent Parent incurs actual out-of-pocket damages and net of
insurance proceeds actually realized by the Parent (collectively, "Losses")
arising out of, based upon or resulting from (i) any inaccuracy in or breach
of any representation and warranty of the Company or the Members which is
contained in this Agreement or any Schedule or certificate delivered pursuant
hereto or thereto; or (ii) any breach or nonfulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of the Company
(which covenants, agreements or undertakings were to be performed or complied
with on or prior to the consummation of the Merger) or the Members which are
contained in or made pursuant to the terms and conditions of this Agreement.
Notwithstanding anything to the contrary contained herein, no Indemnity Claim
made pursuant to this Article XI may be based on consequential damages
sustained by the Parent.
11.2 Notification of Claims. Subject to the provisions of Section 11.3
below, in the event of the occurrence of an event which the Parent asserts
constitutes an Indemnity Claim, the Parent shall provide the Members with
prompt written notice of such event and shall otherwise promptly make
available to the Members all relevant information which is material to the
claim and which is in the possession of the indemnified party. If such event
involves the claim of any third party (a "Third-Party Claim"), the Members as
the indemnifying party shall have the right to elect to join in the defense,
settlement, adjustment or compromise of any such Third-Party Claim, and, if
he so elects to control such defense, settlement, adjustment or compromise,
and to employ counsel to assist such indemnifying party in connection with
the handling of such claim, at the sole expense of the indemnifying party, in
the case of the Members as the indemnifying party, to be paid from amounts
held in escrow by the Escrow Agent in accordance with the terms of the Escrow
Agreement. Unless the Members elect to assume such defense, settlement,
adjustment or compromise, the Parent shall have the right to settle any such
Third-Party Claim; provided, however, that the Parent may not effect the
settlement, adjustment or compromise of any such Third-Party Claim without
the written consent of the Members, which consent shall not be unreasonably
withheld. In the event that the Members have consented in writing to any
such settlement, adjustment or compromise, the Members shall have no power or
authority to object to the amount of any claim by the Parent against the
escrow for indemnity with respect to such settlement, adjustment or
compromise. The Members shall have the right to settle, adjust, or
compromise any Third-Party Claim, the defense of which is controlled by the
Members, using amounts held in escrow; provided, however, that, unless the
settlement, adjustment or compromise involves no more than the payment of an
amount that is less than the amount of funds then remaining in the escrow and
provides for the unconditional release of the Parent, the Company and their
respective affiliates, the Members may not effect the settlement, adjustment,
compromise or satisfaction of any such Third-Party Claim without the consent
of the Parent, which consent shall not be unreasonably withheld. The
Parent's failure to give timely notice or to promptly furnish the Members with
any relevant data and documents in connection with any Third-Party Claim
shall not constitute a defense (in part or in whole) to any claim for
indemnification by such party, except and only to the extent that such
failure shall result in any prejudice to the indemnifying party. In
connection with any Third-Party Claim, the indemnified party, or the
indemnifying party if it has assumed the defense of such claim pursuant to
the preceding sentence, shall diligently pursue the defense of such
Third-Party Claim.
11.3 Duration. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of the parties
contained in this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but, except
in respect of any claims for indemnification as to which notice shall have
been duly given prior to the Escrow Release Date (as defined below), the
representations and warranties of the Company and the Members contained in
this Agreement shall expire on the second anniversary of the Closing Date
(the "Escrow Release Date"). To be duly given, any such notice shall set
forth in reasonable detail the nature of such claim, the provisions under
this Agreement pursuant to which such claim is being asserted and, to the
extent feasible, a reasonable estimate of the anticipated amount of such
claim ("Claim Notice").
11.4 Escrow. At the Effective Time, the Escrow Shares shall be
delivered to Arizona Escrow & Financial Corporation, as escrow agent (the
"Escrow Agent"), to be held for a period ending, (i) with respect to fifty
percent (50%) of the Escrow Shares, on the first anniversary of the Closing
date and, (ii) with respect to the remaining Escrow Shares, on the Escrow
Release Date, except Escrow Shares may be withheld after the Escrow Release
Date to satisfy claims for indemnification which are the subject to a Claim
Notice delivered prior to the Escrow Release Date. The Escrow Shares shall
be held and disbursed by the Escrow Agent in accordance with the terms hereof
and pursuant to the Escrow Agreement in the form attached hereto as Exhibit
B. For the purpose of any claim against the Escrow Shares hereunder, the
value per share of the Escrow Shares shall be deemed to be the Then Market
Price. For purposes of this Agreement, the term "Then Market Price" shall
means the last quoted sales price for Shares on the Nasdaq National market on
the day on which an Indemnity Claim is made. Except with respect to claims
based on fraud committed by the Company or the Members, which shall be
unlimited as to amount recoverable, if the Closing occurs, the Parent agrees
that the Parent's sole and exclusive remedy and recourse against the Members
under this Agreement for Losses attributable to any inaccuracy or breach of
any representation or warranty of the Company or the Members which is
contained in this Agreement or any Schedule or certificate delivered pursuant
hereto or thereto, other than Losses arising from breaches of the
representations and warranties set forth in Sections 3.4 and 3.9 (the
"Covered Representations"), shall be against the Escrow Shares. Except as
provided in the next sentence, the maximum aggregate liability of the Members
hereunder shall not exceed the value (determined by reference to the Then
Market Price) of the Escrow Shares. Any claims for indemnification arising
from any inaccuracy in or breach of any Covered Representations will not be
subject to any limitation.
11.5 No Contribution. The Members hereby waive, and acknowledge and
agree that the Members shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity
or other right or remedy against the Parent, Acquisition, or the Company in
connection with any indemnification payments which the Members are required
to make under this Article XI.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Registrable Shares. For purposes of this Agreement, "Registrable
Shares" shall mean the shares of Parent Common Stock issued in the Merger, no
longer subject to the terms of the Indemnification provisions of Article XI
provided, however, that a distribution of shares of Parent Common Stock
issued in the Merger without additional consideration, to underlying
beneficial owners (such as the general and limited partners, shareholders of
trust beneficiaries of a Member) shall not be deemed such a sale or transfer
for purposes of this Article XII and such underlying beneficial owners shall
be entitled to the same rights under this Article XII as the initial Member
from which the Registrable Shares were received and shall be deemed a Member
for the purposes of this Article XII.
12.2 Piggyback Registration
(a) Right to Piggyback. Subject to the provisions of Article XI
and the provisions of the Escrow Agreement, if at any time the Parent
proposes to file a registration statement under the Securities Act for any
shares of common stock or any options, warrants, units, convertibles, rights
or other securities related or linked to any shares of such common stock
(except with respect to registration statements on Form S-4 or S-8, or any
other form not available for registering the Registrable Securities for sale
to the public), with respect to an offering for its own account or for the
account of another person (other than the holders of Registrable Securities
in their capacity as such) of any class of security (a "Proposed
Registration"), then the Parent shall in each case give written notice of
such proposed filing to the holders of Registrable Securities at least
forty-five (45) days before the anticipated filing date, and shall, include
in such registration statement such amount of Registrable Securities as each
such holder may request within twenty (20) days of the receipt of such
notice. The Parent shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
holders of Registrable Securities requesting to be included in the
registration for such offering to include such securities in such offering on
the same terms and conditions as the securities of the Parent included
therein.
(b) Priority on Piggyback Registrations. If the managing
underwriter or underwriters of such offering delivers a written opinion to
the holders of Registrable Securities that the number of Registrable
Securities which they and any other persons (including the Parent) intend to
include in such offering exceeds the number which can be sold in such
offering or is reasonably likely materially and adversely to affect the
success or offering price of such offering, then the amount of securities to
be offered for the accounts of holders of Registrable Securities shall be
reduced as follows: first, the securities which the Parent proposes to sell;
second, the Registrable Securities of the holders thereof who have made
requests to be included in such registration, pro rata (in accordance with
the number of Registrable Securities held by such holder requested to be
included in such registration); and third, the securities requested to be
included in such registration by other persons, pro rata in accordance with
the number of such securities held by such persons requested to be included
in such registration.
(c) Selection of Underwriters. If any registration pursuant to
this Article XII is an underwritten offering, the Parent will select a
managing underwriter or underwriters to administer the offering, which
managing underwriter or underwriters will be of nationally recognized
standing.
12.3 Expenses. The costs and expenses to be borne by Parent for
purposes of this Article XII shall include, without limitation, printing
expenses (including a reasonable number of prospectuses for circulation by
the selling Members), legal fees and disbursements of counsel for Parent,
"blue sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees (if any) and
disbursements of counsel for the selling Members.
12.4 Indemnification.
(a) To the extent permitted by law, Parent will indemnify and hold
harmless each Member, any underwriter (as defined in the Securities Act) for
such Member, its officers, directors, shareholders or partners and each
person, if any, who controls such Member or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (A) any untrue statement or alleged
untrue statement of a material fact contained or incorporated by reference in
the Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (B)
the omission or alleged omission to state or incorporate by reference therein
a material fact required to be stated or incorporated by reference therein,
or necessary to make the statements included or incorporated by reference
therein not misleading, or (C) any violation or alleged violation by Parent
of the Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and Parent will pay to each such Member (and its
officers, directors, shareholders or partners), underwriter or controlling
person, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity Agreement contained in this
Section 12.4(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of Parent (which consent may not be unreasonably
withheld); nor shall Parent be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon (i) a Violation which occurs in reliance upon and in conformity
with written information furnished by any such Member expressly for use in
the Registration Statement, or (ii) a Violation that would not have occurred
if such Member had delivered to the purchaser the version of the Prospectus
most recently provided by Parent to the Member as of a date prior to such
sale.
(b) To the extent permitted by law, each selling Member, severally
and not jointly, will indemnify and hold harmless Parent, each of its
directors, each of its officers who has signed the Registration Statement,
each person, if any, who controls Parent within the meaning of the Securities
Act, any underwriter, any other Member selling securities pursuant to the
Registration Statement and any controlling person of any such underwriter or
other Member, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as,
and only to the extent that, such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation
(which includes without limitation the failure of the Member to comply with
the prospectus delivery requirements under the Securities Act, and the
failure of the Member to deliver the most current prospectus provided by
Parent prior to the date of such sale), in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Member expressly for use in the
Registration Statement or such Violation is caused by the Member's failure to
deliver to the purchaser of the Member's Registrable Shares a prospectus (or
amendment or supplement thereto) that had been made available to the Member
by Parent prior to the date of the sale; and each such Member will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 12.4(b) in connection with investigating
or defending any such loss, claim, damage, liability, or action;, however,
that the indemnity Agreement contained in this Section 12.4(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Member, which consent shall not be unreasonably withheld. The aggregate
indemnification and contribution liability of each Member under this Section
12.4(b) shall not exceed the net proceeds received by such Member in
connection with sale of shares pursuant to the Registration Statement.
(c) Each person entitled to indemnification under this Section
12.4 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought and shall permit the Indemnifying Party to assume the defense of
any such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party who conducts the defense of such claim or any
litigation resulting therefrom shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12.4 unless the Indemnifying Party is materially prejudiced thereby.
No Indemnifying Party, in the defense of any such claim or litigation, shall
(except with the consent of each Indemnified Party) consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
(d) To the extent that the indemnification provided for in this
Section 12.4 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one had and of
the Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue of alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
12.5 Procedures for Sale of Shares Under Registration Statement.
(a) Notice and Approval. Subject to the provisions of Article XI
and the provisions of the Escrow Agreement, if any Member shall propose to
sell (which may include an intent to sell over a specific period of time)
Registrable Shares pursuant to the Registration Statement, it shall notify
Parent of its intent to do so (including the proposed manner and timing of
all sales) at least one (1) full trading day prior to such sale, and the
provision of such notice to Parent shall conclusively be deemed to
reestablish and reconfirm an Agreement by such Member to comply with the
registration provisions set forth in this Agreement. Unless otherwise
specified in such notice, such notice shall be deemed to constitute a
representation that any information previously supplied by such Member
expressly for inclusion in the Registration Statement (as the same may have
been superseded by subsequent such information) is accurate as of the date of
such notice. At any time within such one (1) trading-day period, Parent may
refuse to permit the Member to resell any Registrable Shares pursuant to the
Registration Statement; provided, however, that in order to exercise this
right, Parent must deliver a certificate in writing to the Member to the
effect that a delay in such sale is necessary because a sale pursuant to the
Registration Statement in its then-current form without the addition of
material, non-public information about Parent, could constitute a violation
of the federal securities laws. Notwithstanding the foregoing, Parent will
ensure that in any event the Members shall have at least ten (10) trading
days (prorated for partial quarters) available to sell Registrable Shares
during each calendar quarter (or portion thereof) from the Pooling Release
Date until the expiration of the applicable Registration Effective Period.
(b) Delivery of Prospectus. For any offer or sale of any of the
Registrable Shares by a Member in a transaction that is not exempt under the
Securities Act, the Member, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment
of or supplement to such prospectus) of Parent covering the Registrable
Shares in the form furnished to the Member by Parent to the purchaser of any
of the Registrable Shares on or before the settlement date for the purchase
of such Registrable Shares.
(c) Copies of Prospectuses. Subject to the provisions of this
Section 12.5, the provisions of Article XI and the provisions of the Escrow
Agreement, when a Member is entitled to sell and gives notice of its intent
to sell Registrable Shares pursuant to the Registration Statement, Parent
shall, within two (2) trading days following the request, furnish to such
Member a reasonable number of copies of a supplement to or in amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the
date of delivery to the Member include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statement therein not misleading or incomplete in the light of
the circumstances then existing.
12.6 Transferability of Registration Rights. The rights under this
Article XII are not transferable except (a) a transfer by will or intestacy,
(b) estate planning transfers consisting of gifts to the spouse or issue of
the transferee and transfers to trusts for the benefit of the spouse or issue
of the transferee, (c) a transfer to the constituent partners of a Member
that is a partnership as part of a pro rata distribution of the shares of
Parent Common Stock held by such partnership so long as all such transferees
appoint a single representative as their attorney-in-fact for the purpose of
receiving any notices and exercising their rights under this Article XII, or
(d) with the written consent of Parent.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Amendment. This Agreement may be amended by written agreement
among the Company and the Parent prior to the Effective Time.
13.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by
any party hereto to exercise, and no delay in exercising, any right
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or future exercise of that
right by that party.
13.3 Notices. All notices and other communications hereunder shall be
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 13.3):
(a) if to the Company, to:
Ironwood Acceptance Company, LLC
13430 N. Scottsdale Road
Suite 206
Scottsdale, AZ 85254
with copies to:
(b) if to the Members, to:
Richard Miller
Mika Ag Corp.
7535 Hilltop Circle
Suite 200
Denver, CO 80221
William Crisp
6051 East Cactus Wren Road
Paradise Valley, AZ 85253
Peter Reardon
8550 East Bronco Trail
Scottsdale, AZ 85255
(c) if to the Parent or Acquisition, to:
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: John Malloy, Esq.
with copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally delivered,
the acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable
overnight courier service.
13.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case of the Members, his heirs,
administrators, executors and personal representatives) and permitted
assigns. Neither this Agreement nor any rights, duties or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties hereto, except that vested rights to receive
payment or to initiate legal action with respect to causes of action that
have accrued hereunder shall be assignable by devise, descent or operation of
law.
13.5 No Third Party Beneficiaries. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor
of any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Members, his heirs, administrators,
executors and personal representatives) and permitted assigns and any other
parties indemnified under Article XI.
13.6 Public Announcements. Promptly upon execution and delivery of this
Agreement, the Parent and the Company shall issue a press release in such
form as they shall mutually agree. Thereafter, and prior to the consummation
of the Merger or the termination of this Agreement, none of the parties
hereto shall, except as mutually agreed by the Parent and the Company, or
except as may be required by law or applicable regulatory authority
(including, without limitation, the rules applicable to Nasdaq National
Market companies), issue any reports, releases, announcements or other
statements to the public relating to the transactions contemplated hereby.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Headings. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the
agreement of the parties and shall not be used in construing this Agreement
or in any way affect the meaning or interpretation of this Agreement.
13.9 Entire Agreement. This Agreement, and the Schedules, certificates
and other instruments and documents delivered pursuant hereto, together with
the other agreements referred to herein and to be entered into pursuant
hereto, embody the entire agreement of the parties hereto in respect of, and
there are no other agreements or understandings, written or oral, among the
parties relating to, the subject matter hereof, other than the
Confidentiality Agreements. This Agreement supersedes all prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter, other than the Confidentiality Agreements.
13.10Governing Law. The parties hereby agree that this Agreement, and
the respective rights, duties and obligations of the parties hereunder, shall
be governed by and construed in accordance with the General Corporation Laws
of the State of Delaware as to matters within the scope thereof and, as to
all other matters shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to
principles of conflicts of law thereunder. Each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be
brought exclusively in the Federal or state courts sitting in Boston,
Massachusetts and any court to which an appeal may be taken in any such
litigation, and (ii) by execution and delivery of this Agreement, irrevocably
submits to and accepts, with respect to any such action or proceeding, for
itself and in respect of its properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to
such jurisdiction.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Parent, Acquisition, the Company and the Members
named below have caused this Agreement to be duly executed and delivered as
of the date first above written.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Joseph S. Weingarten
Name: Joseph S. Weingarten
Title: Executive Vice President
STAMFORD ASSET RECOVERY CORPORATION
By: /s/ Heather A. Sica
Name: Heather A. Sica
Title: Executive Vice President
IRONWOOD ACCEPTANCE COMPANY, LLC
By: /s/ Peter Reardon
Name: Peter Reardon
Title: General Manager
MEMBERS:
/s/ Richard Miller
Richard Miller
/s/ William Crisp
William Crisp
/s/ Peter Reardon
Peter Reardon
HWD2: 531809-6
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of the 1st day of April, 1999, by and among LITCHFIELD FINANCIAL
CORPORATION, a Massachusetts corporation ("Litchfield"), STAMFORD BUSINESS
CREDIT CORPORATION, a Delaware corporation and a wholly-owned subsidiary of
Litchfield ("Stamford"), and LAND FINANCE CORPORATION., a Georgia corporation
("Land"). Stamford and Land are hereinafter sometimes referred to
individually as a "Merging Corporation" and collectively as the "Merging
Corporations."
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Litchfield and Land have approved
the acquisition of Land by Litchfield; and
WHEREAS, the Boards of Directors of Litchfield, Stamford and Land have
approved the merger of Land into Stamford (the "Merger"), pursuant to the
provisions set forth in this Agreement and the transactions contemplated
hereby, in accordance with the applicable provisions of the statutes of the
States of Delaware and Georgia, which permit such Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger and
also to describe various conditions.
NOW, THEREFORE, for and in consideration of the mutual agreements,
promises and covenants contained herein, the Merging Corporations do hereby
agree, subject to the approval and adoption of the Agreement by the
respective shareholders of all of the Merging Corporations, as hereinafter
provided.
I.
NAMES OF MERGING AND
SURVIVING CORPORATIONS
The names of the corporations proposing to merge are Stamford Business
Credit Corporation, a Delaware corporation, and Land Finance Corporation, a
Georgia corporation. Stamford shall be the Surviving Corporation. Upon the
Effective Date of Merger (as hereinafter defined), the name of the Surviving
Corporation shall be "Stamford Business Credit Corporation."
II.
TERMS AND CONDITIONS
OF PROPOSED MERGER
A. The acts and things required to be done by the Georgia Business
Corporation Code ("GBCC") in order to make the Agreement effective,
including, but not limited to, the submission of this Agreement for the
consent of the shareholders of Stamford and Land to the adoption and approval
of this Agreement, the execution of a Certificate of Merger, the filing of
the Certificate of Merger and the publication of the notice of such merger in
the manner provided under the GBCC, shall be attended to and done by the
proper officers of the Merging Corporations.
B. This merger of Land into Stamford shall be effective on the later
of April 1, 1999 or the filing of the Certificate of Merger with the
Secretary of State of Georgia ("Effective Date of Merger").
C. This Agreement may be terminated by the mutual consent of the
Boards of Directors of both of the Merging Corporations at any time prior to
the issuance of a Certificate of Merger by the Secretary of State of Georgia.
III.
ARTICLES OF INCORPORATION, DIRECTORS
AND OFFICERS OF SURVIVING CORPORATION
The Articles of Incorporation of the Surviving Corporation shall not be
changed in any manner as a result of this merger. The By-Laws of the
Surviving Corporation shall not be changed in any manner as a result of this
merger. From and after the Effective Date of Merger, the directors and
officers of Stamford shall be the directors and officers of the Surviving
Corporation
IV.
MANNER AND BASIS OF CONVERSION
OF SHARES OF STOCK
A. Upon the Effective Date of Merger, by virtue of the Merger and
without any action on the part of any holder of any capital stock of Land,
the manner and basis of converting the shares of stock of Land into shares of
stock of Stamford shall be as follows:
(1) all shares of Common Stock, no par value per share, of Land
("Land Common Stock") owned by Litchfield or any subsidiary of
Litchfield or Land shall be canceled and shall cease to exist from and
after the Effective Date of Merger; and
(2) the remaining 16,020 issued and outstanding shares of Land
Common Stock, shall be converted into, and become exchangeable for,
9,092 shares of validly issued, fully paid and nonassessable common
stock, without par value, of Litchfield owned by Stamford ("Litchfield
Common Stock"). Each owner of Land Common Stock will receive Litchfield
Common Stock in proportion to his or her current ownership of Land
Common Stock, or .5675 shares of Litchfield Common Stock for each share
of Land Common Stock. The consideration referred to in this Section A
is hereinafter referred to as the "Merger Consideration."
B. At the Effective Date of Merger, by virtue of the Merger and
without any action on the part of any holder of any capital stock of
Stamford, each issued and outstanding share of common stock of Stamford shall
continue unchanged and remain outstanding as a share of common stock of the
Surviving Corporation.
C. The exchange of capital stock certificates shall take place as
follows:
(1) As soon as practical after the Effective Date of Merger,
Litchfield shall make available to the Exchange Agent the certificates
representing shares of Litchfield Common Stock required to effect the
exchange referred to in Section C(2) of this Article IV. Shares of
Litchfield Common Stock into which shares of Land Common Stock shall be
converted in the Merger shall be deemed to have been issued at the
Effective Date of Merger.
(2) As soon as practical after the Effective Date of Merger, each
holder of a certificate of Land Common Stock, shall receive in exchange
therefor, upon surrender thereof to Lawler & Tanner, P.C. (the "Exchange
Agent"), a certificate or certificates representing the number of shares
of Litchfield Common Stock into which such holder's shares of Land
Common Stock were converted pursuant to Section A hereof. Until so
surrendered, each such outstanding certificate of Land Common Stock
shall be deemed for all corporate purposes to evidence the applicable
ownership interest of the number of shares of Litchfield Common Stock.
D. From and after the Effective Date of Merger, the stock transfer
books of Land shall be closed and no transfer of shares of Land Common Stock
shall thereafter be made. If, after the Effective Date of Merger, Land
Certificates are presented to Litchfield, they shall be canceled and
exchanged for the Merger Consideration in accordance with the procedures set
forth in this Article IV.
IV.
CONTINUITY OF INTEREST
A. The holders of Land Common Stock represent and warrant that they,
individually, have, and as of the Effective Date of Merger will have, no
present plan, intention or arrangement to sell, transfer or otherwise dispose
of a number of shares of Litchfield Common Stock to be received in the Merger
that would reduce former Land's shareholders' ownership of Litchfield Common
Stock to a number of shares having a value, as of the date of the Merger, of
less than fifty percent (50%) of the value of all of the issued and
outstanding capital stock of Land immediately prior to the Effective Date of
Merger.
B. Each holder of Land Common Stock agrees that prior to the Effective
Date of Merger, he or she will not sell, transfer, or otherwise dispose of
any Land Common Stock without the consent of all the other holders of Land
Common Stock.
C. Each Land shareholder agrees that, for a period of one year after
the Effective Date of Merger (the "Post-Merger Continuity Period"), he or she
will not sell, transfer or otherwise dispose of any Litchfield Common Stock
without the consent of all the other pre-merger holders of Land.
V.
REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of Litchfield and Stamford.
Litchfield and Stamford make the following warranties and representations to
Land, its successors and assigns, each of which is true and correct as of the
date of this Agreement and on and as of the Effective Date of Merger, with
the understanding that all of the warranties and representations contained
herein shall survive the Effective Date of Merger:
(1) Litchfield and Stamford are duly organized, validly existing
and in good standing under the laws of the jurisdictions of
incorporation or organization; Litchfield and Stamford have the full
corporate power, authority and legal right to execute and deliver this
Agreement and all other documents and instruments contemplated hereby,
to perform their respective obligations and to comply with the terms and
conditions hereunder and thereunder; this Agreement and all documents
and instruments contemplated hereby have been duly executed and
delivered and constitute the valid, legal, binding and enforceable
obligations of Litchfield and Stamford, regardless of whether such
enforcement is sought in a proceeding in equity or at law; and all
requisite corporate action has been taken by Litchfield and Stamford to
make this Agreement and all other documents and instruments contemplated
hereby valid and binding upon Litchfield and Stamford in accordance with
their terms;
(2) The consummation of the Merger contemplated by this Agreement
will not conflict with or result in a breach of any of the terms,
conditions or provisions of Litchfield's or Stamford's organizational
documents or any legal restriction or any agreement or instrument to
which Litchfield and Stamford is now a party or by which each is bound,
or constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation,
order, judgment or decree to which Litchfield, Stamford or any of their
property is subject;
(3) No consent of any other party and no consent, approval,
authorization or order of, or registration or filing with, or notice to
any court or governmental agency or body is required for the
consummation of the Merger by Litchfield or Stamford, or if required,
such approval has been obtained;
(4) Both Litchfield and Stamford have made all requisite filings
with the Securities and Exchange Commission ("SEC Filings"); and such
filings contain true and accurate information in all material respects;
and
(5) Litchfield and Stamford understand and agree that Land,
without independent investigation, is relying upon the above
representations and warranties in contemplating the Merger. Litchfield
and Stamford further agree that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force
and effect after the Merger.
B. Representations and Warranties of Land. Land makes the following
warranties and representations to Litchfield and Stamford, their successors
and assigns, each of which is true and correct as of the date of this
Agreement and on and as of the Effective Date of Merger, with the
understanding that all of the warranties and representations contained herein
shall survive the Effective Date of Merger:
(1) Land is duly organized and validly existing under the laws of
the jurisdiction of incorporation or organization; Land has the full
corporate power, authority and legal right to execute and deliver this
Agreement and all other documents and instruments contemplated hereby,
to perform its obligations and to comply with the terms and conditions
hereunder and thereunder; this Agreement and all documents and
instruments contemplated hereby have been duly executed and delivered
and constitute the valid, legal, binding and enforceable obligations of
Land, regardless of whether such enforcement is sought in a proceeding
in equity or at law; and all requisite corporate action has been taken
by Land to make this Agreement and all other documents and instruments
contemplated hereby valid and binding upon Land in accordance with their
terms;
(2) The consummation of the Merger contemplated by this Agreement
will not conflict with or result in a breach of any of the terms,
conditions or provisions of Land's organizational documents or any legal
restriction or any agreement or instrument to which Land is now a party
or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of
any law, rule, regulation, order, judgment or decree to which Land or
any of its property is subject;
(3) No consent of any other party and no consent, approval,
authorization or order of, or registration or filing with, or notice to
any court or governmental agency or body is required for the
consummation of the Merger by Land, or if required, such approval has
been obtained;
(4) The authorized capital stock of Land Finance consists solely
of one hundred thousand (100,000) shares of Land Finance Common Stock,
of which twenty-two thousand three hundred fifty-three and one-third
(22,353 1/3) shares are outstanding. All of the issued and outstanding
shares of Land Finance Common Stock are duly authorized and validly
issued, and are fully paid, non-assessable and free of preemptive
rights; and
(5) Land Finance has no subsidiaries.
VI.
EFFECT OF MERGER
Upon the Effective Date of Merger:
A. The separate existence of Land shall cease.
B. The Surviving Corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all of the duties and
liabilities of a corporation organized under the laws of the State of
Delaware.
C. The Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, whether of a public or a private nature, of all of
the Merging Corporations.
D. All property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all other choses in
action, and all and every other interest of or belonging to or due to all of
the Merging Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed.
E. The title to any real estate, or any interest therein, vested in
any of the Merging Corporations, shall not revert or be in any way impaired
by reason of the merger.
F. The Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of all of the Merging
Corporations.
G. Any claims existing or actions or proceedings pending by or against
any of the Merging Corporations may be prosecuted as if the merger had not
taken place, or the Surviving Corporation may be substituted in its place.
H. Neither the rights of creditors nor any liens upon the property of
any of the Merging Corporations shall be impaired by the Merger.
VII.
SERVICE OF PROCESS
The Surviving Corporation may be served with process in the State of
Georgia in any proceeding of enforcement of any obligation of Land, as well
as for enforcement of any obligation of the Surviving Corporation arising
from the merger.
VIII.
PLAN OF REORGANIZATION
The Merging Corporations hereby adopt a plan of reorganization pursuant
to the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended, to be effectuated in the manner herein set
forth.
IX.
GENERAL PROVISIONS
A. Land agrees that from time to time, as and when requested by
Stamford or by its successors or assigns, it will execute and deliver, or
cause to be executed and delivered, all such deeds and other instruments, and
will take or cause to be taken such further or other action, as the Surviving
Corporation may deem necessary or desirable, in order more fully to vest in
and confirm to the Surviving Corporation title to and possession of all
property, rights, privileges, powers and franchises of Land and otherwise to
carry out the intent and purposes of this Agreement.
B. Any number of counterparts of this Agreement may be signed and
delivered and each shall be considered an original and together they shall
constitute one agreement.
C. This Agreement shall be construed and performed in accordance with
the laws of the State of Georgia. The rights and liabilities of the parties
shall bind and inure to the benefit of their respective successors and
assigns.
D. This Agreement constitutes the entire agreement among the parties
pertaining to its subject matter and supersedes all prior agreements and
understandings of the parties in connection therewith. This Agreement cannot
be changed or terminated orally, nor shall any change, termination or
attempted waiver of any of the provisions of this Agreement be binding on any
Merging Corporation unless in writing signed by its President.
[the remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, all of the Merging Corporations have caused this
Agreement and Plan of Merger to be executed on their behalf and their
respective corporate seals affixed and the foregoing attested, all by their
dully authorized officers on the day and year first above specified.
LITCHFIELD FINANCIAL CORPORATION, a
Massachusetts corporation
By:/s/ Joseph S. Weingarten
Name: Joseph S. Weingarten
Title: Executive Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
STAMFORD BUSINESS CREDIT CORPORATION, a
Delaware corporation
By:/s/ Joseph S. Weingarten
Name: Joseph S. Weingarten
Title: Executive Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
Exhibit 4.12
LITCHFIELD FINANCIAL CORPORATION
AND
THE BANK OF NEW YORK,
AS TRUSTEE
JUNIOR SUBORDINATED INDENTURE
DATED AS OF MAY 19, 1999
JUNIOR SUBORDINATED DEBENTURES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
Definitions
<S> <C> <C>
Section 1.01. Definitions..................................................................................2
ARTICLE 2
Issue Description, Terms, Execution Registration and Exchange of Debentures
Section 2.01. Designation, Terms, Amount, Authentication and Delivery
of Debentures................................................................................8
Section 2.02. Form of Debenture and Trustee's Certificate.................................................11
Section 2.03. Date and Denominations of Debentures and Provisions for Payment of
Principal, Premium and Interest.............................................................11
Section 2.04. Execution of Debentures.....................................................................12
Section 2.05. Exchange of Debentures......................................................................14
Section 2.06. Temporary Debentures........................................................................15
Section 2.07. Mutilated, Destroyed, Lost or Stolen Debentures.............................................15
Section 2.08. Cancellation of Surrendered Debentures......................................................16
Section 2.09. Provisions of Indenture and Debentures for Sole Benefit of Parties
and Debentureholders........................................................................16
Section 2.10. Appointment of Authenticating Agent.........................................................16
Section 2.11. Global Debentures...........................................................................17
Section 2.12. Cusip Numbers...............................................................................19
ARTICLE 3
Redemption of Debentures and Sinking Fund Provisions
Section 3.01. Redemption..................................................................................19
Section 3.02. Notice of Redemption........................................................................19
Section 3.04. Sinking Funds for Debentures................................................................21
Section 3.05. Satisfaction of Sinking Fund Payments with Debentures.......................................21
Section 3.06. Redemption of Debentures for Sinking Fund...................................................22
ARTICLE 4
Particular Covenants of the Company
Section 4.01. Payment of Principal of (And Premium, If Any)
and Interest on Debentures..................................................................22
i
<PAGE>
Section 4.02. Maintenance of Office or Agent for Payment of Debentures,
Designation of Office or Agency for Payment, Registration,
Transfer and Exchange of Debentures.........................................................22
Section 4.03. Duties of Paying Agent; Company as Payment Agent; and Holding
Sums in Trust...............................................................................22
Section 4.04. Appointment to Fill Vacancy in Office of Trustee............................................23
ARTICLE 5
Debentureholders Lists and Reports by the Company and the Trustee
Section 5.01. Company to Furnish Trustee Information as to Names and
Addresses of Debentureholders...............................................................23
Section 5.02. Trustee to Preserve Information as to Names and Addresses of
Debentureholders............................................................................24
Section 5.03. Annual and Other Reports to Be Filed by Company with the Trustee............................25
Section 5.04. Trustee to Transmit Annual Report to Debentureholders.......................................26
ARTICLE 6
Remedies of the Trustee and Debentureholders on Event of Default
Section 6.01. Events of Default Defined...................................................................26
Section 6.02. Covenant of Company to Pay to Trustee Whole Amount Due
on Debentures on Default in Payment of Interest or Principal
(And Premiums, If Any)......................................................................29
Section 6.03. Application of Moneys Collected by Trustee..................................................30
Section 6.04. Limitation on Suits by Holders of Debentures................................................31
Section 6.05. Remedies Cumulative; Delay or Omission in Exercise of Rights
Not Waiver of Default.......................................................................32
Section 6.06. Rights of Holders of Majority in Principal Amount of Debentures
to Direct Trustee and to Waive Defaults.....................................................32
Section 6.07. Trustee to Give Notice of Defaults Known to It, but May Withhold
in Certain Circumstances....................................................................33
Section 6.08. Requirements of an Undertaking to Pay Costs in Certain Suits
under Indenture or Against Trustee..........................................................33
ARTICLE 7
Concerning the Trustee
Section 7.01. Upon Event of Default Occurring and Continuing, Trustees
Shall Exercise Powers Vested in It, and Use Same Degree of Care
and Skill in Their Exercise, as Prudent Individual Would Use................................34
Section 7.02. Certain Rights of the Trustee...............................................................35
ii
Section 7.03. Trustee Not Liable for Recitals in Indenture or in Debentures...............................37
Section 7.04. Trustee, Paying Agent or Debenture Registrar May Own Debentures.............................37
Section 7.05. Moneys Received by Trustee to Be Held in Trust Without Interest.............................37
Section 7.06. Trustee Entitled to Compensation, Reimbursement and Indemnity...............................38
Section 7.07. Right of Trustee to Rely on Certificate of Officers of Company
Where No Other Evidence Specifically Prescribed.............................................38
Section 7.08. Disqualification; Conflicting Interests.....................................................39
Section 7.09. Requirements for Eligibility of Trustee.....................................................39
Section 7.10. Resignation of Trustee and Appointment of Successor.........................................39
Section 7.11. Acceptance by Successor to Trustee..........................................................41
Section 7.12. Successor to Trustee by Merger, Consolidation or Succession
to Business.................................................................................42
Section 7.13. Preferential Collection of Claims Against the Company.......................................42
ARTICLE 8
Concerning the Debentures
Section 8.01. Evidence of Action by Debentureholders......................................................42
Section 8.02. Proof of Execution of Instruments and of Holding of Debentures..............................43
Section 8.03. Who May Be Deemed Owners of Debentures......................................................43
Section 8.04. Debentures Owned by the Company or Controlled or Controlling
Companies Disregarded for Certain Purposes..................................................43
Section 8.05. Instruments Executed by Debentureholders Bind Future Holders................................44
ARTICLE 9
Supplemental Indentures
Section 9.01. Purposes for Which Supplemental Indenture May Be Entered into
Without Consent of Debentureholders.........................................................44
Section 9.02. Modification of Indenture with Consent of Debentureholders..................................46
Section 9.03. Effect of Supplemental Indentures...........................................................47
Section 9.04. Debentures May Bear Notation of Changes by Supplemental
Indentures..................................................................................47
Section 9.05. Opinion of Counsel..........................................................................47
iii
ARTICLE 10
Consolidation, Merger, Sale or Conveyance
Section 10.01. Company May Consolidate, Etc. on Certain Terms............................................48
Section 10.02. Successor Corporation Substituted.........................................................48
Section 10.03. Opinion of Counsel........................................................................48
ARTICLE 11
Stisfaction and Discharge of Indenture; Unclaimed Moneys
Section 11.01. Satisfaction and Discharge of Indenture.....................................................48
Section 11.02. Application by Trustee of Funds Deposited for Payment of
Debentures..................................................................................51
Section 11.03. Repayment of Moneys Held by the Paying Agent................................................51
Section 11.04. Repayment of Moneys Held by the Trustee.....................................................51
Section 11.05. Indemnification Relating to Governmental Obligations........................................51
ARTICLE 12
Imunity of Incorporators, Stockholders, Officers and Directors
Section 12.01. Incorporators, Stockholders, Officers and Directors of Company
Exempt from Individual Liability............................................................52
ARTICLE 13
Micellaneous Provisions
Section 13.01. Successors and Assigns of Company Bound by Indenture........................................52
Section 13.02. Acts of Board, Committee or Officer of Successor Company Valid..............................52
Section 13.03. Surrender of Powers of the Company..........................................................53
Section 13.04. Required Notices or Demands May Be Served by Mail...........................................53
Section 13.05. Indenture and Debentures to Be Construed in Accordance with
Laws of the State of New York...............................................................54
Section 13.06. Officer's Certificate and Opinion of Counsel to Be Furnished
upon Application or Demands by Company; Statements to Be
Included in Each Certificate or Opinion with Respect to Compliance
with Condition or Covenant..................................................................53
Section 13.07. Payments Due on Sundays or Holidays.......................................................53
Section 13.08. Provisions Required by Trust Indenture Act of 1939 to Control...............................54
Section 13.09. Indenture May Be Executed by its Counterparts...............................................54
Section 13.10. Separability of Indenture Provisions........................................................54
Section 13.11. Assignment by Company to a Subsidiary or Affiliate..........................................54
iv
Section 13.12. Holders of Preferred Securities as Third Party Beneficiaries
of the Indenture; Holders of Preferred Securities May Institute Legal
Proceedings Against the Company in Certain Cases............................................54
ARTICLE 14
Sbordination of Debentures
Section 14.01. Agreement to Subordinate....................................................................55
Section 14.02. Default on Senior Debt......................................................................55
Section 14.03. Liquidation; Dissolution; Bankruptcy........................................................56
Section 14.04. Subrogation of Debentures...................................................................57
Section 14.05. Authorization by Debentureholders...........................................................58
Section 14.06. Notice to Trustee...........................................................................58
Section 14.07. Trustee's Relation to Senior Debt...........................................................59
Section 14.08. No Impairment to Subordination..............................................................59
Section 14.09. Article Applicable to Paying Agents.........................................................60
Section 14.10. Trust Moneys Not Subordinated...............................................................60
</TABLE>
v
THIS JUNIOR SUBORDINATED INDENTURE, is dated as of the 19th day of May,
1999, between Litchfield Financial Corporation, a corporation duly organized and
existing under the laws of The Commonwealth of Massachusetts (hereinafter
sometimes referred to as the "Company"), and The Bank of New York, a New York
banking corporation, as Trustee (hereinafter sometimes referred to as the
"Trustee"):
WHEREAS, for its lawful corporate purposes, the Company has fully
authorized the execution and delivery of this Indenture to provide for the
issuance of unsecured junior subordinated debentures (hereinafter referred to as
the "Debentures"), in an unlimited aggregate principal amount to be issued from
time to time in one or more series in accordance with the terms of this
Indenture, as registered Debentures without coupons, to be authenticated by the
certificate of the Trustee;
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture;
WHEREAS, the Debentures and the certificate of authentication to be
borne by the Debentures (the "Certificate of Authentication") are to be
substantially in such forms as may be approved by the Board of Directors (as
defined below) or set forth in any indenture supplemental to this Indenture; and
WHEREAS, all acts and things necessary to make the Debentures issued
pursuant hereto, when executed by the Company and authenticated and delivered by
the Trustee in accordance with the terms of this Indenture, the valid, binding
and legal obligations of the Company, and to constitute a valid indenture and
agreement according to its terms, have been done and performed or will be done
and performed prior to the issuance of such Debentures, and the execution of
this Indenture has been and the issuance hereunder of the Debentures has been or
will be prior to issuance in all respects duly authorized, and the Company, in
the exercise of the legal right and power in it vested, executes this Indenture
and proposes to make, execute, issue and deliver the Debentures;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are and are to be authenticated, issued and delivered, and in
consideration of the premises and of the acquisition and acceptance of the
Debentures by the holders thereof, the Company covenants and agrees with the
Trustee, for the equal and proportionate benefit (subject to the provisions of
this Indenture) of the respective holders from time to time of the Debentures,
without any discrimination, preference or priority of any one Debenture over any
other by reason of priority in the time of issue, sale or negotiation thereof,
or otherwise, except as provided herein, as follows:
1
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. The terms defined in this Section (except as
in this Indenture otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture, any resolution of the Board of
Directors of the Company and of any indenture supplemental hereof shall have the
respective meanings specified in this Section. All other terms used in this
Indenture which are defined in the Trust Indenture Act of 1939, as amended, or
which are by reference in such Act defined in the Securities Act of 1933, as
amended (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of this
instrument.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, no Litchfield Capital
Trust to which Debentures have been issued shall be deemed to be an Affiliate of
the Company. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means an authenticating agent with respect to
all or any of the series of Debentures, as the case may be, appointed with
respect to all or any series of the Debentures, as the case may be, by the
Trustee pursuant to Section 2.10.
"Board of Directors" means the Board of Directors of the Company, or
any committee of such Board duly authorized to act hereunder.
"Board Resolution" means a copy of one or more resolutions, certified
by the secretary or an assistant secretary of the Company to have been adopted
or consented to by the Board of Directors and to be in full force and effect,
and delivered to the Trustee.
"Business Day," with respect to any series of Debentures, means any day
other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions
in the Borough of Manhattan, The City and State of New York or Boston,
Massachusetts are authorized or obligated by law or executive order to close or
(iii) a day on which the Corporate Trust Office of the Trustee, or, with respect
to Debentures of a series initially issued to a Litchfield Capital Trust, the
principal corporate trust office of the Property Trustee under the related
Declaration of Trust, is closed for business.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer or
the Treasurer of the Company. The Certificate need not comply with the
provisions of Section 13.06.
2
"Common Securities" means the common undivided beneficial interests in
the assets of the applicable Litchfield Capital Trust.
"Company" means Litchfield Financial Corporation, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, and,
subject to the provisions of Article 10, shall also include its successor and
assigns.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Indenture is
located at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration.
"Debenture" or "Debentures" means any Debenture or Debentures, as the
case may be, authenticated and delivered under this Indenture.
"Debenture Register" has the meaning assigned in Section 2.05(b).
"Debenture Registrar" has the meaning assigned in Section 2.05(b).
"Debentureholder," "holder of Debentures," "registered holder," or
other similar term, means the person or persons in whose name or names a
particular Debenture shall be registered on the books of the Company kept for
the purpose in accordance with the terms of this Indenture.
"Debt" means, with respect to any Person at any date of determination
(without duplication), (i) all indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) all obligations of such
Person in respect of letters of credit or bankers' acceptances or other similar
instruments (or reimbursement obligations thereto) issued on the account of such
person, (iv) all obligations of such person to pay the deferred purchase price
of property or services, except Trade Payables, (v) all obligations of such
Person as lessee under capitalized leases, (vi) all Debt of others secured by a
Lien on any asset of such Person, whether or not such Debt is assumed by such
Person; provided that, for purposes of determining the amount of any Debt of the
type described in this clause (vi), if recourse with respect to such Debt is
limited to such asset, the amount of such Debt shall be limited to the lesser of
the fair market value of such asset or the amount of such Debt, (vii) all Debt
of others Guaranteed by such Person to the extent such Debt is Guaranteed by
such Person, and (viii) to the extent not otherwise included in this definition,
all obligations of such Person for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity prices, forward
contracts, options, swaps, collars and similar arrangements.
"Declaration of Trust" means the Amended and Restated Declaration of
Trust of a Litchfield Capital Trust, if any, specified in the applicable Board
Resolution or supplemental indenture establishing a particular series of
Debentures pursuant to Section 2.01 hereof.
3
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default hereunder.
"Depositary" means with respect to Debentures of any series, for which
the Company shall determine that such Debentures will be issued as one or more
Global Debentures, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Exchange Act or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to either Section 2.01 or 2.11.
"Event of Default," with respect to Debentures of a particular series
means any event specified in Section 6.01(a), continued for the period of time,
if any, and the giving of the notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Global Debenture" means, with respect to any series of Debentures, a
Debenture in the form prescribed in Section 2.11 executed by the Company and
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction, all in accordance with the Indenture, which shall be registered in
the name of the Depositary or its nominee.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Governmental Obligation or the specific payment of principal of
or interest on the Governmental Obligation evidenced by such depository receipt.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt of other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part);
4
provided that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Indenture" means this instrument as originally executed, or, if
amended or supplemented as herein provided, as so amended or supplemented.
"Interest Payment Date" when used with respect to any installment of
interest on a Debenture of a particular series means the date specified in such
Debenture or in a Board Resolution or in an indenture supplemental hereto with
respect to such series as the fixed date on which an installment of interest
with respect to Debentures of that series is due and payable.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. For purposes of this Indenture, the Company shall be deemed to own
subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such property.
"Litchfield Capital Trust" means any statutory business trust created
under the laws of the State of Delaware as specified in the applicable Board
Resolution or supplemental indenture establishing a particular series of
Debentures pursuant to Section 2.01 hereof.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Comptroller or an Assistant Comptroller or the Secretary or an Assistant
Secretary of the Company, and delivered to the Trustee. Each such certificate
shall include the statements provided for in Section 13.06, if and to the extent
required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be counsel for the Company, a Litchfield Capital Trust or the
Trustee, which may be an employee of the Company but not an employee of a
Litchfield Capital Trust or the Trustee, and who shall be reasonably acceptable
to the Trustee. Each such opinion shall include the statements provided for in
Section 13.06, if and to the extent required by the provisions thereof.
"Outstanding," when used with reference to Debentures of any series,
subject to the provisions of Section 8.01, means, as of any particular time, all
Debentures of that series theretofore authenticated and delivered by the Trustee
under this Indenture, except (a) Debentures theretofore cancelled by the Trustee
or any paying agent, or delivered to the Trustee or any paying agent for
cancellation or which have previously been cancelled; (b) Debentures or portions
thereof for the payment or redemption of which moneys or Governmental
Obligations in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust for the holders of such Debentures by the Company
(if the Company shall act as its own paying agent); provided, however, that if
such Debentures or portions of such Debentures are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as in Article
3
5
provided, or provision satisfactory to the Trustee shall have been made for
giving such notice; (c) Debentures paid pursuant to Section 2.07; and (d)
Debentures in lieu of or in substitution for which other Debentures shall have
been authenticated and delivered pursuant to the terms of Section 2.07;
provided, however, that in determining whether the holders of the requisite
principal amount of Outstanding Debentures are present at a meeting of holders
of Debentures for quorum purposes or have consented to or voted in favor of any
request, demand, authorization, direction, notice, consent, waiver, amendment or
modification hereunder, Debentures held for the account of the Company, any of
its subsidiaries or any of its Affiliates shall be disregarded and deemed not to
be Outstanding, except that in determining whether the Trustee shall be
protected in making such a determination or relying upon any such quorum,
consent or vote, only Debentures which the Trustee actually knows to be so owned
shall be so disregarded.
"Person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment," when used with respect to the Debentures of any
series, means the place or places where the principal of and any premium and
interest on the Debentures of that series are payable as specified as
contemplated by Section 2.01.
"Predecessor Debenture" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 2.07 in lieu
of a lost, destroyed or stolen Debenture shall be deemed to evidence the same
debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" means the preferred undivided beneficial
interests in the assets of the applicable Litchfield Capital Trust.
"Property Trustee" means the entity performing the function of the
Property Trustee under the applicable Declaration of Trust of a Litchfield
Capital Trust.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such Person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
6
"Security Exchange" when used with respect to the Debentures of any
series which are held as trust assets of a Litchfield Capital Trust pursuant to
the Declaration of Trust of such Litchfield Capital Trust, means the
distribution of the Debentures of such series by such Litchfield Capital Trust
in exchange for the Preferred Securities and Common Securities of such
Litchfield Capital Trust in dissolution of such Litchfield Capital Trust
pursuant to the Declaration of Trust of such Litchfield Capital Trust.
"Senior Debt" means the principal of (and premium, if any) and interest
on all Debt of the Company whether created, incurred or assumed before, on or
after the date of this Indenture; provided that such Senior Debt shall not
include (i) Debt of the Company that, when incurred and without respect to any
election under Section 1111(b) of Title 11, U.S. Code, was without recourse, and
(ii) any other Debt of the Company which by the terms of the instrument creating
or evidencing the same is specifically designated as being subordinated to or
pari passu with the Debentures, and in particular the Debentures shall rank pari
passu with all other debt securities and guarantees issued to any trust,
partnership or other entity affiliated with the Company which is a financing
vehicle of the Company in connection with an issuance of preferred securities by
such financing entity.
"Subsidiary" means any corporation at least a majority of whose
outstanding voting stock shall at the time be owned, directly or indirectly, by
the Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries. For the purposes only of this definition of the term "Subsidiary,"
the term "voting stock," as applied to the stock of any corporation shall mean
stock of any class or classes having ordinary voting power for the election of a
majority of the directors of such corporation, other than stock having such
power only by reason of the occurrence of a contingency.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"Trustee" means The Bank of New York, a New York banking corporation,
and, subject to the provisions of Article 7, shall also include its successors
and assigns, and, if at any time there is more than one person acting in such
capacity hereunder, "Trustee" shall mean each such person. The term "Trustee" as
used with respect to a particular series of the Debentures shall mean the
trustee with respect to that series.
"Trust Indenture Act," subject to the provisions of Section 9.01 and
9.02, means the Trust Indenture Act of 1939, as amended and in effect at the
date of execution of this Indenture.
7
ARTICLE 2
ISSUE DESCRIPTION, TERMS, EXECUTION REGISTRATION
AND EXCHANGE OF DEBENTURES
SECTION 2.01. DESIGNATION, TERMS, AMOUNT, AUTHENTICATION AND DELIVERY
OF DEBENTURES. The aggregate principal amount of Debentures which may be
authenticated and delivered under this Indenture is unlimited.
The Debentures may be issued in one or more series up to the aggregate
principal amount of Debentures of that series from time to time authorized by or
pursuant to a Board Resolution or pursuant to one or more indentures
supplemental hereto, prior to the initial issuance of Debentures of a particular
series. Prior to the initial issuance of Debentures of any series, there shall
be established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto:
(1) the title of the Debentures of the series (which shall
distinguish the Debentures of the series from all other Debentures);
(2) any limit upon the aggregate principal amount of the Debentures of
that series which may be authenticated and delivered under this Indenture
(except for Debentures authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Debentures of that series);
(3) the date or dates on which the principal of the Debentures of the
series is payable and the right to shorten, extend or defer such date or dates;
(4) the rate or rates at which the Debentures of the series shall bear
interest or the manner of calculation of such rate or rates, if any;
(5) the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest will be payable or the manner of
determination of such Interest Payment Dates and the record date for the
determination of holders to whom interest is payable on any such Interest
Payment Dates;
(6) the right, if any, to extend or defer the interest payment periods
and the duration of such extension;
(7) the period or periods within which, the price or prices at which,
and the terms and conditions upon which, Debentures of the series may be
redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Debentures of the series pursuant to any sinking fund or analogous provisions
(including payments made in cash in anticipation of future sinking fund
obligations) or at the option of a holder thereof and the period or periods
within which, the price or prices at which, the currency or currencies
(including
8
currency unit or units) in which and the terms and conditions upon which,
Debentures of the series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(9) any exchangeability, conversion or prepayment provisions of
the Debentures;
(10) the form of the Debentures of the series including the form of the
Certificate of Authentication for such series;
(11) if other than denominations of $10 or any integral multiple
thereof, the denominations in which the Debentures of the series shall be
issuable;
(12) whether the Debentures are issuable as one or more Global
Debentures and, in such case, the identity of the Depositary for such series,
the form of any legend or legends which shall be borne by any such Global
Debentures in addition to or in lieu of that set forth in Section 2.11 and any
circumstances in addition to or in lieu of those set forth in Section 2.11 in
which any such Global Debentures may be exchanged in whole or in part for
Debentures registered, and any transfer of such Global Debentures in whole or in
part may be registered, in the name or names of Persons other than the
Depositary for such Global Debentures or a nominee thereof;
(13) if the Debentures of such series are to be deposited as trust
assets in a Litchfield Capital Trust the name of the applicable Litchfield
Capital Trust (which shall distinguish such statutory business trust from all
other Litchfield Capital Trusts) into which the Debentures of such series are to
be deposited as trust assets and the date of its Declaration of Trust;
(14) the place or places where the principal of (and premium, if any)
and interest on the Debentures of such series shall be payable, the place or
places where the Debentures of such series may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Debentures of such series may be made;
(15) if other than U.S. dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Debentures of the series shall be payable, or in which
the Debentures of the series shall be denominated;
(16) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Debentures of such series;
(17) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the maturity thereof;
(18) the additions or changes, if any, to this Indenture with respect
to the Debentures of such series as shall be necessary to permit or facilitate
the issuance of the Debentures of such
9
series in bearer form, registrable or not registrable as to principal, and with
or without interest coupons;
(19) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Debentures of such series or the manner
in which such amounts will be determined;
(20) the appointment of any Paying Agent or Agents for the
Debentures of such series;
(21) the relative degree, if any, to which the Debentures of such
series shall be senior to or be subordinated to other series of Debentures in
right of payment, whether such other series of Debentures are Outstanding or
not;
(22) any and all other terms with respect to the Debentures of such
series (and any terms which may be required by or advisable under applicable
laws or regulations not inconsistent with the terms of this Indenture); and
(23) an identification of any applicable United States Federal income
tax consequences with respect to the Debentures of such series, including
whether and under what circumstances the Company will pay additional amounts on
the Debentures of such series held by a Person who is not a U.S. Person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether the Company will have the option to redeem the Debentures of such
series rather than pay such additional amounts.
All Debentures of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to any such Board Resolution or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 2.02. FORM OF DEBENTURE AND TRUSTEE'S CERTIFICATE. The
Debentures of any series and the Trustee's certificate of authentication to be
borne by such Debentures shall be substantially of the tenor and purport as set
forth in one or more indentures supplemental hereto or as provided in a Board
Resolution and as set forth in an Officers' Certificate, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements typewritten, printed, lithographed or engraved thereon
as the Company may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange or automated quotation system on which Debentures of that
series may be listed or traded, or to conform to usage.
10
SECTION 2.03. DATE AND DENOMINATIONS OF DEBENTURES AND
PROVISIONS FOR PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The
Debentures shall be issuable as registered Debentures and in the denominations
of $10 or any integral multiple thereof, subject to Section 2.01(11). The
Debentures of a particular series shall bear interest payable on the dates and
at the rate specified with respect to that series. The principal of and the
interest on the Debentures of any series, as well as any premium thereon in case
of redemption thereof prior to maturity, shall, subject to Section 2.01(8) and
(15), be payable in the coin or currency of the United States of America which
at the time is legal tender for public and private debt, at the Place of
Payment. Each Debenture shall be dated the date of its authentication. Interest
on the Debentures shall be computed on the basis of a 360-day year composed of
twelve 30-day months.
The interest installment on any Debenture which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Debentures of that series shall be paid to the person in whose name said
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the regular record date for such interest installment. In the event
that any Debenture of a particular series or portion thereof is called for
redemption and the redemption date is subsequent to a regular record date with
respect to any Interest Payment Date and prior to such Interest Payment Date,
interest on such Debenture will be paid upon presentation and surrender of such
Debenture as provided in Section 3.03.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Debentures of the
same series (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company, at its election, as provided in clause (1) or clause (2) below:
(1) The Company may make payment of any Defaulted Interest on
Debentures to the persons in whose names such Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Debenture and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than 15 nor less than 10 days prior
to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Debentureholder at his or her address as it
appears in the Debenture Register (as hereinafter defined), not less than 10
days prior to such special record date. Notice of the proposed payment of such
Defaulted
11
Interest and the special record date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the persons in whose names such
Debentures (or their Predecessor Debentures) are registered on such special
record date and shall be no longer payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on any
Debentures in any other lawful manner not inconsistent with the requirements of
any securities exchange or automated quotation system on which such Debentures
may be listed or traded, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Unless otherwise set forth in a Board Resolution or one or more
indentures supplemental hereto establishing the terms of any series of
Debentures pursuant to Section 2.01 hereof, the term "regular record date" as
used in this Section with respect to a series of Debentures with respect to any
Interest Payment Date for such series shall mean either the fifteenth day of the
month immediately preceding the month in which an Interest Payment Date
established for such series pursuant to Section 2.01 hereof shall occur, if such
Interest Payment Date is the first day of a month, or the last day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the fifteenth day of a month, whether or not such date is a
Business Day.
Subject to the foregoing provisions of this Section, each Debenture of
a series delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Debenture of such series shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 2.04. EXECUTION OF DEBENTURES. The Debentures shall, subject to
the provisions of Section 2.06, be printed on steel engraved borders or fully or
partially engraved, or legibly typed, as the proper officers of the Company may
determine, and shall be signed on behalf of the Company by the Chairman or Vice
Chairman of its Board of Directors or its Chief Executive Officer, President or
one of its Vice Presidents, under its corporate seal attested by its Secretary
or one of its Assistant Secretaries. The signature of the Chairman, Vice
Chairman, Chief Executive Officer, President or a Vice President and/or the
signature of the Secretary or an Assistant Secretary in attestation of the
corporate seal, upon the Debentures, may be in the form of a manual or facsimile
signature and may be imprinted or otherwise reproduced on the Debentures and for
that purpose the Company may use the manual or facsimile signature of any person
who shall have been a Chairman, Vice Chairman, Chief Executive Officer,
President or Vice President, or of any person who shall have been a Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Debentures
shall be authenticated and delivered or disposed of such person shall have
ceased to be the Chairman, Vice Chairman, Chief Executive Officer, President or
a Vice President, or the Secretary or an Assistant Secretary, of the Company, as
the case may be. The seal of the Company may be in the form of a facsimile of
the
12
seal of the Company and may be impressed, affixed, imprinted or otherwise
reproduced on the Debentures.
Only such Debentures as shall bear thereon a Certificate of
Authentication substantially in the form established for such Debentures,
executed manually by an authorized signatory of the Trustee, or by any
Authenticating Agent with respect to such Debentures, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate executed by the Trustee, or by any Authenticating Agent appointed by
the Trustee with respect to such Debentures, upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and made available for delivery hereunder and that the
holder is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Debenture shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Debenture to the Trustee for cancellation as provided in Section
2.08, for all purposes of this Indenture such Debenture shall be deemed never to
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures of any series executed by the
Company to the Trustee for authentication, together with a written order of the
Company for the authentication and delivery of such Debentures, signed by its
President or any Vice President and its Treasurer or any Assistant Treasurer,
and the Trustee in accordance with such written order shall authenticate and
make available for delivery such Debentures. Each Debenture shall be dated the
date of its authentication by the Trustee.
In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
The Trustee shall not be required to authenticate such Debentures if
the issue of such Debentures pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner which is not reasonably acceptable to the
Trustee.
SECTION 2.05. EXCHANGE OF DEBENTURES.
(a) Debentures of any series may be exchanged upon presentation thereof
at a Place of Payment, for other Debentures of such series of authorized
denominations, and for a like aggregate principal amount, upon payment of a sum
sufficient to cover any tax or other governmental charge in relation thereto,
all as provided in this Section. In respect of any Debentures so surrendered for
exchange, the Company shall execute, the Trustee shall authenticate and such
office or agency shall make available for delivery in exchange therefor the
Debenture or Debentures of the same series which the Debentureholder making the
exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
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(b) The Company shall keep, or cause to be kept, at the Corporate Trust
Office of the Trustee (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment is herein sometimes
collectively referred to as the "Debenture Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall register the
Debentures and the transfers of Debentures as in this Article provided and which
at all reasonable times shall be open for inspection by the Trustee. The
registrar for the purpose of registering Debentures and transfer of Debentures
as herein provided shall be appointed by the Company (the "Debenture
Registrar"). The initial Debenture Registrar shall be the Trustee.
Upon surrender for transfer of any Debenture at the office or agency of
the Company in a Place of Payment, the Company shall execute and the Trustee
shall authenticate and deliver, in the name of the transferee or transferees,
one or more new Debentures of the same series as the Debenture presented, of any
authorized denominations and of like tenor and aggregate principal amount.
All Debentures presented or surrendered for exchange or registration of
transfer, as provided in this Section, shall be accompanied (if so required by
the Company or the Debenture Registrar) by a written instrument or instruments
of transfer, in form satisfactory to the Company or the Debenture Registrar,
duly executed by the registered holder or by his duly authorized attorney in
writing.
(c) No service charge shall be made for any exchange or registration of
transfer of Debentures, or issue of new Debentures in case of partial redemption
of any series, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge in relation thereto, other than exchanges
pursuant to Section 2.06, the second paragraph of Section 3.03 and Section 9.04
not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Debentures and ending at the close of business on the day of such mailing, nor
(ii) to register the transfer of or exchange any Debentures of any series or
portions thereof called for redemption. The provisions of this Section 2.05 are,
with respect to any Global Debenture, subject to Section 2.11 hereof.
SECTION 2.06. TEMPORARY DEBENTURES. Pending the preparation of
definitive Debentures of any series, the Company may execute, and the Trustee
shall authenticate and make available for delivery, temporary Debentures
(printed, lithographed or typewritten) of any authorized denomination, and
substantially in the form of the definitive Debentures in lieu of which they are
issued, but with such omissions, insertions and variations as may be appropriate
for temporary Debentures, all as may be determined by the Company. Every
temporary Debenture of any series shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Debentures of such series.
Without unnecessary delay the Company will execute and will furnish definitive
Debentures of such series and thereupon any or all temporary Debentures of such
series may be surrendered in exchange therefor (without charge to the holders),
at a Place
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of Payment, and upon receipt of a written order of the Company signed by its
President or any Vice President and its Treasurer or any Assistant Treasurer,
the Trustee shall authenticate and deliver in exchange for such temporary
Debentures an equal aggregate principal amount of definitive Debentures of such
series, unless the Company advises the Trustee to the effect that definitive
Debentures need not be executed and furnished until further notice from the
Company. Until so exchanged, the temporary Debentures of such series shall be
entitled to the same benefits under this Indenture as definitive Debentures of
such series authenticated and delivered hereunder.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
In case any temporary or definitive Debenture shall become mutilated or be
destroyed, lost or stolen, the Company (subject to the next succeeding sentence)
shall execute, and upon its written request the Trustee (subject as aforesaid)
shall authenticate and make available for delivery, a new Debenture of the same
series bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated Debenture, or in lieu of and in substitution for
the Debenture so destroyed, lost or stolen. In every case the applicant for a
substituted Debenture shall furnish to the Company and to the Trustee such
security or indemnity as may be required by them to save each of them harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft of the applicant's Debenture and of the ownership
thereof. The Trustee may authenticate any such substituted Debenture and make
available for delivery the same upon the written request or authorization of any
officer of the Company. Upon the issuance of any substituted Debenture, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
In case any Debenture which has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Debenture, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Debenture) if the applicant
for such payment shall furnish to the Company and to the Trustee such security
or indemnity as they may require to save them harmless, and, in case of
destruction, loss or theft, evidence to the satisfaction of the Company and the
Trustee of the destruction, loss or theft of such Debenture and of the ownership
thereof.
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture which is mutilated, destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the mutilated, destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Debentures of
the same series duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
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SECTION 2.08. CANCELLATION OF SURRENDERED DEBENTURES. All
Debentures surrendered for the purpose of payment, redemption, exchange or
registration of transfer shall, if surrendered to the Company or any paying
agent, be delivered to the Trustee for cancellation, or, if surrendered to the
Trustee, shall be cancelled by it, and no Debentures shall be issued in lieu
thereof except as expressly required or permitted by any of the provisions of
this Indenture. On written request of the Company, the Trustee shall deliver to
the Company cancelled Debentures held by the Trustee. If the Company shall
otherwise acquire any of the Debentures, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until the same are delivered to the Trustee for
cancellation.
SECTION 2.09. PROVISIONS OF INDENTURE AND DEBENTURES FOR SOLE BENEFIT
OF PARTIES AND DEBENTUREHOLDERS. Nothing in this Indenture or in the Debentures,
express or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and the holders of the Debentures,
any legal or equitable right, remedy or claim under or in respect of this
Indenture, or under any covenant, condition or provision herein contained; all
such covenants, conditions and provisions being for the sole benefit of the
parties hereto and of the holders of the Debentures.
SECTION 2.10. APPOINTMENT OF AUTHENTICATING AGENT. So long as any of
the Debentures of any series remain outstanding there may be an Authenticating
Agent for any or all such series of Debentures which the Trustee shall have the
right to appoint. Said Authenticating Agent shall be authorized to act on behalf
of the Trustee to authenticate Debentures of such series issued upon exchange,
transfer or partial redemption thereof, and Debentures so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent for such series
except for authentication upon original issuance or pursuant to Section 2.07
hereof. Each Authenticating Agent shall be acceptable to the Company and shall
be a corporation which has a combined capital and surplus, as most recently
reported or determined by it, sufficient under the laws of any jurisdiction
under which it is organized or in which it is doing business to conduct a trust
business, and which is otherwise authorized under such laws to conduct such
business and is subject to supervision or examination by Federal or State
authorities. If at any time any Authenticating Agent shall cease to be eligible
in accordance with these provisions, it shall resign immediately.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
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SECTION 2.11. GLOBAL DEBENTURES.
(a) If the Company shall establish pursuant to Section 2.01 that the
Debentures of a particular series are to be issued as one or more Global
Debentures, then the Company shall execute and the Trustee shall, in accordance
with Section 2.04, authenticate and deliver, one or more Global Debentures which
(i) shall represent, and shall be denominated in an aggregate amount equal to
the aggregate principal amount of, all of the Outstanding Debentures of such
series, (ii) shall be registered in the name of the Depositary or its nominee,
(iii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction and (iv) shall bear, subject to Section 2.01(12), a
legend substantially to the following effect: "Except as otherwise provided in
Section 2.11 of the Indenture, this Debenture may be transferred, in whole but
not in part, only to another nominee of the Depositary or to a successor
Depositary or to a nominee of such successor Depositary."
(b) Notwithstanding the provisions of Section 2.05, the Global
Debenture of a series may be transferred, in whole but not in part and in the
manner provided in Section 2.05, only to another nominee of the Depositary for
such series, or to a successor Depositary for such series selected or approved
by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary for a series of Debentures notifies
the Company that it is unwilling or unable to continue as Depositary for such
series or if at any time the Depositary for such series shall no longer be
registered or in good standing under the Exchange Act, or other applicable
statute or regulation and a successor Depositary for such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, as the case may be, this Section 2.11 shall
no longer be applicable to the Debentures of such series and the Company will
execute, and subject to Section 2.05, the Trustee will authenticate and make
available for delivery Debentures of such series in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debentures of such series in
exchange for such Global Debentures. In addition, the Company may at any time
determine that the Debentures of any series shall no longer be represented by
one or more Global Debentures and that the provisions of this Section 2.11 shall
no longer apply to the Debentures of such series. In such event the Company will
execute and subject to Section 2.05, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company, will authenticate and
deliver Debentures of such series in definitive registered form without coupons,
in authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Debentures of such series in exchange for such
Global Debentures. Upon the exchange of the Global Debentures for Debentures in
definitive registered form without coupons, in authorized denominations, the
Global Debentures shall be cancelled by the Trustee. Such Debentures in
definitive registered form issued in exchange for Global Debentures pursuant to
this Section 2.11(c) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Debentures to the Depositary for delivery to the persons in
whose name such Debentures are so registered.
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(d) Debentures distributed to holders of Global Certificates (as
defined in the applicable Declaration of Trust) upon the dissolution of the
applicable Litchfield Capital Trust shall be distributed in the form of one or
more Global Debentures registered in the name of the Depositary or its nominee,
and deposited with the Debenture Registrar, as custodian for the Depositary, or
with such Depositary, for credit by the Depositary to the respective accounts of
the beneficial owners of the Debentures represented thereby (or such other
accounts as they may direct). Debentures distributed to holders of Certificates
(as defined in the applicable Declaration of Trust), other than Global
Certificates, upon the dissolution of the applicable Litchfield Capital Trust
shall not be issued in the form of a Global Debenture or any other form intended
to facilitate book-entry trading in beneficial interests in such Debentures.
(e) The Depositary or its nominee, as the registered owner of a Global
Debenture, shall be the holder of such Global Debenture for all purposes under
this Indenture and the Debentures, and owners of beneficial interests in a
Global Debenture shall hold such interests pursuant to the applicable procedures
of the Depositary. Accordingly, any such owner's beneficial interest in a Global
Debenture shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its participants. None of the Company, the Trustee or the Debenture Registrar
shall have any liability in respect of any transfer effected by the Depositary.
(f) The rights of owners of beneficial interests in a Global Debenture
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its participants.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may
use "CUSIP" numbers, and the Trustee shall use such CUSIP numbers in notices of
redemption or exchange as a convenience to Debentureholders and no
representation shall be made as to the correctness of such numbers either as
printed on the Debentures or as contained in any notice of redemption or
exchange. The Company shall promptly notify the Trustee of any change in the
CUSIP numbers of the Debentures.
ARTICLE 3
REDEMPTION OF DEBENTURES AND SINKING FUND PROVISIONS
SECTION 3.01. REDEMPTION. The Company may redeem the Debentures of any
series issued hereunder on and after the dates and in accordance with the terms
established for such series pursuant to Section 2.01 hereof.
SECTION 3.02. NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right to redeem
all or, as the case may be, a portion of the Debentures of any series in
accordance with the right reserved so to do, it shall give notice of such
redemption to the Trustee. The Trustee shall then notify holders of the
Debentures of such series who are to be redeemed by mailing, first class postage
prepaid, by a notice of such redemption not less than 30 days and not more than
60 days before the date fixed
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for redemption of that series to such holders at their last addresses as they
shall appear upon the Debenture Register. Any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the registered holder receives the notice. In any case, failure
duly to give such notice to the holder of any Debenture of any series designated
for redemption in whole or in part, or any defect in the notice, shall not
affect the validity of the proceedings for the redemption of any other
Debentures of such series or any other series. In the case of any redemption of
Debentures prior to the expiration of any restriction on such redemption
provided in the terms of such Debentures or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction.
Each such notice of redemption shall identify the Debentures to be
redeemed (including CUSIP number) and shall specify: (i) the date fixed for
redemption, (ii) the redemption price at which Debentures of that series are to
be redeemed, (iii) the place or places where Debentures are to be surrendered
for payment of the redemption price, (iv) that payment of the redemption price
will be made upon presentation and surrender of such Debentures, at such place
or places, (v) that interest accrued to the date fixed for redemption will be
paid as specified in said notice, (vi) that from and after said date interest
will cease to accrue and (vii) that the redemption is for a sinking fund, if
such is the case. If less than all the Debentures of a series are to be
redeemed, the notice to the holders of Debentures of that series to be redeemed
in whole or in part shall specify the particular Debentures to be so redeemed.
In case any Debenture is to be redeemed in part only, the notice which relates
to such Debenture shall state the portion of the principal amount thereof to be
redeemed, and shall state that on and after the redemption date, upon surrender
of such Debenture, a new Debenture or Debentures of such series in principal
amount equal to the unredeemed portion thereof will be issued.
(b) In the event of a partial redemption of a series of Debentures, the
Company shall give the Trustee at least 45 days' notice in advance of the date
fixed for redemption as to the aggregate principal amount of Debentures of the
series to be redeemed and the other information set forth in the immediately
preceding paragraph, and thereupon the Trustee shall select, by lot or in such
other manner as it shall deem appropriate and fair in its discretion and which
may provide for the selection of a portion or portions (equal to $10 or any
integral multiple thereof) of the principal amount of such Debentures of a
denomination larger than $10, the Debentures to be redeemed and shall thereafter
promptly notify the Company in writing of the numbers of the Debentures to be
redeemed, in whole or in part. For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the redemption of
Debentures shall relate, in the case of any Debenture redeemed or to be redeemed
only in part, to the portion of the principal amount of such Debenture which has
been or is to be redeemed. If the Company shall so direct, Debentures registered
in the name of the Company, any Affiliate or any Subsidiary thereof shall not be
included in the Debentures selected for redemption.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any paying agent to call all or any part of the
Debentures of a particular series for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company
19
or its own name as the Trustee or such paying agent may deem advisable. In any
case in which notice of redemption is to be given by the Trustee or any such
paying agent, the Company shall deliver or cause to be delivered to, or permit
to remain with, the Trustee or such paying agent, as the case may be, such
Debenture Register, transfer books or other records, or suitable copies or
extracts therefrom, sufficient to enable the Trustee or such paying agent to
give any notice by mail that may be required under the provisions of this
Section.
SECTION 3.03. PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been completed as
above provided and funds deposited as required, the Debentures or portions of
Debentures of the series to be redeemed specified in such notice shall become
due and payable on the date and at the place stated in such notice at the
applicable redemption price, together with interest accrued to the date fixed
for redemption, and interest on such Debentures or portions of Debentures shall
cease to accrue on and after the date fixed for redemption, unless the Company
shall default in the payment of such redemption price and accrued interest with
respect to any such Debenture or portion thereof. On presentation and surrender
of such Debentures on or after the date fixed for redemption at the place of
payment specified in the notice, said Debentures shall be paid and redeemed at
the applicable redemption price for such series, together with interest accrued
thereon to, but excluding, the date fixed for redemption (but if the date fixed
for redemption is an interest payment date, the interest installment payable on
such date shall be payable to the registered holder at the close of business on
the applicable record date pursuant to Section 2.03).
(b) Upon presentation of any Debenture of such series which is to be
redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is presented shall
make available for delivery to the holder thereof, at the expense of the
Company, a new Debenture or Debentures of the same series, of authorized
denominations in principal amount equal to the unredeemed portion of the
Debenture so presented.
SECTION 3.04. SINKING FUNDS FOR DEBENTURES. The provisions of Sections
3.04, 3.05 and 3.06 shall be applicable to any sinking fund for the retirement
of Debentures of a series, except as otherwise specified as contemplated by
Section 2.01 for Debentures of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Debentures of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Debentures of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Debentures for any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 3.05. Each sinking fund payment shall be applied to the
redemption of Debentures of any series as provided for by the terms of
Debentures of such series.
SECTION 3.05. SATISFACTION OF SINKING FUND PAYMENTS WITH
DEBENTURES. The Company (i) may deliver outstanding Debentures of a series
(other than
20
any previously called for redemption) and (ii) may apply as a credit Debentures
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Debentures or through the application of permitted
optional sinking fund payments pursuant to the terms of such Debentures, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to the Debentures of such series required to be made pursuant to the terms of
such Debentures as provided for by the terms of such series; provided that such
Debentures have not been previously so credited. Such Debentures shall be
received and credited for such purpose by the Trustee at the redemption price
specified in such Debentures for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 3.06. REDEMPTION OF DEBENTURES FOR SINKING FUND. Not less than
45 days prior to each sinking fund payment date for any series of Debentures,
the Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms for that series, the portion thereof, if any, which is to be satisfied by
delivering and crediting Debentures of that series pursuant to Section 3.05 and
the basis for such credit and will, together with such Officers' Certificate,
deliver to the Trustee any Debentures to be so delivered. Not less than 30 days
before each such sinking fund payment date the Trustee shall select the
Debentures to be redeemed upon such sinking fund payment date in the manner
specified in Section 3.02 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 3.02. Such notice having been duly given, the redemption of such
Debentures shall be made upon the terms and in the manner stated in Section
3.03.
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
The Company covenants and agrees for each series of the Debentures as
follows:
SECTION 4.01. PAYMENT OF PRINCIPAL OF (AND PREMIUM, IF ANY) AND
INTEREST ON DEBENTURES. The Company will duly and punctually pay or cause to be
paid the principal of (and premium, if any) and interest on the Debentures of
that series at the time and place and in the manner provided herein and
established with respect to such Debentures.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENT FOR PAYMENT OF
DEBENTURES, DESIGNATION OF OFFICE OR AGENCY FOR PAYMENT,
REGISTRATION, TRANSFER AND EXCHANGE OF DEBENTURES. So long as any series
of the Debentures remain outstanding, the Company agrees to maintain an office
or agency in each Place of Payment, with respect to each such series and at such
other location or locations as may be designated as provided in this Section
4.02, where (i) Debentures of that series may be presented for payment, (ii)
Debentures of that series may be presented as hereinabove authorized for
registration of transfer and exchange, and (iii) notices and demands to or upon
the Company in respect of the Debentures of that series and this Indenture may
be given or served, such designation to continue with respect to such office or
agency until the Company shall, by written
21
notice signed by its President or a Vice President and delivered to the Trustee,
designate some other office or agency for such purposes or any of them. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, notices and demands.
SECTION 4.03. DUTIES OF PAYING AGENT; COMPANY AS PAYMENT AGENT;
AND HOLDING SUMS IN TRUST.
(a) If the Company shall appoint one or more paying agents for all or
any series of the Debentures, other than the Trustee, the Company will cause
each such paying agency to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of (and premium, if any) or interest on the
Debentures of that series (whether such sums have been paid to it by the Company
or by any other obligor of such Debentures) in trust for the benefit of the
persons entitled thereto;
(2) that it will give the Trustee written notice of any
failure by the Company (or by any other obligor of such Debentures) to make any
payment of the principal of (and premium, if any) or interest on the Debentures
of that series when the same shall be due and payable;
(3) that it will, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(2) above, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in trust
by such paying agent; and
(4) that it will perform all other duties of paying agent
as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect to
any series of the Debentures, it will on or before each due date of the
principal of (and premium, if any) or interest on Debentures of that series, set
aside, segregate and hold in trust for the benefit of the persons entitled
thereto a sum sufficient to pay such principal (and premium, if any) or interest
so becoming due on Debentures of that series until such sums shall be paid to
such persons or otherwise disposed of as herein provided and will promptly
notify in writing the Trustee of such action, or any failure (by it or any other
obligor on such Debentures) to take such action. Whenever the Company shall have
one or more paying agents for any series of Debentures, it will, prior to 11:00
a.m. New York City time on each due date of the principal of (and premium, if
any) or interest on any Debentures of that series, deposit with the paying agent
a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the persons
entitled to such principal, premium or interest, and (unless
22
such paying agent is the Trustee) the Company will promptly notify the Trustee
of its action or failure so to act.
(c) Anything in this Section to the contrary notwithstanding, (i) the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Section 11.05, and (ii) the Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for any
other purpose, pay, or direct any paying agent to pay, to the Trustee all sums
held in trust by the Company or such paying agent, such sums to be held by the
Trustee upon the same terms and conditions as those upon which such sums were
held by the Company or such paying agent; and, upon such payment by any paying
agent to the Trustee, such paying agent shall be released from all further
liability with respect to such money.
SECTION 4.04. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 7.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
ARTICLE 5
DEBENTUREHOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 5.01. COMPANY TO FURNISH TRUSTEE INFORMATION AS TO
NAMES AND ADDRESSES OF DEBENTUREHOLDERS. The Company will furnish or
cause to be furnished to the Trustee (a) on each regular record date (as defined
in Section 2.03) a list, in such form as the Trustee may reasonably require, of
the names and addresses of the holders of each series of Debentures as of such
regular record date, provided, that the Company shall not be obligated to
furnish or cause to be furnished such list at any time that the list shall not
differ in any respect from the most recent list furnished to the Trustee by the
Company and (b) at such other times as the Trustee may request in writing within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished; provided, however, no such list need be furnished for any series
for which the Trustee shall be the Debenture Registrar.
SECTION 5.02. TRUSTEE TO PRESERVE INFORMATION AS TO NAMES AND
ADDRESSES OF DEBENTUREHOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 5.01 and as to the names and addresses of holders of Debentures received
by the Trustee in its capacity as Debenture Registrar (if acting in such
capacity).
(b) The Trustee may destroy any list furnished to it as provided in
Section 5.01 upon receipt of a new list so furnished.
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(c) In case three or more holders of Debentures of a series
(hereinafter referred to as "applicants") apply in writing to the Trustee, and
furnish to the Trustee reasonable proof that each such applicant has owned a
Debenture for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other holders of Debentures of such series or holders of all
Debentures with respect to their rights under this Indenture or under such
Debentures, and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at its
election, either:
(1) afford to such applicants access to the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 5.02; or
(2) inform such applicants as to the approximate number of
holders of Debentures of such series or of all Debentures, as the case may be,
whose names and addresses appear in the information preserved at the time by the
Trustee, in accordance with the provisions of subsection (a) of this Section
5.02, and as to the approximate cost of mailing to such Debentureholders the
form of proxy or other communication, if any, specified in such application.
(d) If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each holder of such series or of all Debentures, as the case
may be, whose name and address appears in the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 5.02, a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Securities and Exchange Commission (the "Commission"), together with a copy of
the material to be mailed, a written statement to the effect that, in the
opinion of the Trustee, such mailing would be contrary to the best interests of
the holders of Debentures of such series or of all Debentures, as the case may
be, or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after opportunity for a
hearing upon the objections specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if, after the entry
of an order sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Debentureholders with reasonable
promptness after the entry of such order and the renewal of such tender;
otherwise, the Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.
(e) Each and every holder of the Debentures, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any paying agent nor any Debenture Registrar shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the holders of Debentures in accordance with the provisions of
subsection (c) of this Section 5.02, regardless of the source
24
from which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
said subsection (c).
SECTION 5.03. ANNUAL AND OTHER REPORTS TO BE FILED BY COMPANY
WITH THE TRUSTEE.
(a) The Company covenants and agrees to file with the Trustee, within
15 days after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with the
Trustee and the Commission in accordance with the rules and regulations
prescribed from time to time by the Commission, such of the supplementary and
periodic information, documents and reports which may be required pursuant to
Section 13 of the Exchange Act, in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations. Delivery of such reports, information and documents to
the Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein,
including the Company's compliance with any of its covenants hereunder (as to
which the Trustee is entitled to rely exclusively on Officers' Certificates).
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail, first class
postage prepaid, or reputable over-night delivery service which provides for
evidence of receipt, to the Debentureholders, as their names and addresses
appear upon the Debenture Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of this Section
as may be required by rules and regulations prescribed from time to time by the
Commission.
(d) The Company covenants and agrees to furnish to the Trustee, on or
before May 15 in each calendar year in which any of the Debentures are
outstanding, or on or before such other day in each calendar year as the Company
and the Trustee may from time to time agree upon, a Certificate as to his or her
knowledge of the Company's compliance with all conditions and covenants under
this Indenture. For purposes of this subsection (d), such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture.
25
<PAGE>
(e) The Company shall deliver to the Trustee, as soon as possible and
in any event within five days after the Company becomes aware of the occurrence
of any Event of Default, an Officers' Certificate setting forth the details of
such Event of Default and the action which the Company proposes to take with
respect thereto.
SECTION 5.04. TRUSTEE TO TRANSMIT ANNUAL REPORT TO
DEBENTUREHOLDERS.
(a) The Trustee shall transmit to Debentureholders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within 60 days after each January 15 following the date of this
Indenture, commencing January 15, 2000, deliver to Debentureholders a brief
report, dated as of such January 15, which complies with the provisions of such
Section 313(a).
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission
to Debentureholders, be filed by the Trustee with the Company, with each stock
exchange upon which any Debentures are listed (if so listed) and also with the
Commission. The Company agrees to notify the Trustee when any Debentures become
listed on any stock exchange and of any delisting thereof.
ARTICLE 6
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT DEFINED.
(a) Whenever used herein with respect to Debentures of a particular
series, "Event of Default" means any one or more of the following events which
has occurred and is continuing:
(1) default in the payment of any installment of interest upon
any of the Debentures of that series, as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; provided,
however, that a valid extension of an interest payment period by the Company in
accordance with the terms of any indenture supplemental hereto, shall not
constitute a default in the payment of interest for this purpose;
(2) default (i) in the payment of the principal of (and
premium, if any, on) any of the Debentures of that series as and when the same
shall become due and payable whether at maturity, upon redemption, by declaring
or otherwise, or (ii) in any payment required by any sinking or analogous fund
established with respect to that series, and in the case of this clause (ii)
only, continuance of such default for a period of 30 days;
26
(3) failure on the part of the Company duly to observe or
perform, in any material respect, any other of the covenants or agreements on
the part of the Company with respect to that series contained in such Debentures
or otherwise established with respect to that series of Debentures pursuant to
Section 2.01 hereof or contained in this Indenture (other than a covenant or
agreement which has been expressly included in this Indenture solely for the
benefit of one or more series of Debentures other than such series) for a period
of 90 days after the date on which written notice of such failure, requiring the
same to be remedied and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Company by the Trustee, by registered or
certified mail, or to the Company and the Trustee by the holders of at least 25%
in principal amount of the Debentures of that series at the time Outstanding;
(4) a decree or order by a court having jurisdiction in the
premises shall have been entered adjudging the Company as bankrupt or insolvent,
or approving as properly filed a petition seeking liquidation or reorganization
of the Company under the Federal Bankruptcy Code or any other similar applicable
Federal or State law, and such decree or order shall have continued unvacated
and unstayed for a period of 90 days; or an involuntary case shall be commenced
under such Code in respect of the Company and shall continue undismissed for a
period of 90 days or an order for relief in such case shall have been entered;
or a decree or order of a court having jurisdiction in the premises shall have
been entered for the appointment on the ground of insolvency or bankruptcy of a
receiver or custodian or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of its property, or for the winding up or
liquidation of its affairs, and such decree or order shall have remained in
force unvacated and unstayed for a period of 90 days;
(5) the Company shall institute proceedings to be adjudicated
a voluntary bankrupt or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking liquidation or
reorganization under the Federal Bankruptcy Code or any other similar applicable
Federal or State law, or shall consent to the filing of any such petition, or
shall consent to the appointment on the ground of insolvency or bankruptcy of a
receiver or custodian or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of its property, or shall make an assignment for the benefit
of creditors; or
(6) any other Event of Default provided with respect to
Debentures of that series.
(b) In each and every such case, unless the principal of all the
Debentures of that series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debentures of that series then Outstanding hereunder, by notice in writing to
the Company (and to the Trustee if given by such Debentureholders), may declare
the principal of all the Debentures of that series to be due and payable
immediately and upon any such declaration the same shall become and shall be
immediately due and payable, anything contained in this Indenture or in the
Debentures of that series or established with respect to that series pursuant to
Section 2.01 hereof to the contrary notwithstanding. Payment of principal and
interest on such Debentures shall remain subordinated
27
to the extent provided in Article 14 notwithstanding that such amount shall
become immediately due and payable as herein provided.
(c) Section 6.01(b), however, is subject to the condition that if, at
any time after the principal of the Debentures of that series shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debentures of that series and the
principal of (and premium, if any, on) any and all Debentures of that series
which shall have become due otherwise than by acceleration (with interest upon
such principal and premium if any, and, to the extent that such payment is
enforceable under applicable law, upon overdue installments of interest, at the
rate per annum expressed in the Debentures of that series to the date of such
payment or deposit) and the amount payable to the Trustee under Section 7.06,
and any and all defaults under the Indenture, other than the nonpayment of
principal on Debentures of that series which shall not have become due by their
terms, shall have been remedied or waived as provided in Section 6.06 then and
in every such case the holders of a majority in aggregate principal amount of
the Debentures of that series then outstanding (subject to, in the case of any
series of Debentures held as trust assets of a Litchfield Capital Trust and with
respect to which a Security Exchange has not theretofore occurred, such consent
of the holders of the Preferred Securities and the Common Securities of such
Litchfield Capital Trust as may be required under the Declaration of Trust of
such Litchfield Capital Trust), by written notice to the Company and to the
Trustee, may rescind and annul such declaration and its consequences with
respect to that series of Debentures; but no such rescission and annulment shall
extend to or shall affect any subsequent default, or shall impair any right
consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Debentures of that series under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
(e) If, prior to a Security Exchange with respect to the Debentures of
any series, a Default with respect to the Debentures of such series shall have
occurred, the Company expressly acknowledges that under the circumstances set
forth in the applicable Declaration of Trust, any holder of Preferred Securities
of the applicable Litchfield Capital Trust may, to the fullest extent permitted
by law, enforce directly against the Company the applicable Property Trustee's
rights hereunder. In furtherance of the foregoing and for the avoidance of any
doubt, the Company acknowledges that, under the circumstances described in the
applicable Declaration of Trust, any such holder of Preferred Securities, in its
own name, in the name of the applicable Litchfield Capital Trust or in the name
of the holders of the Preferred Securities issued by such Litchfield Capital
Trust, may institute or cause to be instituted a proceeding, including, without
limitation, any suit in equity, an action at law or other judicial or
administrative proceeding, to enforce the applicable Property Trustee's rights
hereunder directly against the Company as issuer of the
28
applicable series of Debentures, and may prosecute such proceeding to judgment
or final decree, and enforce the same against the Company.
SECTION 6.02. COVENANT OF COMPANY TO PAY TO TRUSTEE WHOLE
AMOUNT DUE ON DEBENTURES ON DEFAULT IN PAYMENT OF INTEREST OR
PRINCIPAL (AND PREMIUMS, IF ANY).
(a) The Company covenants that (1) in case default shall be made in the
payment of any installment of interest on any of the Debentures of a series, or
any payment required by any sinking or analogous fund established with respect
to that series as and when the same shall have become due and payable, and such
default shall have continued for a period of 30 days, or (2) in case default
shall be made in the payment of the principal of (or premium, if any, on) any of
the Debentures of a series when the same shall have become due and payable,
whether upon maturity of the Debentures of a series or upon redemption or upon
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Debentures of that series,
the whole amount that then shall have become due and payable on all such
Debentures for principal (and premium, if any) or interest, or both, as the case
may be, with interest upon the overdue principal (and premium, if any) and (to
the extent that payment of such interest is enforceable under applicable law and
without duplication of any other amounts paid by the Company or the applicable
Litchfield Capital Trust in respect thereof) upon overdue installments of
interest at the rate per annum expressed in the Debentures of that series; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, and the amount payable to the Trustee under
Section 7.06.
(b) In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any action or proceedings at law or
in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or other obligor upon the
Debentures of that series and collect in the manner provided by law out of the
property of the Company or other obligor upon the Debentures of that series
wherever situated the moneys adjudged or decreed to be payable.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or other judicial
proceedings affecting the Company, any other obligor on such Debentures, or the
creditors or property of either, the Trustee shall have the power to intervene
in such proceedings and take any action therein that may be permitted by the
court and shall (except as may be otherwise provided by law) be entitled to file
such proofs of claim and other papers and documents as may be necessary or
advisable in order to have the claims of the Trustee and of the holders of
Debentures of such series allowed for the entire amount due and payable by the
Company or such other obligor under the Indenture at the date of institution of
such proceedings and for any additional amount which may become due and payable
by the Company or such other obligor after such date, and to collect and receive
any moneys or other property payable or deliverable on any such claim, and to
distribute the same after the deduction of the amount payable to the Trustee
under Section 7.06; and any receiver,
29
assignee or trustee in bankruptcy or reorganization is hereby authorized by each
of the holders of Debentures of such series to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to such Debentureholders, to pay to the Trustee any amount due
it under Section 7.06.
(d) All rights of action and of asserting claims under this Indenture,
or under any of the terms established with respect to Debentures of that series,
may be enforced by the Trustee without the possession of any of such Debentures,
or the production thereof at any trial or other proceeding relative thereto, and
any such suit or proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment shall,
after provision for payment to the Trustee of any amounts due under Section
7.06, be for the ratable benefit of the holders of the Debentures of such
series.
In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debentures of that series or the rights of any holder thereof or to authorize
the Trustee to vote in respect of the claim of any Debentureholder in any such
proceeding.
SECTION 6.03. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any
moneys collected by the Trustee pursuant to this Article with respect to a
particular series of Debentures shall be applied in the order following, at the
date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal (or premium, if any) or interest, upon
presentation of the several Debentures of that series, and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 7.06;
SECOND: To the payment of all Senior Debt of the Company if and to the
extent required by Article 14;
THIRD: To the payment of the amounts then due and unpaid upon
Debentures of such series for principal (and premium, if any) and
interest in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Debentures for
principal (and premium, if any) and interest, respectively; and
30
FOURTH: The balance, if any, to the Person or Persons entitled thereto.
SECTION 6.04. LIMITATION ON SUITS BY HOLDERS OF DEBENTURES. No holder
of any Debenture of any series shall have any right by virtue or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(i) such holder previously shall have given to the Trustee written notice of an
Event of Default and of the continuance thereof with respect to Debentures of
such series specifying such Event of Default, as hereinbefore provided, (ii) the
holders of not less than 25% in aggregate principal amount of the Debentures of
such series then outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as trustee hereunder,
(iii) shall have offered to the Trustee indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred therein or thereby, (iv) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity, shall have failed to institute any such action, suit or proceeding;
and (v) during such 60 day period, the holders of a majority in principal amount
of the Debentures of that series do not give the Trustee a direction
inconsistent with the request; it being understood and intended, and being
expressly covenanted by the taker and holder of every Debenture of such series
with every other such taker and holder and Trustee, that no one or more holders
of Debentures of such series shall have any right in any manner whatsoever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of
Debentures of such series. For the protection and enforcement of the provisions
of this Section, each and every Debentureholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provisions of this Indenture, however, the
right of any holder of any Debenture to receive payment of the principal of (and
premium, if any) and interest on such Debenture, as therein provided, on or
after the respective due dates expressed in such Debenture (or in the case of
redemption, on the redemption date), or to institute suit for the enforcement of
any such payment on or after such respective dates or redemption date, shall not
be impaired or affected without the consent of such holder.
SECTION 6.05. REMEDIES CUMULATIVE; DELAY OR OMISSION IN EXERCISE
OF RIGHTS NOT WAIVER OF DEFAULT.
(a) All powers and remedies given by this Article 6 to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any others thereof or of any other powers and
remedies available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce performance or observance of the covenants
and agreements contained in this Indenture or otherwise established with respect
to such Debentures.
31
(b) No delay or omission of the Trustee or of any holder of any of the
Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 6.04, every power and remedy
given by this Article or by law to the Trustee or to the Debentureholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Debentureholders.
SECTION 6.06. RIGHTS OF HOLDERS OF MAJORITY IN PRINCIPAL AMOUNT
OF DEBENTURES TO DIRECT TRUSTEE AND TO WAIVE DEFAULTS. The holders of a
majority in aggregate principal amount of the Debentures of any series at the
time Outstanding, determined in accordance with Section 8.04 (with, in the case
of any series of Debentures held as trust assets of a Litchfield Capital Trust
and with respect to which a Security Exchange has not theretofore occurred, such
consent of holders of the Preferred Securities and the Common Securities of such
Litchfield Capital Trust as may be required under the Declaration of Trust of
such Litchfield Capital Trust), shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee with respect to such
series; provided, however, that such direction shall not be in conflict with any
rule of law or with this Indenture or unduly prejudicial to the rights of
holders of Debentures of any other series at the time Outstanding determined in
accordance with Section 8.04 not parties thereto. Subject to the provisions of
Section 7.01, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability. The holders of a majority in aggregate
principal amount of the Debentures of any series at the time Outstanding
affected thereby, determined in accordance with section 8.04 (with, in the case
of any series of Debentures held as trust assets of a Litchfield Capital Trust
and with respect to which a Security Exchange has not theretofore occurred, such
consent of holders of the Preferred Securities and the Common Securities of such
Litchfield Capital Trust as may be required under the Declaration of Trust of
such Litchfield Capital Trust), may on behalf of the holders of all of the
Debentures of such series waive any past default in the performance of any of
the covenants contained herein or established pursuant to Section 2.01 with
respect to such series and its consequences, except a default in the payment of
the principal of, or premium, if any, or interest on, any of the Debentures of
that series as and when the same shall become due by the terms of such
Debentures otherwise than by acceleration (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
and any premium has been deposited with the Trustee (in accordance with Section
6.01(c)), or a call for redemption of Debentures of that series. Upon any such
waiver, the default covered thereby shall be deemed to be cured for all purposes
of this Indenture and the Company, the Trustee and the holders of the Debentures
of such series shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
SECTION 6.07. TRUSTEE TO GIVE NOTICE OF DEFAULTS KNOWN TO IT, BUT
MAY WITHHOLD IN CERTAIN CIRCUMSTANCES. The Trustee shall, within 90 days after
32
the occurrence of a default with respect to a particular series, transmit by
mail, first class postage prepaid, to the holders of Debentures of that series,
as their names and addresses appear upon the Debenture Register, notice of all
defaults with respect to that series known to the Trustee, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purposes of this Section being hereby defined to be the events specified in
subsections (1), (2), (3), (4) and (5) of Section 6.01(a), not including any
periods of grace provided for therein and irrespective of the giving of notice
provided for by subsection (3) of Section 6.01(a)); provided, that, except in
the case of default in the payment of the principal of (or premium, if any) or
interest on any of the Debentures of that series or in the payment of any
sinking fund installment established with respect to that series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers, of the Trustee in good faith determine that the
withholding of such notice is in the interests of the holders of Debentures of
that series; provided further, that in the case of any default of the character
specified in Section 6.01(a)(3) with respect to Debentures of such series no
such notice to the holders of the Debentures of that series shall be given until
at least 30 days after the occurrence thereof.
The Trustee shall not be deemed to have knowledge of any default,
except (i) a default under subsection (a)(1) or (a)(2) of Section 6.01 as long
as the Trustee is acting as paying agent for such series of Debentures or (ii)
any default as to which a Responsible Officer of the Trustee shall have received
written notice.
SECTION 6.08. REQUIREMENTS OF AN UNDERTAKING TO PAY COSTS IN
CERTAIN SUITS UNDER INDENTURE OR AGAINST TRUSTEE. All parties to this
Indenture agree, and each holder of any Debentures by his or her 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 or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Debentureholder, or group of Debentureholders, holding more
than 10% in aggregate principal amount of the outstanding Debentures of any
series, or to any suit instituted by any Debentureholder for the enforcement of
the payment of the principal of (or premium, if any) or interest on any
Debenture of such series, on or after the respective due dates expressed in such
Debenture or established pursuant to this Indenture.
ARTICLE 7
CONCERNING THE TRUSTEE
SECTION 7.01. UPON EVENT OF DEFAULT OCCURRING AND CONTINUING, TRUSTEE
SHALL EXERCISE POWERS VESTED IN IT, AND USE SAME DEGREE OF CARE AND SKILL IN
THEIR EXERCISE, AS PRUDENT INDIVIDUAL WOULD USE.
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(a) The Trustee, prior to the occurrence of an Event of Default with
respect to Debentures of a series and after the curing of all Events of Default
with respect to Debentures of that series which may have occurred, shall
undertake to perform with respect to Debentures of such series such duties and
only such duties as are specifically set forth in this Indenture, and no implied
covenants shall be read into this Indenture against the Trustee. In case an
Event of Default with respect to Debentures of a series has occurred (which has
not been cured or waived), the Trustee shall exercise with respect to Debentures
of that series 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 person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default with
respect to Debentures of a series and after the curing or waiving of all such
Events of Default with respect to that series which may have occurred:
(i) the duties and obligations of the Trustee
shall with respect to Debentures of such series be determined solely by the
express provisions of this Indenture and the Trust Indenture Act and the
Trustee shall not be liable with respect to Debentures of such series except
for the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of
the Trustee, the Trustee may with respect to Debentures of such series
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case
of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture but need not confirm or investigate the accuracy
of mathematical calculations or other facts stated therein;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of the
Debentures of any series at the time outstanding relating to 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 under this Indenture
with respect to the Debentures of that series;
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(4) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it; and
(5) whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Article 7.
SECTION 7.02. CERTAIN RIGHTS OF THE TRUSTEE. Except as otherwise
provided in Section 7.01:
(a) The Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Board Resolution or an instrument
signed in the name of the Company by the President or any Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer (unless other evidence in respect thereof is specifically prescribed
herein);
(c) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(d) 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 Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing herein contained
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default with respect to a series of the Debentures (which has not been
cured or waived) to exercise with respect to Debentures of that series such of
the rights and powers vested in it by this Indenture, and to use the same degree
of care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs;
(e) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture; nothing
herein contained shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default with respect to a series of the Debentures
(which has not been cured or waived) to exercise with respect to Debentures of
that
35
series such of the rights and powers vested in it by this Indenture, and to use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs;
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security, or
other papers or documents, unless requested in writing so to do by the holders
of not less than a majority in principal amount of the outstanding Debentures of
the particular series affected thereby (determined as provided in Section 8.04);
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require indemnity satisfactory to it against such costs,
expenses or liabilities as a condition to so proceeding. The reasonable expense
of every such examination shall be paid by the Company or, if paid by the
Trustee, shall be repaid by the Company upon demand;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder.
SECTION 7.03. TRUSTEE NOT LIABLE FOR RECITALS IN INDENTURE OR IN
DEBENTURES.
(a) The recitals contained herein and in the Debentures (other than the
Certificate of Authentication on the Debentures) shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Company of any of the Debentures or of the proceeds of such Debentures, or
for the use or application of any moneys paid over by the Trustee in accordance
with any provision of this Indenture or established pursuant to Section 2.01, or
for the use or application of any moneys received by any paying agent other than
the Trustee.
SECTION 7.04. TRUSTEE, PAYING AGENT OR DEBENTURE REGISTRAR MAY
OWN DEBENTURES. The Trustee or any paying agent or Debenture Registrar,
in its individual
36
or any other capacity, may become the owner or pledgee of Debentures and,
subject to Sections 7.08 and 7.13, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, paying agent or Debenture
Registrar.
SECTION 7.05. MONEYS RECEIVED BY TRUSTEE TO BE HELD IN TRUST WITHOUT
INTEREST. Subject to the provisions of Section 11.05, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any moneys received by it hereunder except such as it
may agree in writing to pay thereon.
SECTION 7.06. TRUSTEE ENTITLED TO COMPENSATION, REIMBURSEMENT
AND INDEMNITY.
(a) The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as the Company and
the Trustee shall from time to time agree in writing (which shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust) for all services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and the Company will pay or reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the reasonable expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify each of the
Trustee or any predecessor Trustee and their officers, agents, directors and
employees for, and to hold them harmless against, any and all loss, liability,
damage, claim or expense including taxes (other than taxes based upon, measured
by or determined by the income of the Trustee) incurred without negligence or
bad faith on the part of the Trustee and arising out of or in connection with
the acceptance or administration of this trust, including the reasonable costs
and expenses of defending itself against any claim (whether asserted by the
Company, any Debentureholder or any other Person) of liability in the premises.
The provisions of this Section 7.06 shall survive the termination of this
Indenture and resignation or removal of the Trustee.
(b) The obligations of the Company under this Section to compensate and
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Debentures upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular
Debentures. When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(4) or Section 6.01(5), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
37
SECTION 7.07. RIGHT OF TRUSTEE TO RELY ON CERTIFICATE OF OFFICERS OF
COMPANY WHERE NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED. Except as otherwise
provided in Sections 7.01 and 7.02, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering or omitting
to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee and such certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken, suffered or omitted to be taken by it under the provisions of
this Indenture upon the faith thereof.
SECTION 7.08. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee
has or shall acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Trustee and the Company shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act. Nothing herein shall prevent the Trustee from filing with the Commission
the application referred to in the second to last paragraph of said Section
310(b).
SECTION 7.09. REQUIREMENTS FOR ELIGIBILITY OF TRUSTEE. There shall at
all times be a Trustee with respect to the Debentures issued hereunder which
shall at all times be a corporation or banking association organized and doing
business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia, or a corporation or other
Person permitted to act as trustee by the Commission, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars, and subject to supervision or examination by
Federal, State, territorial, or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. The Company may not, nor
may any person directly or indirectly controlling, controlled by, or under
common control with the Company, serve as a Trustee. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 7.10.
SECTION 7.10. RESIGNATION OF TRUSTEE AND APPOINTMENT OF
SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at any time
resign with respect to the Debentures of one or more series by giving written
notice thereof to the Company and by transmitting notice of resignation by mail,
first class postage prepaid, to the Debentureholders of such series, as their
names and addresses appear upon the Debenture Register. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee
with respect to Debentures of such series by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the
38
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 60 days after the mailing of such notice of
resignation, the resigning Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor trustee
with respect to Debentures of such series, or any Debentureholder of that series
who has been a bona fide holder of a Debenture or Debentures for at least six
months may, subject to the provisions of Section 6.08, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 7.08 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or Debentures for
at least six months; or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.09 and shall fail to resign after written request
therefor by the Company or by any such Debentureholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the Company may remove the
Trustee with respect to all Debentures and appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors,
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the mailing of such
notice of removal, the Trustee so removed may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
trustee with respect to Debentures of such series, or any Debentureholder of
that series who has been a bona fide holder of a Debenture or Debentures for at
least six months may, subject to the provisions of Section 6.08, on behalf of
himself and all others similarly situated, petition any such court for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures of any series at the time outstanding may at any time remove the
Trustee with respect to such series and appoint a successor trustee. If no
successor Trustee shall have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of removal, the Trustee being
removed may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Debentures of such series.
39
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee with respect to the Debentures of a series pursuant to any of
the provisions of this Section shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 7.11.
(e) Any successor trustee appointed pursuant to this Section may be
appointed with respect to the Debentures of one or more series or all of such
series, and at any time there shall be only one Trustee with respect to the
Debentures of any particular series.
SECTION 7.11. ACCEPTANCE BY SUCCESSOR TO TRUSTEE.
(a) In case of the appointment hereunder of a successor trustee with
respect to all Debentures, every such successor trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor trustee all the rights, powers, and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor trustee with
respect to the Debentures of one or more (but not all) series, the Company, the
retiring Trustee and each successor trustee with respect to the Debentures of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor trustee shall accept such appointment and which shall (1)
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Debentures of that
or those series to which the appointment of such successor trustee relates, (2)
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Debentures of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust, that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and that no Trustee shall be responsible for any act or
failure to act on the part of any other Trustee hereunder; and upon the
execution and delivery of such supplemental indenture the resignation or removal
of the retiring Trustee shall become effective to the extent provided therein,
such retiring Trustee shall with respect to the Debentures of that or those
series to which the appointment of such successor trustee relates have no
further responsibility for the exercise of rights and powers or for the
performance of the duties and obligations vested in the Trustee under this
Indenture, and each such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
40
trusts and duties of the retiring Trustee with respect to the Debentures of that
or those series to which the appointment of such successor trustee relates; but,
on request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor trustee, to the extent
contemplated by such supplemental indenture, the property and money held by such
retiring Trustee hereunder with respect to the Debentures of that or those
series to which the appointment of such successor trustee relates.
(c) Upon request of any such successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, power and trusts referred
to in paragraph (a) or (b) of this Section 7.11, as the case may be.
(d) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article.
(e) Upon acceptance of appointment by a successor trustee as provided
in this Section 7.11, the successor trustee shall transmit notice of the
succession of such trustee hereunder by mail, first class postage prepaid, to
the Debentureholders, as their names and addresses appear upon the Debenture
Register.
SECTION 7.12. SUCCESSOR TO TRUSTEE BY MERGER, CONSOLIDATION OR
SUCCESSION TO BUSINESS. Any corporation or banking association into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such corporation shall be otherwise qualified
and eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. In case any Debentures shall have been authenticated,
but not made available for delivery, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and make available for delivery the Debentures so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Debentures.
SECTION 7.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein as
though such resignation or removal, as the case may be, had not occurred.
ARTICLE 8
CONCERNING THE DEBENTURES
41
SECTION 8.01. EVIDENCE OF ACTION BY DEBENTUREHOLDERS. Whenever in
this Indenture it is provided that the holders of a majority or specified
percentage in aggregate principal amount of the Debentures of a particular
series 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 majority or
specified percentage of that series have joined therein may be evidenced by any
instrument or any number of instruments of similar tenor executed by such
holders of Debentures of that series in person or by agent or proxy appointed in
writing.
If the Company shall solicit from the Debentureholders of any series
any request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for such series for the determination
of Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Debentureholders of record at the
close of business on the record date shall be deemed to be Debentureholders for
the purposes of determining whether Debentureholders of the requisite proportion
of Outstanding Debentures of that series have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or
other action, and for that purpose the Outstanding Debentures of that series
shall be computed as of the record date; provided that no such authorization,
agreement or consent by such Debentureholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
SECTION 8.02. PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
DEBENTURES. Subject to the provisions of Sections 7.01 and 7.02, proof of the
execution of any instrument by a Debentureholder (such proof will not require
notarization) or his agent or proxy and proof of the holding by any person of
any of the Debentures shall be sufficient if made in the following manner;
(a) The fact and date of the execution by any such person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the Debenture Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 8.03. WHO MAY BE DEEMED OWNERS OF DEBENTURES. Prior to the due
presentment for registration of transfer of any Debenture, the Company, the
Trustee, any paying agent and any Debenture Registrar may deem and treat the
person in whose name such Debenture shall be registered upon the books of the
Company as the absolute owner of such Debenture (whether or not such Debenture
shall be overdue and notwithstanding any notice of
42
ownership or writing thereon made by anyone other than the Debenture Registrar)
for the purpose of receiving payment of or on account of the principal of,
premium, if any, and (subject to Section 2.03) interest on such Debenture and
for all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any Debenture Registrar shall be affected by any notice to the
contrary.
SECTION 8.04. DEBENTURES OWNED BY THE COMPANY OR CONTROLLED
OR CONTROLLING COMPANIES DISREGARDED FOR CERTAIN PURPOSES. In
determining whether the holders of the requisite aggregate principal amount of
Debentures of a particular series have concurred in any direction, consent or
waiver under this Indenture, Debentures of that series which are owned by the
Company or any other obligor on the Debentures of that series or by any
Subsidiary of the Company or of such other obligor on the Debentures of that
series shall be disregarded and deemed not to be Outstanding for the purpose of
any such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Debentures of such series which a Responsible Officer of the Trustee
actually knows are so owned shall be so disregarded. Debentures so owned which
have been pledged in good faith may be regarded as outstanding for the purposes
of this Section, if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and that
the pledgee is not a person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 8.05. INSTRUMENTS EXECUTED BY DEBENTUREHOLDERS BIND FUTURE
HOLDERS. At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 8.01, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Debentures of a
particular series specified in this Indenture in connection with such action,
any holder of a Debenture of that series which is shown by the evidence to be
included in the Debentures the holders of which have consented to such action
may, by filing written notice with the Trustee, and upon proof of holding as
provided in Section 8.02, revoke such action so far as concerns such Debenture.
Except as aforesaid any such action taken by the holder of any Debenture shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Debenture, and of any Debenture issued in exchange therefor, on
registration of transfer thereof or in place thereof, irrespective of whether or
not any notation in regard thereto is made upon such Debenture. Any action taken
by the holders of the majority or percentage in aggregate principal amount of
the Debentures of a particular series specified in this Indenture in connection
with such action shall be conclusively binding upon the Company, the Trustee and
the holders of all the Debentures of that series.
ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 9.01. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURE MAY BE
ENTERED INTO WITHOUT CONSENT OF DEBENTUREHOLDERS. In addition to any
supplemental indenture otherwise authorized by this Indenture, the Company and
the Trustee
43
may from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as then in effect), without the consent of the Debentureholders,
for one or more of the following purposes:
(a) to evidence the succession of another corporation or other entity
to the Company, and the assumption by any such successor of the obligations of
the Company contained herein or otherwise established with respect to the
Debentures;
(b) to add further covenants, restrictions, conditions or provisions
for the protection of the holders of the Debentures of all or any series as the
Board of Directors and the Trustee shall consider to be for the protection of
the holders of Debentures of all or any series, and to make the occurrence, or
the occurrence and continuance, of a default in any of such additional
covenants, restrictions, conditions or provisions a default or an Event of
Default with respect to such series permitting the enforcement of all or any of
the several remedies provided in this Indenture as herein set forth; provided,
however, that in respect of any such additional covenant, restriction, condition
or provision such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default or may limit the right of the holders of a majority in aggregate
principal amount of the Debentures of such series to waive such default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture or to make such other provisions in regard to matters or questions
arising under this Indenture as shall not be inconsistent with the provisions of
this Indenture and shall not materially adversely affect the interests of the
holders of the Debentures of any series;
(d) to add to, change or eliminate any of the provisions of this
Indenture, provided that any such addition, change or elimination shall become
effective only when there is no Debenture outstanding of any series created
prior to the execution of such supplemental indenture which is entitled to the
benefit of such provision;
(e) to provide for the issuance under this Indenture of Debentures in
coupon form (including Debentures registrable as to principal only) and to
provide for exchangeability of such Debentures with the Debentures issued
hereunder in fully registered form and to make all appropriate changes for such
purposes;
(f) to evidence and provide for the acceptance of appointment hereunder
by a successor trustee with respect to the Debentures;
(g) to qualify or maintain qualification of this Indenture under the
Trust Indenture Act;
44
(h) to establish the form or terms of Debentures of any series as
permitted by Section 2.01; or
(i) to make any addition, change or elimination of any provision of
this Indenture that does not adversely affect the rights of any Debentureholder
in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to, but may in its discretion, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 9.02.
SECTION 9.02. MODIFICATION OF INDENTURE WITH CONSENT OF
DEBENTUREHOLDERS. With the consent (evidenced as provided in Section 8.01) of
the holders of not less than a majority in aggregate principal amount of the
Debentures of each series affected by such supplemental indenture or indentures
at the time outstanding (and, in the case of any series of Debentures held as
trust assets of a Litchfield Capital Trust and with respect to which a Security
Exchange has not theretofore occurred, such consent of holders of the Preferred
Securities and the Common Securities of such Litchfield Capital Trust as may be
required under the Declaration of Trust of such Litchfield Capital Trust), the
Company and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Debentures of such series under this
Indenture; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debentures of any series, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the redemption thereof,
without the consent of the holder of each Debenture so affected or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Debenture (and, in the case of any series of Debentures held as trust
assets of a Litchfield Capital Trust and with respect to which a Security
Exchange has not theretofore occurred, such consent of the holders of the
Preferred Securities and the Common Securities of such Litchfield Capital Trust
as may be required under the Declaration of Trust of such Litchfield Capital
Trust) then outstanding and affected thereby.
Upon the request of the Company, and upon the filing with the Trustee
of evidence of the consent of Debentureholders (and, in the case of any series
of Debentures held as trust assets of a Litchfield Capital Trust and with
respect to which a Security Exchange has not theretofore occurred, such consent
of holders of the Preferred Securities and the Common Securities of such
Litchfield Capital Trust as may be required under the Declaration of Trust of
such Litchfield
45
Capital Trust) required to consent thereto as aforesaid, the Trustee shall join
with the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion but shall not be obligated to enter into such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders of
any series affected thereby under this Section to approve the particular form of
any proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Debentureholders of all series affected thereby as their names and addresses
appear upon the Debenture Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article or of
Section 10.01, this Indenture shall, with respect to such series, be and be
deemed to be modified and amended in accordance therewith and the respective
rights, limitations of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Company and the holders of Debentures of the
series affected thereby shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
SECTION 9.04. DEBENTURES MAY BEAR NOTATION OF CHANGES BY SUPPLEMENTAL
INDENTURES. Debentures of any series, affected by a supplemental indenture,
authenticated and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article or of Section 10.01, may bear a
notation in form approved by the Company, provided such form meets the
requirements of any exchange upon which such series may be listed or traded, as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Debentures of that series so modified as to conform, in the
opinion of the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Debentures of
that series then outstanding.
SECTION 9.05. OPINION OF COUNSEL. The Trustee, subject to the
provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article 9.
ARTICLE 10
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
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SECTION 10.01. COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. The
Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
other Person, and the Company shall not permit any other Person to consolidate
with or merge into the Company, unless:
(a) either the Company shall be the continuing corporation, or the
corporation (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the Company
substantially as an entity are transferred or leased shall be a corporation,
limited liability company, partnership or trust organized and existing under the
laws of the United States of America or any state thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Debentures and this Indenture; and
(b) immediately after giving effect to such transaction no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing.
SECTION 10.02. SUCCESSOR CORPORATION SUBSTITUTED. The successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer or lease is made shall succeed to and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor corporation had been named as the Company
herein, and thereafter (except in the case of a lease to another Person) the
predecessor corporation shall be relieved of all obligations and covenants under
the Indenture and the Debentures and, in the event of such conveyance, or
transfer, any such predecessor corporation may be dissolved and liquidated.
SECTION 10.03. OPINION OF COUNSEL. The Trustee, subject to the
provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article.
ARTICLE 11
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE.
(A) If at any time (a) the Company shall have paid or caused to be paid
the principal of, premium, if any, and interest on all the Debentures of any
series Outstanding hereunder (other than Debentures of such series which have
been destroyed, lost or stolen and which have been replaced or paid as provided
in Section 2.07) as and when the same shall have become due and payable, or (b)
the Company shall have delivered to the Trustee for cancellation all Debentures
of any series theretofore authenticated (other than any Debentures of such
series which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section
47
2.07) or (c) (i) all the Debentures of any series not theretofore delivered to
the Trustee for cancellation shall have become due and payable, or by their
terms will 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 (ii) the Company shall have irrevocably
deposited or caused to be deposited with the Trustee as trust funds the entire
amount in cash (other than moneys repaid by the Trustee or any paying agent to
the Company in accordance with Section 11.04) or Government Obligations,
maturing as to principal and interest at such times and in such amounts as will
insure the availability of cash, or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
(A) the principal of, premium, if any, and interest on all Debentures of such
series on each date that such principal or interest is due and payable and (B)
any mandatory sinking fund payments on the dates on which such payments are due
and payable in accordance with the terms of the Indenture and the Debentures of
such series; and if, in any such 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 (i) rights of registration of
transfer and exchange of Debentures of such series and the Company's right of
optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed
lost or stolen Debentures, (iii) rights of holders of Debentures to receive
payments of principal thereof and interest thereon, upon the original stated due
dates therefor (but not upon acceleration), and remaining rights of the
Debentureholders to receive mandatory sinking fund payments, if any, (iv) the
rights, obligations, duties and immunities of the Trustee hereunder, (v) the
rights of the holders of Debentures of such series as beneficiaries hereof with
respect to the property so deposited with the Trustee payable to all or any of
them and (vi) the obligations of the Company under Section 4.02) and the
Trustee, on demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of the Company, shall execute
proper instruments acknowledging such satisfaction of and discharging this
Indenture; provided, that the rights of the Debentureholders to receive amounts
in respect of principal of, premium, if any, and interest on the Debentures held
by them shall not be delayed longer than required by then-applicable mandatory
rules or policies of any securities exchange or automated quotation system upon
which the Debentures are listed or traded. The Company agrees to reimburse the
Trustee for any costs or expenses thereafter reasonably and properly incurred
and to compensate the Trustee for any services thereafter reasonably and
properly rendered by the Trustee in connection with this Indenture or the
Debentures of such series.
(B) The following provisions shall apply to the Debentures of each
series unless specifically otherwise provided in a Board Resolution or indenture
supplemental hereto provided pursuant to Section 2.01. In addition to discharge
of the Indenture pursuant to the next preceding paragraph, the Company shall be
deemed to have paid and discharged the entire indebtedness on all the Debentures
of a series on the date of the deposit referred to in subparagraph (a) below,
and the provisions of this Indenture with respect to the Debentures of such
series shall no longer be in effect (except as to (i) rights of registration of
transfer and exchange of Debentures of such series and the Company's right of
optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed,
lost or stolen Debentures, (iii) rights of holders of Debentures to receive
payments of principal thereof and interest thereon, upon the original stated due
dates therefor (but not upon
48
acceleration), and remaining rights of the holders of Debentures to receive
mandatory sinking fund payments, if any, (iv) the rights, obligations, duties
and immunities of the Trustee hereunder, (v) the rights of the Holders of
Debentures as beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them and (vi) the obligations of the
Company under Section 4.02) and the Trustee, at the expense of the Company,
shall at the Company's request, execute proper instruments acknowledging the
same, if
(a) with reference to this provision the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Debentures of such series (i) cash in an
amount, or (ii) Governmental Obligations maturing as to principal and interest
at such times and in such amounts as will insure the availability of cash or
(iii) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay (A) the principal of,
premium, if any, and interest on all Debentures of such series on each date that
such principal or interest is due and payable and (B) any mandatory sinking fund
payments on the dates on which such payments are due and payable in accordance
with the terms of the Indenture and the Debentures of such series;
(b) such deposit will not result in a breach or violation of,
or constitute a default under, any agreement or instrument to which the Company
is a party or by which it is bound;
(c) the Company has delivered to the Trustee an Opinion of
Counsel based on the fact that (x) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (y) since the date
hereof, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and such opinion shall confirm that, the holders
of the Debentures of such series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same amount and in
the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred;
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the defeasance contemplated by this provision
have been complied with; and
(e) no event or condition shall exist that, pursuant to the
provisions of Section 14.02 or 14.03, would prevent the Company from making
payments of the principal of, premium, if any, or interest on the Debentures of
such series on the date of such deposit.
SECTION 11.02. APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT OF
DEBENTURES. Subject to Section 11.04, all moneys deposited with the Trustee (or
other trustee) pursuant to Section 11.01 shall be held in trust and applied by
it to the payment, either directly or through any paying agent (including the
Company acting as its own paying agent), to the Holders of the particular
Debentures of such series for the payment or
49
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.
SECTION 11.03. REPAYMENT OF MONEYS HELD BY THE PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture with respect to
Debentures of any series, all moneys then held by any paying agent under the
provisions of this Indenture with respect to such series of Debentures shall,
upon demand of the Company, be repaid to it or paid to the Trustee and thereupon
such paying agent shall be released from all further liability with respect to
such moneys.
SECTION 11.04. REPAYMENT OF MONEYS HELD BY THE TRUSTEE. Any moneys
deposited with or paid to the Trustee or any paying agent for the payment of the
principal of or interest on any Debenture of any series and not applied but
remaining unclaimed for two years after the date upon which such principal or
interest shall have become due and payable, shall, upon the written request of
the Company and unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property law, be repaid to the Company by the
Trustee for such series or such paying agent, and the Holder of the Debentures
of such series shall, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property laws, thereafter look only
to the Company for any payment which such holder may be entitled to collect, and
all liability of the Trustee or any paying agent with respect to such moneys
shall thereupon cease; provided, however, that the Trustee or such paying agent,
before being required to make any such repayment with respect to moneys
deposited with it for any payment series, shall at the expense of the Company,
mail by first-class mail to holders of such Debentures at their addresses as
they shall appear on the Debenture Register, notice, that such moneys remain and
that, after a date specified therein, which shall not be less than 30 days from
the date of such mailing or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 11.05. INDEMNIFICATION RELATING TO GOVERNMENTAL OBLIGATIONS.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the Governmental Obligations deposited
pursuant to Section 11.01 or the principal or interest received in respect of
such obligations.
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 12.01. INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS OF COMPANY EXEMPT FROM INDIVIDUAL LIABILITY. No recourse
under or upon any obligation, covenant or agreement of this Indenture, or of any
Debenture, or for any claim based thereon or otherwise in respect thereof, shall
be had against any incorporator, stockholder, officer or director, past, present
or future as such, of the Company or of any predecessor or successor
corporation, either directly or through the Company or any such predecessor or
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood
50
that this Indenture and the obligations issued hereunder are solely corporate
obligations, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, the incorporators, stockholders, officers or directors
as such, of the Company or of any predecessor or successor corporation, or any
of them, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Debentures or implied therefrom; and that any and all
such personal liability of every name and nature, either at common law or in
equity or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer or director as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any of the Debentures or implied therefrom, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issuance of such Debentures.
ARTICLE 13
MISCELLANEOUS PROVISIONS
SECTION 13.01. SUCCESSORS AND ASSIGNS OF COMPANY BOUND BY INDENTURE.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or on behalf of the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 13.02. ACTS OF BOARD, COMMITTEE OR OFFICER OF SUCCESSOR COMPANY
VALID. Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
corresponding board, committee or officer of any corporation that shall at the
time be the lawful sole successor of the Company.
SECTION 13.03. SURRENDER OF POWERS OF THE COMPANY. The Company by
instrument in writing executed by authority of two-thirds of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company and thereupon such power so surrendered shall terminate both as
to the Company and as to any successor corporation.
SECTION 13.04. REQUIRED NOTICES OR DEMANDS MAY BE SERVED BY MAIL.
Except as otherwise expressly provided herein, any notice or demand which by any
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Debentures to or on the Company may be given or
served by being deposited first class postage prepaid in a post-office letterbox
addressed (until another address is filed in writing by the Company with the
Trustee), as follows: Litchfield Financial Corporation, 430 Main Street, P.O.
Box 488, Williamstown, Massachusetts 01267, Attention: Corporate Secretary. Any
notice, election, request or demand by the Company or any Debentureholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
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SECTION 13.05. INDENTURE AND DEBENTURES TO BE CONSTRUED IN ACCORDANCE
WITH LAWS OF THE STATE OF NEW YORK. This Indenture and each Debenture shall be
deemed to be a contract made under the laws of the State of New York, and
for all purposes shall be construed in accordance with the laws of said State
(without regard to principles of conflicts of laws thereof).
SECTION 13.06. OFFICER'S CERTIFICATE AND OPINION OF COUNSEL TO BE
FURNISHED UPON APPLICATION OR DEMANDS BY COMPANY; STATEMENTS TO BE INCLUDED IN
EACH CERTIFICATE OR OPINION WITH RESPECT TO COMPLIANCE WITH CONDITION OR
COVENANT.
(a) Upon any application or demand by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
(b) Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
in this Indenture (other than the certificate provided pursuant to Section
5.03(d) of this Indenture) shall include (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 such
person, such condition or covenant has been complied with.
SECTION 13.07. PAYMENTS DUE ON SUNDAYS OR HOLIDAYS. Except as
provided pursuant to Section 2.01 pursuant to a Board Resolution, and as set
forth in an Officers' Certificate, or established in one or more indentures
supplemental to the Indenture, in any case where the date of maturity of
interest or principal of any Debenture or the date of redemption of any
Debenture shall not be a Business Day then payment of interest or principal (and
premium, if any) may be made on the next succeeding Business Day, with the same
force and effect as if made on the nominal date of maturity or redemption, and
no interest shall accrue for the period after such nominal date.
SECTION 13.08. PROVISIONS REQUIRED BY TRUST INDENTURE ACT OF 1939 TO
CONTROL. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
52
SECTION 13.09. INDENTURE MAY BE EXECUTED BY ITS COUNTERPARTS. This
Indenture may be executed in any number of counterparts, each of which shall be
an original; but such counterparts shall together constitute but one and the
same instrument.
SECTION 13.10. SEPARABILITY OF INDENTURE PROVISIONS. In case any one or
more of the provisions contained in this Indenture or in the Debentures of any
series shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Indenture or of such Debentures, but this Indenture
and such Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 13.11. ASSIGNMENT BY COMPANY TO A SUBSIDIARY OR
AFFILIATE. The Company will have the right at all times to assign any of its
rights or obligations under this Indenture to a Subsidiary or an Affiliate;
provided that, in the event of any such assignment, the Company will remain
jointly and severally liable for all such obligations. Subject to the foregoing,
this Indenture is binding upon and inures to the benefit of the parties thereto
and their respective successors and assigns. This Indenture may not otherwise be
assigned by the parties hereto (other than pursuant to Article 10).
SECTION 13.12. HOLDERS OF PREFERRED SECURITIES AS THIRD PARTY
BENEFICIARIES OF THE INDENTURE; HOLDERS OF PREFERRED SECURITIES MAY INSTITUTE
LEGAL PROCEEDINGS AGAINST THE COMPANY IN CERTAIN CASES.
The Company acknowledges that, prior to a Security Exchange with respect to
Debentures of any series held as trust assets of a Litchfield Capital Trust, if
the Property Trustee of such Litchfield Capital Trust fails to enforce its
rights under this Indenture as the holder of the Debentures of a series held as
trust assets of such Litchfield Capital Trust, any holder of the Preferred
Securities of such Litchfield Capital Trust may, to the fullest extent permitted
by law, institute legal proceedings directly against the Company to enforce such
Property Trustee's rights under this Indenture without first instituting any
legal proceedings against such Property Trustee or any other Person; provided
that, if an Event of Default has occurred and is continuing and such event is
attributed to the failure of the Company to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities of such Litchfield Capital Trust may directly institute a proceeding
for enforcement of payment to such holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Holder Direct Action") on or
after the respective due date specified in the Debentures. In connection with
such Holder Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities to the extent of any payment made by the Company
to such holders of Preferred Securities in such Holder Direct Action. Except as
provided in the preceding sentences, the holders of Preferred Securities of such
Litchfield Capital Trust will not be able to exercise directly any other remedy
available to the holders of the Debentures.
ARTICLE 14
SUBORDINATION OF DEBENTURES
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SECTION 14.01. AGREEMENT TO SUBORDINATE. The Company covenants and
agrees, and each Debentureholder issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued subject to
the provisions of this Article 14; and each person holding any Debenture,
whether upon original issue or upon transfer, assignment or exchange thereof
accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of, premium, if any, and
interest on all Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
all Senior Debt, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article 14 shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 14.02. DEFAULT ON SENIOR DEBT. In the event and during the
continuation of any default by the Company in the payment of principal, premium,
interest or any other payment due on any Senior Debt, or in the event that the
maturity of any Senior Debt has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption payments) of or premium, if any, or interest on
the Debentures until such default shall have been cured or waived in writing or
shall have ceased to exist or such Senior Debt shall have been discharged or
paid in full.
In the event of the acceleration of the maturity of the Debentures,
then no payment shall be made by the Company with respect to the principal
(including redemption payments) of or premium, if any, or interest on the
Debentures until the holders of all Senior Debt outstanding at the time of such
acceleration shall receive payment in full of such Senior Debt (including any
amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Debentureholder when such payment is prohibited
by the preceding paragraphs of this Section 14.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear.
SECTION 14.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment
by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of the Company, all amounts due or
to become due upon all Senior Debt shall first be paid in full, in cash or cash
equivalents, or payment thereof provided for in accordance with its terms,
before any payment is made on account of the principal of, premium, if any, or
interest on the indebtedness evidenced by the Debentures, and upon any such
liquidation, dissolution, winding up, receivership, reorganization,
54
assignment, marshaling or proceeding, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the Debentureholders or the Trustee under this Indenture would be
entitled, except for the provisions of this Article 14, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution, or by the Debentureholders or
by the Trustee under this Indenture if received by them or it, directly to the
holders of Senior Debt (pro rata to such holders on the basis of the respective
amounts of Senior Debt held by such holders) or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Debt may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Debt in full (including, without limitation, except to the extent, if
any, prohibited by mandatory provisions of law, post-petition interest, in any
such proceedings), after giving effect to any concurrent payment or distribution
to or for the holders of Senior Debt, before any payment or distribution is made
to the holders of the indebtedness evidenced by the Debentures or to the Trustee
under this Indenture.
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, prohibited by the foregoing, shall be received by the
Trustee under this Indenture or the holders of the Debentures before all Senior
Debt is paid in full or provision is made for such payment in accordance with
its terms, such payment or distribution shall be held in trust for the benefit
of and shall be paid over or delivered to the holders of such Senior Debt or
their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of all Senior Debt remaining unpaid until all such Senior Debt
shall have been paid in full in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders of such Senior
Debt.
For purposes of this Article 14, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of arrangement, reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Article 14 with respect to the Debentures) to the payment of all Senior Debt
which may at the time be outstanding; provided, that (i) the Senior Debt is
assumed by the new corporation, if any, resulting from any such arrangement,
reorganization or readjustment, and (ii) the rights of the holders of the Senior
Debt are not, without the consent of such holders, altered by such arrangement,
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided in Article 10 shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if
such other Person shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article 10. Nothing in Section
14.02 or this Section 14.03 shall apply to claims of, or payments to, the
Trustee under or pursuant to Article 7, except as provided therein. This Section
shall be subject to the further provisions of Section 14.06.
55
SECTION 14.04. SUBROGATION OF DEBENTURES. Subject to the payment in
full of all Senior Debt, the rights of the holders of the Debentures shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of, premium, if any, and interest on the
Debentures shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the holders of the Debentures or the Trustee on
their behalf would be entitled except for the provisions of this Article 14 and
no payment over pursuant to the provisions of this Article 14 to the holders of
Senior Debt by holders of the Debentures or the Trustee on their behalf shall,
as between the Company, its creditors other than holders of Senior Debt and the
holders of the Debentures, be deemed to be a payment by the Company to or on
account of the Senior Debt; and no payments or distributions of cash, property
or securities to or for the benefit of the Debentureholders pursuant to the
subrogation provisions of this Article, which would otherwise have been paid to
the holders of Senior Debt shall be deemed to be a payment by the Company to or
for the account of the Debentures. It is understood that the provisions of this
Article 14 are and are intended solely for the purpose of defining the relative
rights of the holders of the Debentures, on the one hand, and the holders of the
Senior Debt, on the other hand.
Nothing contained in this Article 14 or elsewhere in this Indenture or
in the Debentures is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of, premium, if any, and
interest on the Debentures 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 of the Debentures and creditors of the Company other than
the holders of the Senior Debt, nor shall anything herein or therein prevent the
holder of any Debenture or the Trustee on his behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article 14 of the holders
of Senior Debt in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article 14, the Trustee, subject to the provisions of Article 7, and the
holders of the Debentures shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such liquidation,
dissolution, winding up, receivership, reorganization, assignment or marshaling
proceedings are pending, or a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or to the holders of the Debentures, for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt 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 14.
SECTION 14.05. AUTHORIZATION BY DEBENTUREHOLDERS. Each holder of a
Debenture by his acceptance thereof authorizes and directs the Trustee in his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article 14 and appoints the Trustee his attorney-
in-fact for any and all such purposes.
56
SECTION 14.06. NOTICE TO TRUSTEE. The Company shall give prompt written
notice to the Trustee and to any paying agent of any fact known to the Company
which would prohibit the making of any payment of moneys to or by the Trustee or
any paying agent in respect of the Debentures pursuant to the provisions of this
Article 14. Regardless of anything to the contrary contained in this Article 14
or elsewhere in this Indenture, the Trustee shall not be charged with knowledge
of the existence of any Senior Debt or of any default or event of default with
respect to any Senior Debt or of any other facts which would prohibit the making
of any payment of moneys to or by the Trustee, unless and until the Trustee
shall have received notice in writing at its principal Corporate Trust Office to
that effect signed by an officer of the Company, or by a holder or agent of a
holder of Senior Debt who shall have been certified by the Company or otherwise
established to the reasonable satisfaction of the Trustee to be such holder or
agent, or by the trustee under any indenture pursuant to which Senior Debt shall
be outstanding, and, prior to the receipt of any such written notice, the
Trustee shall, subject to the provisions of Article 7, be entitled to assume
that no such facts exist; provided, however, that if on a date at least three
Business Days prior to the date upon which by the terms hereof any such moneys
shall become payable for any purpose (including, without limitation, the payment
of the principal of, or interest on any Debenture) the Trustee shall not have
received with respect to such moneys the notice provided for in this Section
14.06, then, regardless of anything herein to the contrary, the Trustee shall
have full power and authority to receive such moneys 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 prior date.
The Trustee shall be entitled to conclusively rely on the delivery to
it of a written notice by a Person representing himself to be a holder of Senior
Debt (or a trustee on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt or a trustee on behalf of any 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 Debt to
participate in any payment or distribution pursuant to this Article 14, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article 14, 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.
SECTION 14.07. TRUSTEE'S RELATION TO SENIOR DEBT. The Trustee and any
agent of the Company or the Trustee shall be entitled to all the rights set
forth in this Article 14 with respect to any Senior Debt which may at any time
be held by it in its individual or any other capacity to the same extent as any
other holder of Senior Debt and nothing in this Indenture shall deprive the
Trustee or any such agent, of any of its rights as such holder. Nothing in this
Article shall apply to claims of, or payments to, the Trustee under or pursuant
to Article 7.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article 14, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary
57
>
duty to the holders of Senior Debt and, subject to the provisions of Article 7,
the Trustee shall not be liable to any holder of Senior Debt if it shall pay
over or deliver to holders of Debentures, the Company or any other person moneys
or assets to which any holder of Senior Debt shall be entitled by virtue of this
Article 14 or otherwise.
Nothing in this Article 14 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.06.
SECTION 14.08. NO IMPAIRMENT TO SUBORDINATION. No right of any present
or future holder of any Senior Debt to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt of the Company may, at any time and from time to
time, without the consent of or notice to the Trustee or the Debentureholders,
without incurring responsibility to the Debentureholders and without impairing
or releasing the subordination provided in this Article 14 or the obligations
hereunder of the holders of the Debentures to the holders of such Senior Debt,
do any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such Senior Debt,
or otherwise amend or supplement in any manner such Senior Debt or any
instrument evidencing the same or any agreement under which such Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Debt; (iii) release any
Person liable in any manner for the collection of such Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company, as the case
may be, and any other Person.
SECTION 14.09. ARTICLE APPLICABLE TO PAYING AGENTS. In case at any time
any paying agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article shall
in such case (unless the context otherwise requires) be construed as extending
to and including such paying agent within its meaning as fully for all intents
and purposes as if such paying agent were named in this Article in addition to
or in place of the Trustee.
SECTION 14.10. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Section 11.02 of this Indenture by
the Trustee for the payment of principal of and interest on the Debentures shall
not be subordinated to the prior payment of any Senior Debt or subject to the
restrictions set forth in this Article 14, and none of the Debentureholders
shall be obligated to pay over any such amount to the Company or any holder of
Senior Debt of the Company or any other creditor of the Company.
58
The Bank of New York, a New York banking corporation, as Trustee,
hereby accepts the trust in this Indenture declared and provided, upon the terms
and conditions herein above set forth.
59
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
LITCHFIELD FINANCIAL CORPORATION
/s/ Ronald E. Rabidou
By: ______________________________
Ronald E. Rabidou
Executive Vice President and Chief
Financial Officer
THE BANK OF NEW YORK, as TRUSTEE
By: /s/ Michael Culhane
------------------------------
Michael Culhane
Vice President
STATE OF Massachusetts
COUNTY OF Berkshire
BEFORE ME, the undersigned authority, on this day of May 19, 1999,
personally appeared Ronald Rabidou on behalf of Litchfield Financial
Corporation, known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that he or she executed the same as
the act of such corporation and for the purposes and consideration herein
expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS 19th day of May, 1999.
/s/ Losha M. Daub
------------------------------
Notary Public
My Commission Expires: April 21, 2000
STATE OF
COUNTY OF
BEFORE ME, the undersigned authority, on this day of May 19, 1999,
personally appeared Michael Culhane of The Bank of New York, a New York banking
corporation, known to me (or proved to me by introduction upon the oath of a
person known to me) to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that
60
he or she executed the same as the act of such trust for the purposes and
consideration herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS 19th day of May, 1999.
/s/ William J. Cassels
------------------------------
Notary Public
My Commission Expires: May 16, 2000
HWD2: 551485-1
61
Exhibit 4.13
LITCHFIELD FINANCIAL CORPORATION
AND
THE BANK OF NEW YORK,
as Trustee
SUPPLEMENTAL INDENTURE NO. 1
Dated as of May 19, 1999
TO
JUNIOR SUBORDINATED INDENTURE
Dated as of May 19, 1999
10% Series A Junior Subordinated Debentures Due 2029
$25,773,200
SUPPLEMENTAL INDENTURE NO. 1, dated as of the 19th day of May, 1999,
between Litchfield Financial Corporation, a corporation duly organized and
existing under the laws of The Commonwealth of Massachusetts (the "Company"),
and The Bank of New York, a New York banking corporation, as trustee (the
"Trustee").
RECITALS
The Company has heretofore executed and delivered to the Trustee a
Junior Subordinated Indenture, dated as of May 19, 1999 (the "Indenture"),
providing for the issuance from time to time of one or more series of its
unsecured junior subordinated debentures (the "Debentures").
Pursuant to the terms of the Indenture, the Company desires to provide
for the establishment of a new series of Debentures to be designated as the 10%
Junior Subordinated Debentures due 2029 (the "Series A Debentures"), the form
and substance of such Series A Debentures and the terms, provisions and
conditions thereof to be set forth as provided in the Indenture and this
Supplemental Indenture No. 1.
The Company has caused Litchfield Capital Trust I ("Litchfield Capital
Trust I") to be created as a statutory business trust under the Business Trust
Act of the State of Delaware (12 Del. Code ss.3801 et seq.) pursuant to a
Declaration of Trust, dated as of April 12, 1999 (as amended by an Amendment of
the Declaration of Trust, dated as of May 19, 1999, the "Original Declaration"),
and the filing of a Certificate of Trust with the Secretary of State of the
State of Delaware on April 12, 1999.
The Original Declaration is to be amended and restated in its entirety
pursuant to an Amended and Restated Declaration of Trust dated as of May 19,
1999 (such Amended and Restated Declaration of Trust, as amended from time to
time, the "Declaration of Trust").
Litchfield Capital Trust I desires to issue its 10% Series A Trust
Preferred Securities (the "Preferred Securities") and sell such Preferred
Securities to the underwriters set forth in that certain Underwriting Agreement
dated May 13, 1999 by and among the Company, Litchfield Capital Trust I and the
underwriters named therein.
In connection with such purchases of Preferred Securities and the
related purchase by the Company of the Common Securities (as defined in the
Declaration of Trust) of Litchfield Capital Trust I, Litchfield Capital Trust I
will purchase and hold as trust assets the Series A Debentures.
Pursuant to the Declaration of Trust, the legal title to the Series A
Debentures shall be owned and held of record in the name of The Bank of New York
or its successor under the Declaration of Trust, as Property Trustee (the
"Property Trustee"), in trust for the benefit of holders of the Preferred
Securities and the Common Securities.
Upon written direction of the Company or any subsequent holder of the
Common Securities, the Regular Trustees (as defined in the Declaration of Trust)
of Litchfield Capital Trust I shall, unless the Series A Debentures are redeemed
as described herein, dissolve Litchfield
<PAGE>
Capital Trust I and cause to be distributed to the holders of the Preferred
Securities and the Common Securities, on a Pro Rata basis (determined as
provided in the terms of the Preferred Securities and Common Securities attached
as Exhibits B and C to the Declaration of Trust), Series A Debentures and, in
connection with a Liquidation Distribution (as defined in the Declaration of
Trust), the Regular Trustees may cause to be distributed to holders of Preferred
Securities and Common Securities, on a Pro Rata basis, Series A Debentures (each
a "Dissolution Event").
Section 2.01 of the Indenture provides that various matters with
respect to any series of Debentures issued under the Indenture may be
established in an indenture supplemental to the Indenture.
Subparagraph (h) of Section 9.01 of the Indenture provides that the
Company and the Trustee may enter into an indenture supplemental to the
Indenture to establish the form or terms of Debentures of any series as
permitted by Section 2.01 of the Indenture.
For and in consideration of the premises and the issuance of the series
of Debentures provided for herein, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the holders of the Debentures of such series,
as follows:
ARTICLE ONE
Relation to Indenture; Additional Definitions
SECTION 1.01. Relation to Indenture. This Supplemental Indenture No.1
constitutes an integral part of the Indenture.
SECTION 1.02. Additional Definitions. For all purposes of this
Supplemental Indenture No. 1:
(1) Capitalized terms used herein shall have the meanings
specified herein or in the Indenture, as the case may be;
(2) "Additional Interest" has the meaning set forth in Section
2.05(d) hereof;
(3) "Change in Investment Company Act Law" has the meaning set forth in
the definition of Investment Company Event;
(4) "Common Securities" has the meaning set forth in the Recitals
herein;
(5) "Compounded Interest" has the meaning set forth in Section
2.05(a) hereof;
(6) "Debentures" has the meaning set forth in the Recitals herein;
3
(7) "Declaration of Trust" has the meaning set forth in the
Recitals herein;
(8) "Dissolution Event" has the meaning set forth in the Recitals
herein;
(9) "Extended Interest Payment Period" has the meaning set forth
in Section 4.01(a) hereof;
(10) "Guarantee Payments" has the meaning set forth in Section
5.01 hereof;
(11) "Indenture" has the meaning set forth in the Recitals herein;
(12) "Interest Payment Date" has the meaning set forth in Section
2.05(a) hereof;
(13) "Investment Company Act" means the Investment Company Act of 1940,
as amended;
(14) "Investment Company Event" means that the Company and the Regular
Trustees shall have received an opinion of counsel, who may be counsel for
Litchfield Capital Trust I, the Trustee or the Company, who may be an employee
of the Company but not an employee of Litchfield Capital Trust I or the Trustee,
and who shall be reasonably acceptable to the Trustee, experienced in practice
under the Investment Company Act that as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in Investment Company Act Law"), there is more than an
insubstantial risk that Litchfield Capital Trust I is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act, which Change in Investment Company Act Law becomes effective on or
after June 30, 2004;
(15) "Liquidation Distribution" has the meaning set forth in the
Recitals herein;
(16) "Maturity Date" has the meaning set forth in Section 2.03
hereof;
(17) "Non Book-Entry Preferred Securities" has the meaning set forth in
Section 2.04(b)(ii) hereof;
(18) "Optional Redemption Price" has the meaning set forth in
Section 3.01(a) hereof;
(19) "Original Declaration" has the meaning set forth in the
Recitals herein;
(20) "Preferred Securities" has the meaning set forth in the
Recitals herein;
4
(21) "Preferred Securities Guarantee" means the Guarantee Agreement,
dated as of May 19, 1999, between the Company and The Bank of New York as the
initial Guarantee Trustee thereunder, in respect of the Preferred Securities;
(22) "Property Account" has the meaning set forth in Section
2.04(a) hereof;
(23) "Property Trustee" has the meaning set forth in the Recitals
herein;
(24) "Regular Trustees" has the meaning set forth in the Recitals
herein;
(25) "Litchfield Capital Trust I" has the meaning set forth in the
Recitals herein;
(26) "Series A Debentures" has the meaning set forth in the Recitals
herein and Section 2.01 hereof;
(27) "Special Event" means either a Tax Event or an Investment
Company Event;
(28) "Tax Event" means that the Company and the Regular Trustees shall
have received an opinion of counsel, who may be counsel for Litchfield Capital
Trust I, the Trustee or the Company, who may be an employee of the Company but
not an employee of Litchfield Capital Trust I or the Trustee, and who shall be
reasonably acceptable to the Trustee, experienced in such matters to the effect
that on or after May 19, 1999 as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement by any
legislative body, court, governmental agency or regulatory authority that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after May 19, 1999, there is more than an insubstantial risk that (i)
Litchfield Capital Trust I is, or will be within 90 days of the date thereof,
subject to federal income tax with respect to income accrued or received on the
Series A Debentures, (ii) Litchfield Capital Trust I is, or will be within 90
days of the date thereof, subject to more than a de minimis amount of taxes,
duties or other governmental charges or (iii) interest payable by the Company to
Litchfield Capital Trust I on the Series A Debentures is not, or within 90 days
of the date thereof will not be, deductible by the Company for federal income
tax purposes;
(29) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 1; and
5
(30) The terms "herein," "hereof," "hereunder" and other words of
similar import refer to this Supplemental Indenture No. 1.
ARTICLE TWO
General Terms and Conditions of the Series 10% Series A Debentures
SECTION 2.01. Title of Debentures. There shall be and is hereby
authorized a series of Debentures designated as the "10% Junior Subordinated
Debentures due 2029" (the "Series A Debentures").
SECTION 2.02. Limitation on Aggregate Principal Amount. The aggregate
principal amount of the Series A Debentures shall be limited to $25,773,200;
provided, however, that the authorized aggregate principal amount of the Series
A Debentures may be increased above such amount by a Board Resolution to such
effect. Each Series A Debenture shall be dated the date of its authentication.
SECTION 2.03. Maturity Date. The Series A Debentures shall mature and
the principal amount thereof shall be due and payable together with all accrued
and unpaid interest thereon, including Additional Interest and Compounded
Interest, if any, on June 30, 2029 (the "Maturity Date"); provided, if a Tax
Event occurs, then the Company will have the right (a) prior to the dissolution
of Litchfield Capital Trust I, to shorten the Maturity Date of the Series A
Debentures, to the minimum extent required, but not earlier than September 30,
2018, or (b) to direct the Property Trustee to dissolve Litchfield Capital Trust
I (if not previously dissolved) and shorten the Maturity Date of the Series A
Debentures, to the minimum extent required, but not earlier than September 30,
2018, in each case such that in the opinion of counsel to the Company, who may
be an employee of the Company, experienced in such matters, after shortening the
Maturity Date, interest paid on the Series A Debentures will be deductible for
federal income tax purposes.
SECTION 2.04. Place of Payment, Registration or Exchange.
(a) Except as provided in Section 2.04(b), the Series A Debentures
shall be issued in fully registered certificated form without interest coupons
in denominations of $10 or integral multiples thereof. Principal and interest on
the Series A Debentures issued in certificated form will be payable, the
transfer of such Series A Debentures will be registrable and such Series A
Debentures will be exchangeable for Series A Debentures bearing identical terms
and provisions at the Corporate Trust Office of the Trustee; provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the registered holders at such addresses as shall appear in the
Debenture Register and that the payment of principal with respect to the Series
A Debentures will only be made upon surrender of the Series A Debentures to the
Trustee. Notwithstanding the foregoing, so long as the Property Trustee is the
legal owner and record holder of the Series A Debentures, the payment of the
principal of and interest (including Additional Interest and Compounded
Interest, if any) on the Series A Debentures held by the
6
Property Trustee will be made by the Company in immediately available funds on
the payment date therefor at such place and to the Property Account (as defined
in the Declaration of Trust) established and maintained by the Property Trustee
pursuant to the Declaration of Trust.
(b) In connection with a Dissolution Event:
(i) Series A Debentures in certificated form may be presented
to the Trustee by the Property Trustee in exchange for one or more Global
Debentures representing the Series A Debentures in an aggregate principal amount
equal to all Outstanding Series A Debentures, to be registered in the name of
the Depositary, or its nominee, and delivered by the Trustee to the Depositary
for crediting to the accounts of its participants pursuant to the instructions
of the Regular Trustees. The Company upon any such presentation shall execute
one or more Global Debentures representing the Series A Debentures in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with the Indenture and this
Supplemental Indenture No. 1. Payments on the Series A Debentures issued as a
Global Debenture will be made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, Series A Debentures in certificated form may be presented to
the Trustee by the Property Trustee and any Definitive Preferred Security
Certificate (as defined in the Declaration of Trust) which represents Preferred
Securities other than Preferred Securities held by the Clearing Agency (as
defined in the Declaration of Trust) or its nominee ("Non Book- Entry Preferred
Securities") will be deemed to represent beneficial interests in Series A
Debentures presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the Non Book-Entry
Preferred Securities until such Definitive Preferred Security Certificate is
presented to the Debenture Registrar for transfer or reissuance at which time
such Preferred Security Certificate will be canceled and a Series A Debenture,
registered in the name of the holder of the Preferred Security Certificate or
the transferee of the holder of such Preferred Security Certificate, as the case
may be, with an aggregate principal amount equal to the aggregate liquidation
amount of the Definitive Preferred Security Certificate canceled will be
executed by the Company and delivered to the Trustee for authentication and
delivery in accordance with the Indenture and this Supplemental Indenture No. 1.
Upon issuance of such Series A Debentures, Series A Debentures with an
equivalent aggregate amount that were presented by the Property Trustee to the
Trustee will be deemed to have been canceled.
SECTION 2.05. Interest and Interest Rates.
(a) Each Series A Debenture will bear interest at the rate of 10% per
annum from May 19, 1999 until the principal thereof becomes due and payable, and
on any overdue principal and (to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum (10%), compounded quarterly ("Compounded Interest"), payable
(subject to the provisions of Article Four) quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year (each an "Interest Payment
Date"),
7
commencing on June 30, 1999, to the person in whose name such Series A Debenture
or any predecessor Series A Debenture is registered, at the close of business on
the regular record date for such interest installment, which, except as set
forth below, shall be, in respect of any Series A Debentures of which the
Property Trustee is the registered holder or a Global Debenture, the close of
business on the Business Day next preceding that Interest Payment Date.
Notwithstanding the foregoing sentence, if the Preferred Securities are no
longer in book-entry only form or if pursuant to the provisions of Section
2.11(c) of the Indenture the Series A Debentures are not represented by a Global
Debenture, the regular record dates for such interest installment shall be the
close of business on the fifteenth day of the month in which that Interest
Payment Date occurs.
(b) Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holders on such
regular record date, and shall instead be paid to the person in whose name the
Series A Debenture (or one or more Predecessor Debentures) is registered at the
close of business on a special record date to be fixed by the Trustee for the
payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Series A Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange or quotation
system on which the Series A Debentures may be listed or traded, and upon such
notice as may be required by such exchange or quotation system, all as more
fully provided in Section 2.03 of the Indenture.
(c) The amount of interest payable for any full quarterly interest
period will be computed on the basis of a 360-day year of twelve 30-day months,
and for any period shorter than a full quarterly interest period for which
interest is computed, interest shall be computed on the basis of the actual
number of days elapsed per 90-day quarter. In the event that any date on which
interest is payable on the Series A Debentures is not a Business Day, then
payment of interest payable on such date shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable.
(d) If at any time Litchfield Capital Trust I shall be required to pay
any taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States of America or any other
taxing authority, then, in any such case, the Company shall pay as additional
interest ("Additional Interest") on the Series A Debentures such additional
amounts as shall be required so that the net amounts received and retained by
Litchfield Capital Trust I after paying any such taxes, duties, assessments or
other governmental charges shall be equal to the amounts Litchfield Capital
Trust I would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
8
SECTION 2.06. Denomination of Debentures. The Series A Debentures shall
be in registered form without coupons and shall be issuable in denominations of
$10 and integral multiples thereof.
SECTION 2.07. Currency. Payment of principal and interest on the
Series A Debentures shall be payable in U.S. dollars.
SECTION 2.08. Paying Agent. The Trustee shall initially serve as
paying agent of the Series A Debentures.
SECTION 2.09. Sinking Fund Obligations. The Company has no obligation
to redeem or purchase any Series A Debentures pursuant to any sinking fund or
analogous provisions (including payments made in cash in anticipation of future
sinking fund obligations) or at the option of a holder thereof.
ARTICLE THREE
Optional Redemption of the Series A Debentures
SECTION 3.01. Optional Redemption on or after June 30, 2004.
(a) Except as provided in Section 3.02 hereof and subject to the
provisions below, Series A Debentures shall not be redeemed by the Company prior
to June 30, 2004. Subject to the terms of Article 3 of the Indenture, the
Company shall have the right to redeem the Series A Debentures, without premium
or penalty, in whole or in part, at any time from time to time on or after June
30, 2004, upon not less than 30 nor more than 60 days' notice to each holder of
the Series A Debentures, at a redemption price of 100% of the principal amount
of the Series A Debentures, together with any accrued and unpaid interest
thereon, including Compounded Interest and Additional Interest, if any, to, but
excluding, the date of such redemption (the "Optional Redemption Price").
(b) If the Series A Debentures are redeemed on any Interest Payment
Date, accrued and unpaid interest shall be payable to holders of record on the
relevant record date.
(c) The Company shall not redeem any Series A Debentures unless all
accrued and unpaid interest thereon, including Compounded Interest and
Additional Interest, if any, has been paid for all quarterly interest periods
terminating on or prior to the date of notice of redemption.
(d) If the Company gives a notice of redemption in respect of Series A
Debentures (which notice will be irrevocable), then by 10:00 a.m., New York City
time, on the redemption date, the Company shall deposit irrevocably with the
Trustee funds sufficient to pay the applicable Optional Redemption Price and
shall give irrevocable instructions and authority to pay such Optional
Redemption Price to the holders of the Series A Debentures. If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the
9
close of business on the redemption date interest shall cease to accrue on the
Series A Debentures called for redemption, such Series A Debentures shall no
longer be deemed to be outstanding and all rights of holders of such Series A
Debentures so called for redemption shall cease, except the right of the holders
of such Series A Debentures to receive the Optional Redemption Price but without
interest on such Optional Redemption Price.
(e) If any date fixed for redemption of any Series A Debentures is not
a Business Day, then payment of the Optional Redemption Price payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if such
Business Day falls in the next calender year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If the Company fails to repay the
Series A Debentures on maturity or the date fixed for redemption or if payment
of the Optional Redemption Price in respect of the Series A Debentures is
improperly withheld or refused and not paid by the Company, interest on such
Series A Debentures shall continue to accrue from the original redemption date
to the date of payment, in which case the actual payment date shall be
considered the date fixed for redemption for purposes of calculating the
Optional Redemption Price.
(f) In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Series A
Debentures during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Series A Debentures and ending at the
close of business on the date of such mailing and (ii) register the transfer of
or exchange any Series A Debentures so selected for redemption, in whole or in
part, except the unredeemed portion of any Series A Debentures being redeemed in
part.
SECTION 3.02. Optional Redemption upon the Occurrence of a Special
Event. If a Special Event shall occur and be continuing, the Company shall have
the right at any time to redeem the Series A Debentures in whole, but not in
part, for cash at the Optional Redemption Price within 90 days following the
occurrence of such Special Event.
SECTION 3.03. Partial Redemption. If the Series A Debentures are only
partially redeemed pursuant to this Article Three, the Series A Debentures will
be redeemed pro rata or by lot or by any other method utilized by the Trustee.
Notwithstanding the foregoing, if a partial redemption of the Series A
Debentures would result in the delisting of the Preferred Securities by any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, the Company shall not be permitted to
effect such partial redemption and will only redeem the Series A Debentures in
whole.
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ARTICLE FOUR
Extension of Interest Payment Period
SECTION 4.01. Option to Extend Interest Payment Period.
(a) So long as the Company is not in default in the payment of interest
on the Series A Debentures, the Company shall have the right to defer payments
of interest on the Series A Debentures by extending the interest payment period
of the Series A Debentures at any time and from time to time for up to 20
consecutive quarterly interest periods (each such period an "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
accrued and unpaid thereon (together with Compounded Interest and Additional
Interest, if any); provided that no Extended Interest Payment Period may extend
beyond the Maturity Date or redemption date of the Series A Debentures.
(b) During any Extended Interest Payment Period, the Company shall not
(i) declare or pay any dividend on, or redeem, purchase, acquire or make a
distribution or liquidation payment with respect to, any of its capital stock,
other than:
(A) dividends or distributions in shares of, or options,
warrants, rights to subscribe for or purchase shares of, the Company's common
stock;
(B) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto;
(C) as a result of a reclassification of the Company's capital
stock or the exchange or the conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock;
(D) the payment of accrued dividends and the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged; or
(E) purchases of the Company's common stock related to the
issuance of the Company's common stock or rights under any of the Company's
benefit plans for its directors, officers, employees, any of the Company's
dividend reinvestment plans or stock purchase plans, or any of the benefit plans
of any of the Company's Affiliates for such Affiliates' directors, officers or
employees;
(ii) make any payment of principal or of interest or premium, if any, on or
repay, repurchase or redeem any debt security of the Company that, ranks pari
passu with or junior in interest to the Series A Debentures; or (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiary of the Company (other than the Preferred
11
Securities Guarantee) if such guarantee ranks pari passu with or junior in
interest to the Series A Debentures.
(c) Prior to the termination of any Extended Interest Payment Period,
the Company may pay all or any portion of the interest accrued on the Series A
Debentures on any Interest Payment Date to holders of record on the regular
record date for such Interest Payment Date or from time to time further extend
such Extended Interest Payment Period; provided that such Extended Interest
Payment Period together with all such further extensions thereof shall not
exceed 20 consecutive quarterly interest periods. Upon the termination of any
Extended Interest Payment Period and the payment of all accrued and unpaid
interest, including any Additional Interest and Compounded Interest, the Company
may commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof. On the Interest Payment Date
occurring at the end of the Extended Interest Payment Period, the Company shall
pay all accrued and unpaid interest on the Series A Debentures, including any
Additional Interest and Compounded Interest, to the holders of the Series A
Debentures in whose names the Series A Debentures are registered in the
Debenture Register (regardless of who the holders of record may have been on
other dates during the Extended Interest Payment Period) on the record date for
such Interest Payment Date.
SECTION 4.02. Notice of Extension of Interest Payment Period.
(a) So long as the Property Trustee is the legal owner and sole holder
of record of the Series A Debentures, at the time the Company elects to begin an
Extended Interest Payment Period, the Company shall give both the Property
Trustee and the Trustee notice of its election to begin such Extended Interest
Payment Period one Business Day prior to the earlier of (i) the next succeeding
date on which Distributions (as defined in the Declaration of Trust) on the
Preferred Securities are payable or (ii) the date Litchfield Capital Trust I is
required to give notice of the record date or the date such Distributions are
payable to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities, but in any event not
less than one Business Day prior to such record date.
(b) If as a result of a Dissolution Event Series A Debentures have been
distributed to holders of Trust Securities, the Company shall give the holders
of the Series A Debentures and the Trustee notice of its election to begin an
Extended Interest Payment Period at least 10 Business Days prior to the earlier
of (i) the next succeeding Interest Payment Date or (ii) the date the Company is
required to give notice of the record or payment date of such related interest
payment to the New York Stock Exchange (if the Series A Debentures are then
listed thereon) or other applicable self-regulatory organization or to holders
of the Series A Debentures.
(c) The quarter in which any notice is given pursuant to Section 4.02
shall be counted as one of the quarters permitted in the maximum Extended
Interest Payment Period permitted under this Article Four.
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ARTICLE FIVE
Covenants Applicable to the Series A Debentures
SECTION 5.01. Prohibited Actions while Preferred Securities are
Outstanding. So long as any Preferred Securities issued by Litchfield Capital
Trust I remain outstanding, the Company shall not (i) declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its capital stock (other than (a) dividends or
distributions in shares of, or options, warrants, rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) as a result of a
reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (d) the payment of accrued
dividends and the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, or (e) purchases of the
Company's common stock related to the issuance of the Company's common stock or
rights under any of the Company's benefit plans for its directors, officers,
employees, any of the Company's dividend reinvestment plans or stock purchase
plans, or any of the benefit plans of any of the Company's Affiliates for such
Affiliates' directors, officers or employees), (ii) make any payment of
principal or of interest or premium, if any, on or repay, repurchase or redeem
any debt security of the Company that, ranks pari passu with or junior in
interest to the Series A Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company (other than pursuant to the Preferred Securities Guarantee) if
such guarantee ranks pari passu with or junior in interest to the Series A
Debentures, if at such time (x) the Company shall be in default with respect to
its Guarantee Payments (as defined in the Preferred Securities Guarantee) or
other payment obligations under the Preferred Securities Guarantee, (y) there
shall have occurred any Event of Default with respect to the Series A Debentures
or (z) the Company shall have given notice of its election to defer payments of
interest on the Series A Debentures by extending the interest payment period in
accordance with Article Four hereof.
SECTION 5.02. Listing on NASDAQ. In connection with the distribution of
the Series A Debentures to the holders of the Preferred Securities upon a
Dissolution Event, the Company will use its best efforts to list such Series A
Debentures on the Nasdaq National Market or on such other exchange or quotation
system as the Preferred Securities are then listed and traded.
SECTION 5.03. Compliance With the Declaration of Trust. The Company
covenants and agrees for the benefit of the holders of the Preferred Securities
to comply fully with all of its obligations and agreements under the Declaration
of Trust, including, without limitation, its obligations under Article 4
thereof.
13
SECTION 5.04. Covenants with Respect to Litchfield Capital Trust I.
Prior to the distribution of Series A Debentures to the holders of Preferred
Securities upon a Dissolution Event, the Company covenants and agrees for the
benefit of the holders of the Preferred Securities (i) to remain the sole direct
or indirect owner of all of the outstanding Common Securities and not to cause
or permit the Common Securities to be transferred except as permitted by the
Declaration of Trust, provided that any permitted successor of the Company under
the Indenture may succeed to the Company's ownership of the Common Securities,
and (ii) use reasonable efforts to cause Litchfield Capital Trust I to continue
to be treated as a grantor trust for United States federal income tax purposes,
except in connection with a Dissolution Event.
ARTICLE SIX
Form of Series A Debentures
SECTION 6.01. The Series A Debentures and the Trustee's Certificate of
Authentication to be endorsed thereon are to be substantially in the following
forms:
(FORM OF FACE OF DEBENTURE)
[IF THE NOTE IS TO BE A GLOBAL DEBENTURE, INSERT - This Debenture is a
Global Debenture within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depositary or a nominee of a Depositary. This
Debenture is exchangeable for Debentures registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative to
The Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]
14
No. $
[CUSIP NO. ____________]
LITCHFIELD FINANCIAL CORPORATION
__% JUNIOR SUBORDINATED DEBENTURE DUE 2029
LITCHFIELD FINANCIAL CORPORATION, a corporation duly organized and
existing under the laws of The Commonwealth of Massachusetts (herein referred to
as the "Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to _____________________________, or registered assigns, the principal sum of
___________________ Dollars on __________, 2029, provided, if a Tax Event
occurs, then the Company will have the right (a) prior to the dissolution of
Litchfield Capital Trust I, to shorten the Maturity Date of this series of
Debentures to the minimum extent required, but not earlier than _______________,
or (b) to direct the Property Trustee to dissolve Litchfield Capital Trust I (if
not previously dissolved) and shorten the Maturity Date of this series of
Debentures to the minimum extent required, but not earlier than _______________,
in each case such that in the opinion of counsel to the Company, experienced in
such matters, after shortening the Maturity Date, interest paid on this series
of Debentures will be deductible for federal income tax purposes, and to pay
interest on said principal sum from __________, 1999 or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing __________, 1999
at the rate of __% per annum plus Additional Interest and Compounded Interest,
if any, until the principal hereof shall have become due and payable, and on any
overdue principal and premium, if any.
So long as the Company is not in default in the payment of interest on
this series of Debentures, the Company shall have the right to defer payments of
interest on this series of Debentures by extending the interest payment period
of this series of Debentures at any time from time to time for up to 20
consecutive quarterly interest periods (each such period an "Extended Interest
Payment Period"), at the end of which period the Company shall pay all interest
accrued and unpaid thereon (together with Compounded Interest and Additional
Interest, if any); provided that no Extended Interest Payment Period may extend
beyond the Maturity Date or redemption date of this series of Debentures. Prior
to the termination of any Extended Interest Payment Period, the Company may pay
all or any portion of the interest accrued on this series of Debentures on any
Interest Payment Date to holders of record on the regular record date for such
Interest Payment Date or prepay at any time all or any portion of the interest
accrued during an Extension Period or from time to time further extend such
Extended Interest Payment Period; provided that such Extended Interest Payment
Period together with all such further extensions thereof shall not exceed 20
consecutive quarterly interest periods or extend beyond the Maturity Date or
redemption date of this series of Debentures. Upon the termination of any
Extended Interest Payment Period and the payment of all accrued and unpaid
interest, including any
15
Additional Interest and Compounded Interest, the Company may commence a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof. On the Interest Payment Date occurring at the end of
the Extended Interest Payment Period, the Company shall pay all accrued and
unpaid interest on this series of Debentures, including any Additional Interest
and Compounded Interest, to the holders of this series of Debentures in whose
names this series of Debentures are registered in the Debenture Register
(regardless of who the holders of record may have been on other dates during the
Extended Interest Payment Period) on the record date for such Interest Payment
Date.
The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly interest period for which interest is
computed, interest shall be computed on the basis of the actual number of days
elapsed per 90-day quarter. In the event that any date on which interest is
payable on this series of Debentures is not a Business Day, then payment of
interest payable on such date shall be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. The interest installment so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Debenture (or one or more
Predecessor Debentures, as defined in said Indenture) is registered at the close
of business on the regular record date for such interest installment, [IF
LITCHFIELD CAPITAL TRUST I OR ITS PROPERTY TRUSTEE IS THE HOLDER OF RECORD OF
THIS DEBENTURE -- which shall be the close of business on the Business Day next
preceding such Interest Payment Date, provided if the Preferred Securities of
Litchfield Capital Trust I are no longer in book-entry only form, the regular
record dates shall be the close of business on the fifteenth (15th) day of the
month in which such Interest Payment Date occurs] [IF PURSUANT TO THE PROVISIONS
OF SECTION 2.11(c) OF THE INDENTURE THIS series of Debentures IS NOT REPRESENTED
BY A GLOBAL DEBENTURE -- which shall be the close of business on the fifteenth
(15th) day of the month in which such Interest Payment Date occurs.] Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such regular record date, and
shall instead be paid to the person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered holders of this series
of Debentures not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange or quotation system on which the
Debentures of this series may be listed or traded, and upon such notice as may
be required by such exchange or quotation system, all as more fully provided in
Section 2.03 of the Indenture. The principal of and the interest on this
Debenture shall be payable at the Corporate Trust Office of the Trustee, in any
coin or currency of the United States of America which at the time of payment is
legal tender for payment of public and private debts;
16
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the registered holder at such addresses as shall
appear in the Debenture Register and that the payment of principal will only be
made upon the surrender of this Debenture to the Trustee. Notwithstanding the
foregoing, so long as the owner and record holder of this Debenture is the
Property Trustee (as defined in the Indenture), the payment of the principal of
and interest (including Additional Interest and Compounded Interest, if any) on
this Debenture will be made by the Company in immediately available funds on the
payment date therefor at such place and to the Property Account (as defined in
the Indenture) established and maintained by the Property Trustee pursuant to
the Declaration of Trust (as defined in the Indenture).
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Debt (as defined in the Indenture), and this
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes. Each holder hereof, by his
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated: LITCHFIELD FINANCIAL CORPORATION
By: /s/ R.A. Stratton
Name: Richard A. Stratton
Title: President and Chief Executive Officer
Attest:
By: /s/ Heather A. Sica
Name: Heather A. Sica
Title: Executive Vice President
17
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in the
within-mentioned Indenture.
as Trustee or as Authentication Agent
By:______________________________ By:______________________________
Authorized Signatory Authorized Signatory
18
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of __________, 1999 duly executed and delivered between
the Company and The Bank of New York, a New York banking corporation, as Trustee
(herein referred to as the "Trustee"), as supplemented by the Supplemental
Indenture No. 1 dated as of __________, 1999 between the Company and the Trustee
(said Indenture as so supplemented being hereinafter referred to as the
"Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Debentures, and, to the extent specifically set forth in the
Indenture, the holders of Senior Debt and Preferred Securities. By the terms of
the Indenture, the Debentures are issuable in series which may vary as to
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided. This series of Debentures is designated the __% Junior
Subordinated Debentures due 2029 and is limited in aggregate principal amount as
specified in said Supplemental Indenture No. 1.
Except as provided in the next paragraph, the Debentures of this series
shall not be redeemed by the Company prior to __________, 2004. The Company
shall have the right to redeem this Debenture at the option of the Company,
without premium or penalty, in whole or in part, at any time from time to time
on or after __________, 2004 (an "Optional Redemption"), upon not less than 30
nor more than 60 days' notice to the holders of the Debentures of this series,
at the redemption price of 100% of the principal amount of the Debentures,
together with any accrued but unpaid interest thereon, including Compounded
Interest and Additional Interest, if any, to, but excluding, the date of such
redemption (the "Optional Redemption Price").
If the Debentures of this series are redeemed on any Interest Payment
Date, accrued and unpaid interest shall be payable to holders of record on the
relevant record date.
The Company shall not redeem any Debentures of this series unless all
accrued and unpaid interest thereon, including Compounded Interest and
Additional Interest, if any, has been paid for all quarterly interest periods
terminating on or prior to the date of notice of redemption.
If a Tax Event or an Investment Company Event (each, a "Special Event")
shall occur or be continuing, the Company shall have the right at any time to
redeem the Debentures of this series in whole, but not in part, for cash at the
Optional Redemption Price within 90 days following the occurrence of such
Special Event.
"Tax Event" means that the Company and the Regular Trustees shall have
received an opinion of counsel experienced in such matters to the effect that on
or after __________, 1999 as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
19
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement by any
legislative body, court, governmental agency or regulatory authority that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after __________, 1999, there is more than an insubstantial risk that (i)
Litchfield Capital Trust I is, or will be within 90 days of the date thereof,
subject to federal income tax with respect to income accrued or received on the
Debentures of this series, (ii) Litchfield Capital Trust I is, or will be within
90 days of the date thereof, subject to more than a de minimis amount of taxes,
duties or other governmental charges or (iii) interest payable by the Company to
Litchfield Capital Trust I on the Debentures of this series is not, or within 90
days of the date thereof will not be, deductible by the Company for federal
income tax purposes;
"Investment Company Event" means that the Company and the Regular
Trustees shall have received an opinion of counsel experienced in practice under
the Investment Company Act that as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in Investment Company Act Law"), there is more than an insubstantial
risk that Litchfield Capital Trust I is or will be considered an "investment
company" which is required to be registered under the Investment Company Act,
which Change in Investment Company Act Law becomes effective on or after
__________, 1999.
If the Debentures of this series are only partially redeemed by the
Company pursuant to an Optional Redemption, the Debentures shall be redeemed pro
rata or by lot or in some other equitable manner determined by the Trustee;
provided if, at the time of redemption, the Debentures of this series are
registered as a Global Debenture, the Depository shall determine the principal
amount of such Debentures of this series held by each holder of Debentures to be
redeemed in accordance with its customary procedures. Notwithstanding the
foregoing, if a partial redemption of the Debentures of this series would result
in the delisting of the Preferred Securities by any national securities exchange
or other organization on which the Preferred Securities are then listed or
traded, the Company shall not be permitted to effect such partial redemption and
will only redeem the Debentures of this series in whole.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for unredeemed portion hereof will be
issued in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures of this
series may be declared, and upon such
20
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture (and, if this Debenture is held as a
trust asset of Litchfield Capital Trust I, such consent of holders of the
Preferred Securities and the Common Securities as may be required under the
Declaration of Trust), to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Debentures; provided, however, that
no such supplemental indenture shall (i) extend the fixed maturity of the
Debentures of this series, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce any premium
payable upon the redemption thereof, without the consent of the holder of each
Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Debenture (and, if this Debenture is
held as a trust asset of Litchfield Capital Trust I, such consent of the holders
of the Preferred Securities and the Common Securities as may be required under
the Declaration of Trust) then outstanding and affected thereby. The Indenture
also contains provisions permitting the holders of a majority in aggregate
principal amount of the Debentures of a series at the time Outstanding affected
thereby (subject, in the case of a Debenture held as a trust asset of Litchfield
Capital Trust I and with respect to which a Securities Exchange has not
theretofore occurred, to such consent of holders of Preferred Securities and
Common Securities as may be required under the Declaration of Trust), on behalf
of the holders of the Debentures of such series, to waive any past default in
the performance of any of the covenants contained in the Indenture, or
established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debentures of such series as and when the same
shall become due by the terms of the Debentures of such series otherwise than by
acceleration (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal and any premium has been
deposited with the Trustee), or a call for redemption of the Debentures of such
series. Any such consent or waiver by the registered holder of this Debenture
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Debenture and of
any Debenture issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Debenture.
Subject to Section 13.11 of the Indenture, no reference herein to the
Indenture (other than such Section) and no provision of this Debenture or of the
Indenture shall alter or impair the
21
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Debenture at the time and place at the rate
and in the money herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register, upon surrender of this Debenture for registration of
transfer at the Corporate Trust Office of the Trustee accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Debentures of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Debenture Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, shareholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
[If certificated Debentures -- The Debentures of this series are
issuable only in registered form without coupons in denominations of $10 and any
integral multiple thereto.] [If Global Debenture -- This Global Debenture is
exchangeable for Debentures in definitive form under certain limited
circumstances set forth in the Indenture. Debentures of this series so issued
are issuable only in registered form without coupons in denominations of $10 or
any integral multiple thereof.] As provided in the Indenture and subject to
certain limitations [If Global Debenture -- herein and] therein set forth,
Debentures of this series [If Global Debenture -- so issued] are exchangeable
for a like aggregate principal amount of Debentures of this series of a
different authorized denomination, as requested by the holder surrendering the
same.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
22
The Company and, by its acceptance of this Debenture or a beneficial
interest therein, the holder of, and any Person that acquires a beneficial
interest in, this Debenture agree that for United States federal, state and
local tax purposes it is intended that this Debenture constitute indebtedness.
THE INDENTURE AND THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
ARTICLE SEVEN
Miscellaneous Provisions
SECTION 7.01. The Indenture, as supplemented by this Supplemental
Indenture, is in all respects ratified and confirmed. This Supplemental
Indenture No. 1 shall be deemed part of the Indenture in the manner and to
the extent herein and therein provided.
SECTION 7.02. The recitals herein contained are made by the Company
and not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity
or sufficiency of this Supplemental Indenture No. 1.
SECTION 7.03. This Supplemental Indenture No. 1 may be executed in any
number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 7.04. THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH SERIES A
DEBENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE
OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
Attest: LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica By: /s/ R.A. Stratton
Name: Heather A. Sica Name: Richard A. Stratton
Title: Executive Vice President Title: President and Chief
Executive Officer
23
Attest: THE BANK OF NEW YORK, as Trustee
By: /s/ Robert A. Massimillo By: /s/ Michael Culhane
Name: Robert A. Massimillo Name: Michael Culhane
Title: Assistant Vice President Title: Vice President
HWD2: 554670-1
24
Exhibit 4.14
AMENDED AND RESTATED DECLARATION OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
DATED AS OF MAY 19, 1999
TABLE OF CONTENTS
(This Table of Contents does not constitute part of the Amended and
Restated Declaration of Trust and should not have any bearing upon the
interpretation of any of its terms or provisions.)
<TABLE>
<CAPTION>
Page
ARTICLE 1
Definitions
<S> <C>
Section 1.01. Definitions............................................................. 2
Affiliate......................................................................... 2
Book Entry Interest............................................................... 2
Business Day...................................................................... 2
Business Trust Act................................................................ 2
Certificate....................................................................... 2
Certificate of Trust.............................................................. 3
Clearing Agency................................................................... 3
Clearing Agency Participant....................................................... 3
Closing Date...................................................................... 3
Code.............................................................................. 3
Commission........................................................................ 3
Common Securities................................................................. 3
Common Security Certificate....................................................... 3
Covered Person.................................................................... 3
Creditor.......................................................................... 3
Debenture Trustee................................................................. 3
Debentures........................................................................ 3
Definitive Preferred Security Certificates........................................ 3
Delaware Trustee.................................................................. 4
Depositary Agreement.............................................................. 4
Distribution...................................................................... 4
DTC............................................................................... 4
Event of Default.................................................................. 4
Exchange.......................................................................... 4
Exchange Act...................................................................... 4
Fiscal Year....................................................................... 4
Global Certificate................................................................ 4
Holder............................................................................ 4
Holder Direct Action.............................................................. 4
Litchfield Financial.............................................................. 4
Sponsor........................................................................... 4
Indemnified Person................................................................ 4
Indenture......................................................................... 4
Indenture Event of Default........................................................ 4
Investment Company................................................................ 5
Investment Company Act............................................................ 5
Legal Action...................................................................... 5
Liquidation Distribution.......................................................... 5
List of Holders................................................................... 5
Majority in liquidation amount of the Securities.................................. 5
NASD.............................................................................. 5
Nasdaq............................................................................ 5
1933 Act Registration Statement................................................... 5
1934 Act Registration Statement................................................... 5
Officers' Certificate............................................................. 5
Opinion of Counsel................................................................ 6
Original Declaration.............................................................. 6
Paying Agent...................................................................... 6
Payment Amount.................................................................... 6
Person............................................................................ 6
Preferred Guarantee............................................................... 6
Preferred Securities.............................................................. 6
Preferred Security Beneficial Owner............................................... 6
Preferred Security Certificate.................................................... 6
Property Trustee.................................................................. 7
Property Account.................................................................. 7
Quorum............................................................................ 7
Regular Trustee................................................................... 7
Related Party..................................................................... 7
Resignation Request............................................................... 7
Responsible Officer............................................................... 7
Rule 3a-7......................................................................... 7
Securities........................................................................ 7
Securities Act.................................................................... 7
Special Event..................................................................... 7
Successor Delaware Trustee........................................................ 7
Successor Entity.................................................................. 7
Successor Property Trustee........................................................ 7
Successor Securities.............................................................. 7
Super Majority.................................................................... 8
Supplemental Indenture............................................................ 8
10% in liquidation amount of the Securities....................................... 8
Treasury Regulations.............................................................. 8
Trust............................................................................. 8
Trustee........................................................................... 8
Trustees.......................................................................... 8
Trust Indenture Act............................................................... 8
Underwriting Agreement............................................................ 8
ARTICLE 2
Trust Indenture Act
Section 2.01. Trust Indenture Act; Application......................................... 8
Section 2.02. Lists of Holders of Preferred Securities................................. 9
Section 2.03. Reports by the Property Trustee.......................................... 9
Section 2.04. Periodic Reports to the Property Trustee................................. 10
Section 2.05. Evidence of Compliance with Conditions Precedent......................... 10
Section 2.06. Events of Default; Waiver................................................ 10
Section 2.07. Disclosure of Information................................................ 12
ARTICLE 3
Organization
Section 3.01. Name..................................................................... 12
Section 3.02. Office................................................................... 12
Section 3.03. Issuance of the Securities............................................... 12
Section 3.04. Purchase of Debentures................................................... 13
Section 3.05. Purpose.................................................................. 13
Section 3.06. Authority................................................................ 14
Section 3.07. Title to Property of the Trust........................................... 14
Section 3.08. Powers and Duties of the Regular Trustees................................ 14
Section 3.09. Prohibition of Actions by the Trust and the Trustees..................... 17
Section 3.10. Powers and Duties of the Property Trustee................................ 18
Section 3.11. Delaware Trustee......................................................... 21
Section 3.12. Certain Rights and Duties of the Property Trustee........................ 21
Section 3.13. Registration Statement and Related Matters............................... 25
Section 3.14. Filing of Amendments to Certificate of Trust............................. 26
Section 3.15. Execution of Documents by the Regular Trustees........................... 26
Section 3.16. Trustees Not Responsible for Recitals or Issuance of
Securities............................................................... 26
Section 3.17. Duration of the Trust.................................................... 26
Section 3.18. Mergers.................................................................. 26
Section 3.19. Property Trustee May File Proofs of Claim................................ 38
ARTICLE 4
Sponsor
Section 4.01. Purchase of Common Securities by the Sponsor............................. 29
Section 4.02. Expenses................................................................. 29
ARTICLE 5
Trustees
Section 5.01. Number of Trustees; Qualifications....................................... 30
Section 5.02. Appointment, Removal and Resignation of the Trustees..................... 32
Section 5.03. Vacancies among the Trustees............................................. 33
Section 5.04. Effect of Vacancies...................................................... 33
Section 5.05. Meetings................................................................. 34
Section 5.06. Delegation of Power...................................................... 34
Section 5.07. Merger, Conversion, Consolidation or Succession to
Business................................................................. 34
ARTICLE 6
Distributions
Section 6.01. Distributions............................................................ 35
ARTICLE 7
Issuance of the Securities
Section 7.01. General Provisions Regarding the Securities.............................. 35
ARTICLE 8
Dissolution of the Trust
Section 8.01. Dissolution of the Trust................................................. 37
ARTICLE 9
Transfer of Interests
Section 9.01. Transfer of Securities................................................... 37
Section 9.02. Transfer of Certificates................................................. 38
Section 9.03. Deemed Security Holders.................................................. 38
Section 9.04. Book Entry Interests..................................................... 38
Section 9.05. Notices to Holders of Certificates....................................... 39
Section 9.06. Appointment of Successor Clearing Agency................................. 39
Section 9.07. Definitive Preferred Securities Certificates............................. 40
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates........................ 40
ARTICLE 10
Limitation of Liability; Indemnification
Section 10.01. Exculpation............................................................. 40
Section 10.02. Indemnification......................................................... 41
Section 10.03. Outside Business........................................................ 41
ARTICLE 11
Accounting
Section 11.01. Fiscal Year............................................................. 42
Section 11.02. Certain Accounting Matters.............................................. 42
Section 11.03. Banking................................................................. 43
Section 11.04. Withholding............................................................. 43
ARTICLE 12
Amendments and Meetings
Section 12.01. Amendments.............................................................. 43
Section 12.02. Meetings of the Holders of Securities; Action by
Written Consent......................................................... 44
ARTICLE 13
Representations of the Property Trustee and the Delaware Trustee
Section 13.01. Representations and Warranties of the Property
Trustee................................................................. 46
Section 13.02. Representations and Warranties of the Delaware
Trustee................................................................. 46
ARTICLE 14
Miscellaneous
Section 14.01. Notices................................................................. 47
Section 14.02. Undertaking for Costs................................................... 48
Section 14.03. Governing Law........................................................... 49
Section 14.04. Headings................................................................ 49
Section 14.05. Partial Enforceability.................................................. 49
Section 14.06. Counterparts............................................................ 49
Section 14.07. Intention of the Parties................................................ 49
Section 14.08. Successors and Assigns.................................................. 49
Section 14.09. No Recourse............................................................. 49
SIGNATURES AND SEALS
EXHIBIT A: CERTIFICATE OF TRUST
EXHIBIT B: TERMS OF THE PREFERRED SECURITIES
EXHIBIT C: TERMS OF THE COMMON SECURITIES
</TABLE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated and
effective as of May 19, 1999, by John J. Malloy, an individual, Heather A. Sica,
an individual, and Ronald E. Rabidou, an individual, as Regular Trustees (the
"Regular Trustees"), The Bank of New York, a New York banking corporation, as
Property Trustee (the "Property Trustee") and The Bank of New York (Delaware), a
Delaware banking corporation, as Delaware Trustee (the "Delaware Trustee")
(together with all other Persons from time to time duly appointed and serving as
trustees in accordance with the provisions of this Declaration, the "Trustees"),
Litchfield Financial Corporation, a Massachusetts corporation, as trust sponsor
("Litchfield Financial" or the "Sponsor"), and by the holders, from time to
time, of undivided beneficial interests in the assets of the Trust to be issued
pursuant to this Declaration.
WHEREAS, the Sponsor and certain of the Trustees entered into a Declaration of
Trust dated as of May 19, 1999 (the "Original Declaration") in order to
establish Litchfield Capital Trust I, a statutory business trust (the "Trust"),
under the Business Trust Act (as hereinafter defined);
WHEREAS, the Certificate of Trust (the "Certificate of Trust") of the Trust was
filed with the office of the Secretary of State of the State of Delaware on
April 12, 1999; and
WHEREAS, the Trustees and the Sponsor desire to continue the Trust pursuant to
the Business Trust Act for the purpose of, as described more fully in Sections
303 and 304 hereof, (i) issuing and selling Preferred Securities (as hereinafter
defined) representing preferred undivided beneficial interests in the assets of
the Trust for cash and investing the proceeds thereof in Debentures (as
hereinafter defined) of Litchfield Financial issued under the Indenture (as
hereinafter defined) to be held as assets of the Trust and (ii) issuing and
selling Common Securities (as hereinafter defined) representing common undivided
beneficial interests in the assets of the Trust to Litchfield Financial in
exchange for cash and investing the proceeds thereof in additional Debentures
issued under the Indenture to be held as assets of the Trust;
NOW, THEREFORE, it being the intention of the parties hereto that the Trust
constitute a business trust under the Business Trust Act, that the Original
Declaration be amended and restated in its entirety as provided herein and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all Debentures referred to in clauses (i) and (ii) of the
previous paragraph purchased by the Trust will be held for the benefit of the
Holders (as hereinafter defined) from time to time, of the Certificates (as
hereinafter defined) representing undivided beneficial interests in the assets
of the Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE 1
Definitions
Section 1.01. Definitions.
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Amended and Restated Declaration of Trust (including Exhibits A, B and C
hereto (the "Exhibits")) as modified, supplemented or amended from time
to time;
(d) all references in this Declaration to Articles, Sections and Exhibits
are to Articles and Sections of and Exhibits to this Declaration unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Book Entry Interest" means a beneficial interest in a Global Certificate
registered in the name of a Clearing Agency or a nominee thereof,
ownership and transfers of which shall be maintained and made through
book entries by such Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the Borough of Manhattan, The City and
State of New York or Boston, Massachusetts are authorized or required by
law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code (S) 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Certificate" means a Common Security Certificate or a Preferred Security
Certificate.
2
"Certificate of Trust" has the meaning set forth in the second WHEREAS
clause above.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository
for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and
which shall undertake to effect book entry transfers and pledges of the
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means the Closing Date as specified in the Underwriting
Agreement, which date is also the date of execution and delivery of this
Declaration.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation. A reference to a specific section
(Sec.) of the Code refers not only to such specific section but also to
any corresponding provision of any Federal tax statute enacted after the
date of this Declaration, as such specific section or corresponding
provision is in effect on the date of application of the provisions of
this Declaration containing such reference.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form
of Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder, partner,
member, representative, employee or agent of the Trust or of any of its
Affiliates, (ii) any officer, director, shareholder, employee,
representative or agent of Litchfield Financial or of any of its
Affiliates and (iii) the Holders from time to time of the Securities.
"Creditor" has the meaning specified in Section 4.02(c).
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture until a successor is
appointed thereunder and thereafter means such successor trustee.
"Debentures" means the series of junior subordinated debentures issued by
Litchfield Financial under the Indenture to the Property Trustee and
entitled the "10% Series A Junior Subordinated Debentures due 2029."
"Definitive Preferred Security Certificates" has the meaning set forth
in Section 9.04.
3
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(3).
"Depositary Agreement" means the agreement among the Trust, the Property
Trustee and DTC dated as of the Closing Date, as the same may be amended
or supplemented from time to time.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.01.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Securities means that an Indenture
Event of Default has occurred and is continuing with respect to the
Debentures.
"Exchange" has the meaning specified in Section 3.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"First Closing Date" means the First Closing Date as specified in the
Underwriting Agreement.
"Global Certificate" has the meaning set forth in Section 9.04.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Holder Direct Action" has the meaning specified in Section 3.10(e).
"Indemnified Person" means any Trustee, any Affiliate of any Trustee, any
Paying Agent, any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee or Paying Agent, or
any employee or agent of the Trust or of any of its Affiliates.
"Indenture" means the Junior Subordinated Indenture dated as of May 19,
1999, between Litchfield Financial and the Debenture Trustee as
supplemented by the Supplemental Indenture No. 1 thereto dated as of May
19, 1999, pursuant to which the Debentures are to be issued.
"Indenture Event of Default" means that an event or condition defined as
an "Event of Default" with respect to the Debentures under Section
6.01(a) of the Indenture has occurred and is continuing.
4
"Investment Company" means an "investment company" as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Legal Action" has the meaning specified in Section 3.08(g).
"Liquidation Distribution" has the meaning set forth in Exhibits B and C
hereto establishing the terms of the Securities.
"List of Holders" has the meaning specified in Section 2.02(a).
"Litchfield Financial" or " Sponsor" means Litchfield Financial
Corporation, a Massachusetts corporation, or any successor entity
resulting from any merger, consolidation, amalgamation or other business
combination, in its capacity as sponsor of the Trust.
"Majority in liquidation amount of the Securities" means, except as
otherwise required by the Trust Indenture Act and except as provided in
the penultimate paragraph of paragraph 6 of Exhibit B hereto, Holder(s)
of outstanding Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or
Common Securities voting separately as a class, who are the record owners
of a relevant class of Securities whose liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise,
plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) represents more than 50% of the
liquidation amount of all outstanding Securities of such class.
"NASD" has the meaning specified in Section 3.13.
"Nasdaq" has the meaning specified in Section 3.13.
"1933 Act Registration Statement" has the meaning specified in Section
3.13.
"1934 Act Registration Statement" has the meaning specified in Section
3.13.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President,
and by the Treasurer, an Associate Treasurer, an Assistant Treasurer, the
Comptroller, the Secretary or an Assistant Secretary of the Sponsor, and
delivered to the appropriate Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 2.04 shall be the
principal executive, financial or accounting officer of the Sponsor. Any
Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Declaration shall include:
5
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Sponsor, which may be
an employee of the Sponsor but not an employee of the Trust or the
Property Trustee, and who shall be reasonably acceptable to the Property
Trustee. Any Opinion of Counsel pertaining to Federal income tax matters
may rely on published rulings of the Internal Revenue Service.
"Option Closing Date" means the Option Closing Date as specified in the
Underwriting Agreement.
"Original Declaration" has the meaning set forth in the first WHEREAS
clause above.
"Paying Agent" has the meaning specified in Section 3.10(i).
"Payment Amount" has the meaning specified in Section 6.01.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated association, government
or any agency or political subdivision thereof, or any other entity of
whatever nature.
"Preferred Guarantee" means the Guarantee Agreement dated as of May 19,
1999, of Litchfield Financial in respect of the Preferred Securities.
"Preferred Securities" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in fully
registered form representing a Preferred Security substantially in the
form of Annex I to Exhibit B.
6
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.01(c) and having the duties set forth for the
Property Trustee herein.
"Property Account" has the meaning specified in Section 3.10(c)(i).
"Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property Trustee and
the Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary of
Litchfield Financial or any other Person which owns, directly or
indirectly, 100% of the outstanding voting securities of Litchfield
Financial.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, when used with respect to the Property
Trustee, any officer within the corporate trust department of the
Property Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any other
officer of the Property Trustee who customarily performs functions
similar to those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of such Person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration
of this Declaration.
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any
successor rule thereunder.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Securities
as set forth in paragraph 4 of Exhibits B and C hereto.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Entity" has the meaning specified in Section 3.18(b)(i).
"Successor Property Trustee" has the meaning specified in Section
5.02(b)(i).
"Successor Securities" has the meaning specified in Section 3.18(b)(i)(B).
7
"Super Majority" has the meaning specified in Section 2.06(a)(ii).
"Supplemental Indenture" means the Supplemental Indenture No. 1 dated as
of May 19, 1999, between Litchfield Financial and the Debenture Trustee,
pursuant to which the Debentures are to be issued.
"10% in liquidation amount of the Securities" means, except as otherwise
required by the Trust Indenture Act and except as provided in the
penultimate paragraph of paragraph 6 of Exhibit B hereto, Holder(s) of
outstanding Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or
Common Securities, voting separately as a class, who are the record
owners of a relevant class of Securities whose liquidation amount
(including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accumulated and unpaid Distributions to
the date upon which the voting percentages are determined) represents 10%
or more of the liquidation amount of all outstanding Securities of such
class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Trust" has the meaning set forth in the first WHEREAS clause above.
"Trustee" or " Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office
in accordance with the terms hereof, and all other Persons who may from
time to time be duly appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and references herein to a Trustee
or the Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement dated as of May
13, 1999, among the Trust, the Sponsor and Tucker Anthony Incorporated,
as representatives of the several underwriters named therein.
ARTICLE 2
Trust Indenture Act
Section 2.01. Trust Indenture Act; Application.
8
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by (S)(S) 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control;
(c) the Property Trustee, to the extent permitted by applicable law
and/or the rules and regulations of the Commission, shall be the only
Trustee which is a trustee for the purposes of the Trust Indenture Act;
and
(d) the application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
Section 2.02. Lists of Holders of Preferred Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Property Trustee unless the Property Trustee is
registrar for the Securities, (i) within 14 days after each record date
for payment of Distributions, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the Holders
("List of Holders") as of such record date, provided that neither the
Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time that the List of
Holders does not differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Regular Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust
of a written request for a List of Holders as of a date no more than 14
days before such List of Holders is given to the Property Trustee. The
Property Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if acting in such
capacity) provided that the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under (S)(S)
310(b), 311 and 312(b) of the Trust Indenture Act.
Section 2.03. Reports by the Property Trustee.
Within 60 days after January 15 of each year, the Property Trustee shall
provide to the Holders of the Securities such reports as are required by
(S) 313 of the Trust Indenture Act, if any, in the form, in the manner
and at the times provided by (S) 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of (S) 313(d) of
the Trust Indenture Act. A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Property Trustee with the
Company, with each stock exchange upon which any Preferred
9
Securities are listed (if so listed) and also with the Commission. The
Company agrees to notify the Property Trustee when any Preferred
Securities become listed on any stock exchange and of any delisting
thereof.
Section 2.04. Periodic Reports to the Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee, the Commission and the Holders of the
Securities, as applicable, such documents, reports and information as
required by (S) 314(a)(1)-(3) (if any) of the Trust Indenture Act and the
compliance certificates required by (S) 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the
manner and at the times required by (S) 314(a)(4) and (c) of the Trust
Indenture Act (provided that any certificate to be provided pursuant to
(S) 314(a)(4) of the Trust Indenture Act shall be provided within 120
days of the end of each Fiscal Year). Delivery of such reports,
information and documents to the Property Trustee is for informational
purposes only and the Property Trustee's receipt of such shall not
constitute constructive notice of any information contained therein,
including the Company's compliance with any of its covenants hereunder
(as to which the Property Trustee is entitled to rely exclusively on
Officers' Certificates).
Section 2.05. Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration which relate to any
of the matters set forth in (S) 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to (S)
314(c) may be given in the form of an Officers' Certificate.
Section 2.06. Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, provided that, if the underlying Event
of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default under this
Declaration shall also not be waivable; or
(ii) requires the consent or vote of the holders of greater than a
majority in aggregate principal amount of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
this Declaration may only be waived by the vote of the Holders of at
least the proportion in aggregate liquidation amount of the Preferred
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
10
The foregoing provisions of this Section 2.06(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event
of Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of the
Common Securities are deemed to have waived such Event of Default under
the Declaration as provided above in Section 2.06(a) or below in this
Section 2.06(b), the Event of Default under this Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have
waived such Event of Default under this Declaration as provided above in
Section 2.06(a) or below in this Section 2.06(b), the Event of Default
under this Declaration may only be waived by the vote of the Holders of
at least the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding;
provided, further, that the Holders of Common Securities will be deemed to have
waived any such Event of Default and all Events of Defaults with respect to the
Common Securities and their consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.06(b) shall be in lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. In the event that any Event
of Default with respect to the Preferred Securities is waived by the Holders of
Preferred Securities as provided in the Declaration, the Holders of Common
Securities agree that such waiver shall also constitute the waiver of such Event
of Default with respect to the Common Securities for all purposes under the
Declaration without any further
11
act, vote or consent of the Holders of the Common Securities. Subject to the
foregoing provisions of this Section 2.06(b), upon waiver, any such default
shall cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default with respect to the Common Securities or
impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee, at the direction of the Holders of Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.06(c) shall be in
lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S)
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from
this Declaration and the Securities, as permitted by the Trust Indenture
Act.
Section 2.07. Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Securities in accordance with (S) 312 of the Trust
Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or
any law hereafter enacted which does not specifically refer to (S) 312 of
the Trust Indenture Act, nor shall the Property Trustee be held
accountable by reason of mailing any material pursuant to a request made
under (S) 312(b) of the Trust Indenture Act.
ARTICLE 3
Organization
Section 3.01. Name.
The Trust continued by this Declaration is named "Litchfield Capital
Trust I" as such name may be modified from time to time by the Regular
Trustees following written notice to the Holders of the Securities. The
Trust's activities may be conducted under the name of the Trust or any
other name deemed advisable by the Regular Trustees.
Section 3.02. Office.
The address of the principal office of the Trust is c/o Litchfield
Financial Corporation, 430 Main Street, Williamstown, Massachusetts
01267. Upon ten days' written notice to the Holders, the Regular Trustees
may change the location of the Trust's principal office.
Section 3.03. Issuance of the Securities.
12
The Sponsor, on behalf of the Trust and pursuant to the Original
Declaration, executed and delivered the Underwriting Agreement.
On the First Closing Date and contemporaneously with the execution and
delivery of this Declaration, the Regular Trustees, on behalf of the
Trust, shall execute and deliver (i) one or more Global Certificates,
registered in the name of the nominee of the initial Clearing Agency as
specified in Section 9.04 for the benefit of the underwriters named in
the Underwriting Agreement, in an aggregate amount of 2,500,000 Preferred
Securities having an aggregate liquidation amount of $25,000,000, against
receipt of the aggregate purchase price of such Preferred Securities of
$25,000,000, and (ii) to the Sponsor, one or more Common Securities
Certificates, registered in the name of the Sponsor, in an aggregate
amount of 71,320 Common Securities having an aggregate liquidation amount
of $773,200, against receipt of the aggregate purchase price of such
Common Securities of $773,200.
On the Option Closing Date, if any, the Regular Trustees, on behalf of
the Trust, shall execute and deliver (i) one or more Global Certificates,
registered in the name of the nominee of the initial Clearing Agency as
specified in Section 9.04 for the benefit of the underwriters named in
the Underwiting Agreement, in an aggregate amount of up to 375,000
Preferred Securities having an aggregate liquidation amount of up to
$3,750,000, against receipt of the aggregate purchase price of such
Preferred Securities of up to $3,750,000 plus accrued interest from the
First Closing Date, and (ii) to the Sponsor, one or more Common
Securities Certificates, registered in the name of the Sponsor, in an
aggregate amount of up to 11,598 Common Securities having an aggregate
liquidation amount of up to $115,980, against receipt of the aggregate
purchase price of such Common Securities of up to $115,980.
Section 3.04. Purchase of Debentures.
On the First Closing Date and contemporaneously with the execution and
delivery of this Declaration, the Regular Trustees, on behalf of the
Trust, shall purchase from the Sponsor with the proceeds received by the
Trust from the sale of the Securities on such date pursuant to Section
3.03, at a purchase price of 100% of the principal amount thereof,
Debentures, registered in the name of the Property Trustee and having an
aggregate principal amount equal to $25,773,200, and, in satisfaction of
the purchase price for such Debentures, the Regular Trustee, on behalf of
the Trust, shall deliver or cause to be delivered to the Sponsor the sum
of $25,773,200.
On the Option Closing Date, if any, the Regular Trustees, on behalf of
the Trust, shall purchase from the Sponsor with the proceeds received by
the Trust from the sale of the Securities on such date pursuant to
Section 3.03, at a purchase price of 100% of the principal amount thereof
plus accrued interest from the First Closing Date, Debentures, registered
in the name of the Property Trustee and having an aggregate principal
amount equal to up to $3,750,000, and, in satisfaction of the purchase
price for such Debentures, the Regular Trustee, on behalf of the Trust,
shall deliver or cause to be delivered to the Sponsor the sum of up to
$3,750,000.
Section 3.05. Purpose.
The exclusive purposes and functions of the Trust are: (a)(i) to issue
and sell Preferred Securities for cash and use the proceeds of such sales
to acquire from Litchfield Financial Debentures issued under the
Indenture having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities so issued and sold; (ii)
to enter into such agreements and arrangements as may be necessary in
connection with the sale of Preferred Securities to the initial
purchasers thereof (including the Underwriting Agreement) and to take all
action, and exercise such discretion, as may be necessary or desirable in
connection therewith and to file such registration statements or make
such other filings under the Securities Act, the Exchange Act or state
securities or "Blue Sky" laws as may be necessary or desirable in
connection therewith and the issuance of the Preferred Securities; and
(iii) to issue and sell Common Securities to Litchfield Financial for
cash and use the proceeds of such sale to purchase as trust assets an
equal aggregate principal amount of Debentures issued under the
Indenture; and (b) except as otherwise limited herein, to engage in only
those other activities necessary, convenient or incidental thereto,
including such other activities specifically authorized in this
Declaration. The Trust shall not borrow money, issue debt or reinvest
proceeds derived from investments, mortgage or pledge any of its assets
or at any time while the Securities are outstanding, otherwise undertake
(or permit to be undertaken) any activity that would result in or cause
the Trust not to be classified for United States Federal income tax
purposes as a grantor trust.
13
Section 3.06. Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In
dealing with the Trustees acting on behalf of the Trust, no Person shall
be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively
on the power and authority of the Trustees as set forth in this
Declaration.
Section 3.07. Title to Property of the Trust.
Except as provided in Section 3.10 with respect to the Debentures and the
Property Account or unless otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The
Holders shall not have legal title to any part of the assets of the
Trust, but shall have undivided beneficial interests in the assets of the
Trust.
Section 3.08. Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, authority and duty
to cause the Trust, and shall cause the Trust, to engage in the following
activities:
(a) to issue Preferred Securities and Common Securities, in each case in
accordance with this Declaration; provided, however, that the Trust may
issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided further, that there shall
be no interests in the Trust other than the Securities and the issuance
of Securities shall be limited to a one-time, simultaneous issuance of
both Preferred Securities and Common Securities on the Closing Date;
(b) in connection with the issuance of the Preferred Securities, at the
direction of the Sponsor, to effect or cause to be effected the filings,
and to execute or cause to be executed, the documents, set forth in
Section 3.13 and to execute, deliver and perform on behalf of the Trust
the Depositary Agreement;
(c) to acquire as trust assets Debentures with the proceeds of the sale
of the Preferred Securities and the Common Securities; provided, however,
that the Regular Trustees shall cause legal title to all of the
Debentures to be vested in, and the Debentures to be held of record
14
in the name of, the Property Trustee for the benefit of the Holders of
the Preferred Securities and the Common Securities;
(d) if and to the extent that the Sponsor on behalf of the Trust has not
already done so, to cause the Trust to enter into the Underwriting
Agreement and such other agreements and arrangements as may be necessary
or desirable in connection with the sale of the Preferred Securities to
the initial purchasers thereof and the consummation thereof, and to take
all action, and exercise all discretion, as may be necessary or desirable
in connection with the consummation thereof;
(e) to give the Sponsor and the Property Trustee prompt written notice of
the occurrence of a Special Event; provided that the Regular Trustees
shall consult with the Sponsor and the Property Trustee before taking or
refraining to take any Ministerial Action in relation to a Special Event;
(f) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of (S) 316(c) of the Trust Indenture Act and with respect to
Distributions, voting rights, redemptions, and exchanges, and to issue
relevant notices to Holders of the Preferred Securities and Common
Securities as to such actions and applicable record dates;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.10(e), the Property
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate to the Property Trustee required by (S)
314(a)(4) of the Trust Indenture Act, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses which are necessary or incidental to carrying out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities, the Regular Trustees hereby initially
appointing the Property Trustee for such purposes;
(m) to take all actions and perform such duties as may be required of the
Regular Trustee pursuant to the terms of the Securities set forth in
Exhibits B and C hereto;
15
(n) to take all actions which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of
the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Securities or to enable the Trust to effect the purposes for which
the Trust has been created;
(o) to take all actions, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion
to be necessary or desirable in carrying out the purposes of the Trust
and the activities of the Trust as set out in this Section 3.08,
including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States Federal income
tax purposes as a grantor trust; and
(iii) cooperating with the Sponsor to ensure that the Debentures will be
treated as indebtedness of the Sponsor for United States Federal income
tax purposes;
(p) to take all actions necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of
the Trust, and to comply with any requirements imposed by any taxing
authority on holders of instruments treated as indebtedness for United
States Federal income tax purposes;
(q) subject to the requirements of Rule 3a-7 (if the Trust is excluded
from the definition of an Investment Company solely by reason of Rule
3a-7) and (S) 317(b) of the Trust Indenture Act, to appoint one or more
Paying Agents in addition to the Property Trustee; and
(r) to execute all documents or instruments, perform all duties and
powers and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.
The Regular Trustees must exercise the powers set forth in this Section 3.08 in
a manner which is consistent with the purposes and functions of the Trust set
out in Section 3.05, and the Regular Trustees shall not take any action which is
inconsistent with the purposes and functions of the Trust set forth in Section
3.05.
Subject to this Section 3.08, the Regular Trustees shall have none of the powers
or any of the authority of the Property Trustee set forth in Section 3.10.
The Regular Trustees shall take all actions on behalf of the Trust that are not
specifically required by this Declaration to be taken by any other Trustee.
16
Any expenses incurred by the Regular Trustees pursuant to this Section 3.08
shall be reimbursed by the Sponsor.
Section 3.09. Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property Trustee)
shall cause the Trust not to, engage in any activity other than in
connection with the purposes of the Trust or other than as required or
authorized by this Declaration. In particular, the Trust shall not and
the Trustees (including the Property Trustee) shall not cause the Trust
to:
(a) invest any proceeds received by the Trust from holding the Debentures
but shall promptly distribute from the Property Account all such proceeds
to Holders of Securities pursuant to the terms of this Declaration and of
the Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary the Trust
assets or the terms of the Securities in any way whatsoever, except as
otherwise expressly provided herein;
(f) issue any securities or other evidences of beneficial ownership of,
or beneficial interests in, the Trust other than the Securities;
(g) incur any indebtedness for borrowed money;
(h) (i) direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee or exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section
6.06 of the Indenture, or (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the
Debentures, without, in each case, obtaining the prior approval of the
Holders of a Majority in liquidation amount of all outstanding
Securities;
(i) revoke any action previously authorized or approved by a vote of the
Holders of Preferred Securities except by subsequent vote of such
Holders;
(j) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required, unless
in the case of this clause (j) the Property Trustee shall have received
an Opinion of Counsel experienced in such matters to the effect that such
17
amendment, modification or termination will not cause more than an
insubstantial risk that for United States Federal income tax purposes the
Trust will not be classified as a grantor trust;
(k) take or consent to any action that would result in the placement of a
lien, pledge, charge, mortgage or other encumbrance on any of the Trust
property;
(l) vary the investment (within the meaning of Treasury Regulation
Section 301.7701-4(c)) of the Trust or of the Holders of Securities; or
(m) after the date hereof, enter into any contract or agreement (other
than any depositary agreement or any agreement with any securities
exchange or automated quotation system) that does not expressly provide
that the Holders of Preferred Securities, in their capacities as such,
have limited liability (in accordance with the provisions of the Business
Trust Act) for the liabilities and obligations of the Trust, which
express provision shall be in substantially the following form, "The
Holders of the Preferred Securities, in their capacities as such, shall
not be personally liable for any liabilities or obligations of the Trust
arising out of this Agreement, and the parties hereto hereby agree that
the Holders of the Preferred Securities, in their capacities as such,
shall be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware."
Section 3.10. Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the
Property Trustee to the Debentures shall vest automatically in each
Person who may hereafter be appointed as Property Trustee in accordance
with Article 5. Such vesting and cessation of title shall be effective
whether or not conveyancing documents with regard to the Debentures have
been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Debentures to the Regular Trustees or, if the Property Trustee
does not also act as the Delaware Trustee, the Delaware Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank account
(the "Property Account") in the name of and under the exclusive control
of the Property Trustee on behalf of the Holders of the Securities and on
the receipt of payments of funds made in respect of the Debentures held
by the Property Trustee, deposit such funds into the Property Account
and, without any further acts of the Property Trustee or the Regular
Trustees, promptly make payments to the Holders of the Preferred
Securities and Common Securities from the Property Account in accordance
with Section 6.01. Funds in the Property Account shall be held
18
uninvested, and without liability for interest thereon, until disbursed
in accordance with this Declaration. The Property Account shall be an
account which is maintained with a banking institution whose long term
unsecured indebtedness is rated by a "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act, at least investment grade;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities
and the Common Securities to the extent the Debentures are redeemed or
mature;
(iii) upon notice of distribution issued by the Regular Trustees in accordance
with the terms of the Preferred Securities and the Common Securities, engage in
such ministerial activities as shall be necessary or appropriate to effect
promptly pursuant to terms of the Securities the distribution of Debentures to
Holders of Securities upon the election of the Holder of Common Securities to
distribute the Debentures to Holders of Securities and dissolve the Trust; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Debentures under the Indenture and, if an
Event of Default occurs and is continuing, the Property Trustee, subject
to Section 3.10(e), shall for the benefit of the Holders of the
Securities, enforce its rights as holder of the Debentures under the
Indenture, subject to the rights of the Holders of the Preferred
Securities pursuant to the terms of this Declaration, the Business Trust
Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the
terms of the Securities set forth in Exhibits B and C hereto.
(e) If an Event of Default has occurred and is continuing, then the
Holders of a Majority in liquidation amount of the Preferred Securities
will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the
Debentures. If the Property Trustee fails to enforce its rights under the
Debentures, a Holder of Preferred Securities, to the extent permitted by
applicable law, may, after a period of 30 days has elapsed since such
Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Sponsor to enforce the
Property Trustee's rights under the Debentures without first instituting
any legal proceeding against the Property Trustee or any other Person;
provided further, that, if an Event of Default has occurred and is
continuing and such event is attributed to the failure of the Sponsor to
pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the Debentures having a principal amount
equal to the aggregate
19
liquidation amount of the Preferred Securities of such Holder (a "Holder
Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Holder Direct Action, the Sponsor
will be subrogated to the rights of such Holder of Preferred Securities
to the extent of any payment made by the Sponsor to such Holders of
Preferred Securities in such Holder Direct Action. Except as provided in
the preceding sentences, the Holders of Preferred Securities will not be
able to exercise directly any other remedy available to the Holders of
the Debentures.
(f) All moneys deposited in the Property Account and all Debentures held
by the Property Trustee for the benefit of the Holders of the Securities
will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of, or for the benefit of the Property Trustee
or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities actually known to a Responsible
Officer of the Property Trustee, transmit by mail, first class postage
prepaid, to the holders of the Securities, as their names and addresses
appear upon the register, notice of such defaults with respect to the
Securities known
20
to the
Property Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purposes of this
Section 3.10(g) being hereby defined to be an Indenture Event of Default,
not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided,
that, except in the case of default in the payment of the principal of
(or premium, if any) or interest on any of the Debentures, the Property
Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers, of the Property Trustee in good
faith determines that the withholding of such notice is in the interests
of the Holders of the Securities. The Property Trustee shall not be
deemed to have knowledge of any default, except (i) a default in the
payment of principal, premium or interest on the Debentures or (ii) any
default as to which the Property Trustee shall have received written
notice or a Responsible Officer charged with the administration of this
Declaration shall have obtained written notice.
(h) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and accepted
that appointment in accordance with Article 5.
(i) The Property Trustee shall act as paying agent in respect of the
Common Securities and, if the Preferred Securities are not in book entry
only form, the Preferred Securities and, subject to Section 3.08(q), may
authorize one or more Persons (each, a "Paying Agent") to pay
Distributions, redemption payments or liquidation payments on behalf of
the Trust with respect
20
to the Preferred Securities. Any such Paying Agent shall comply with (S)
317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the
Property Trustee, after consultation with the Regular Trustees, at any
time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Property Trustee, subject to Section
3.08(q).
(j) The Property Trustee shall give prompt written notice to the Holders
of the Securities of any notice received by it from Litchfield Financial
of its election to defer payments of interest on the Debentures by
extending the interest payment period with respect thereto.
(k) Subject to this Section 3.10, the Property Trustee shall have none of
the powers or the authority of the Regular Trustees set forth in Section
3.08.
(l) The Property Trustee shall exercise the powers, duties and rights set
forth in this Section 3.10 and Section 3.12 in a manner which is
consistent with the purposes and functions of the Trust set out in
Section 3.05, and the Property Trustee shall not take any action which is
inconsistent with the purposes and functions of the Trust set forth in
Section 3.05.
Section 3.11. Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.01(a)(3), the Delaware Trustee shall not be entitled to
exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of the Trustees described in this
Declaration. Except as set forth in Section 5.01(a)(3), the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling
the requirements of (S) 3807(a) of the Business Trust Act. No implied
covenants or obligations shall be read into this Declaration against the
Delaware Trustee.
Section 3.12. Certain Rights and Duties of the Property Trustee.
(a) The Property Trustee, before the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth
in this Declaration, and no implied covenants shall be read into this
Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06),
the Property Trustee shall exercise such of the rights and powers vested
in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
21
(i) prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration,
and the Property Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Declaration, and no implied covenants or obligations
shall be read into this Declaration against the Property Trustee;
and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this
Declaration; provided, however, that in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee, the
Property Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Declaration;
(ii) the Property Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property
Trustee hereunder or under the Indenture, or exercising any trust or
power conferred upon the Property Trustee under this Declaration; and
(iv) no provision of this Declaration shall require the Property Trustee
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of
any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or adequate indemnity
against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.12(a) and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part and, if the Trust is excluded from
the definition of Investment Company solely by means of Rule 3a-7,
subject to the requirements of Rule 3a-7,
22
request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Sponsor or the Regular
Trustees;
(ii) the Property Trustee (A) may consult with counsel (which may be
counsel to the Sponsor or any of its Affiliates and may include any of
its employees) selected by it in good faith and with due care and the
advice or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice and opinion and (B) shall have
the right at any time to seek instructions concerning the administration
of this Declaration from any court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Property Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed by it in good faith
and with due care;
(iv) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Declaration at the request or
direction of any Holder, unless such Holder shall have offered to the
Property Trustee security and indemnity satisfactory to the Property
Trustee against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with
such request or direction; provided that nothing contained in this clause
(iv) shall relieve the Property Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured or waived) to
exercise such of the rights and powers vested in it by this Declaration,
and to use the same degree of care and skill in this exercise, as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs; and
(v) any action taken by the Property Trustee or its agents hereunder
shall bind the Holders of the Securities, and the signature of the
Property Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire
as to the authority of the Property Trustee to so act, or as to its
compliance with any of the terms and provisions of this Declaration, both
of which shall be conclusively evidenced by the Property Trustee's or its
agent's taking such action.
(d) The recitals contained herein shall be taken as the statements of the
Sponsor, and the Property Trustee assumes no responsibility for the correctness
of the same. The Property Trustee makes no representations as to the validity or
sufficiency of this Declaration.
(e) The Property Trustee, in its individual or any other capacity, may become
the owner or pledgee of Preferred Securities and may otherwise deal with the
Sponsor with the same rights it would have if it were not the Property Trustee.
23
(f) All moneys received by the Property Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Property Trustee shall be under no liability for interest on any moneys
received by it hereunder except such as it may agree in writing to pay thereon.
(g) (i) The Sponsor covenants and agrees to pay to the Property Trustee from
time to time, and the Property Trustee shall be entitled to, such compensation
as the Sponsor and the Property Trustee shall from time to time agree in writing
(which shall not be limited by any provision of law in regard to the
compensation of a Property Trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Property
Trustee, and the Sponsor will pay or reimburse the Property Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee in accordance with any of the provisions of this
Declaration (including the reasonable compensation and the reasonable expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Sponsor also covenants to indemnify each of the
Property Trustee or any predecessor Property Trustee and their officers, agents,
directors and employees for, and to hold them harmless against, any and all
loss, liability, damage, claim or expense including taxes (other than taxes
based upon, measured by or determined by the income of the Property Trustee)
incurred without negligence or bad faith on the part of the Property Trustee and
arising out of or in connection with the acceptance or administration of this
trust, including the reasonable costs and expenses of defending itself against
any claim (whether asserted by the Sponsor, any Holder or any other Person) of
liability in the premises. The provisions of this subpart (g) of this Section
3.12 shall survive the termination of this Declaration and resignation or
removal of the Property Trustee.
(ii) The obligations of the Sponsor under this subpart (g) of this
Section 3.12 to compensate and indemnify the Property Trustee and to pay
or reimburse the Property Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder. Such
additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Property
Trustee as such, except funds held in trust for the benefit of the
holders of particular Securities.
(h) Except as otherwise provided in this Section 3.12, whenever in the
administration of the provisions of this Declaration the Property Trustee shall
deem it necessary or desirable that a matter be proved or established prior to
taking or suffering or omitting to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Property
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Property Trustee and such certificate, in the
absence of negligence or bad faith on the part of the Property Trustee, shall be
full warrant to the Property Trustee for any action taken, suffered or omitted
to be taken by it under the provisions of this Declaration upon the faith
thereof.
24
(i) Whether or not expressly stated, every provision of this Declaration
pertaining to the Property Trustee shall be subject to this Section 3.12.
Section 3.13. Registration Statement and Related Matters.
In accordance with the Original Declaration, Litchfield Financial, as the
sponsor of the Trust, was authorized (i) to file with the Commission and
execute, in each case on behalf of the Trust, (a) the Registration
Statement on Form S-3 (File Nos. 333-76285, 333-76285-01, and 333-
76285-02) (the "1933 Act Registration Statement") including any
pre-effective or post-effective amendments thereto, relating to the
registration under the Securities Act of the Preferred Securities and (b)
if Litchfield Financial shall deem it desirable, a Registration Statement
on Form 8-A or other appropriate form (the "1934 Act Registration
Statement") (including all pre-effective and post-effective amendments
thereto) relating to the registration of the Preferred Securities under
Section 12 of the Exchange Act; (ii) if Litchfield Financial shall deem
it desirable, to prepare and file with the New York Stock Exchange or one
or more national securities exchange(s) (each, an "Exchange") or the
National Association of Securities Dealers, Inc. (the "NASD") and execute
on behalf of the Trust a listing application or applications and all
other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on any such Exchange or The Nasdaq Stock Market's
National Market ("Nasdaq"); (iii) to file and execute on behalf of the
Trust such applications, reports, surety bonds, irrevocable consents,
appointments of attorney for service of process and all other papers and
documents as Litchfield Financial, on behalf of the Trust, may deem
necessary or desirable to register the Preferred Securities under the
securities or "Blue Sky" laws of such jurisdictions as Litchfield
Financial on behalf of the Trust, may deem necessary or desirable; and
(iv) to negotiate the terms and execute on behalf of the Trust the
Underwriting Agreement. In the event that any filing referred to in
clauses (i)- (iii) above is required by the rules and regulations of the
Commission, any Exchange, Nasdaq, the NASD or state securities or blue
sky laws, to be executed on behalf of the Trust by one or more Trustees,
the Regular Trustees, in their capacities as Trustees of the Trust, and
Litchfield Financial are hereby authorized and directed to join in any
such filing and to execute on behalf of the Trust any and all of the
foregoing. In connection with all of the foregoing, Litchfield Financial
and each Trustee, solely in its capacity as Trustee of the Trust, have
constituted and appointed, and hereby confirm the appointment of, Richard
A. Stratton, Ronald E. Rabidou, and Heather A. Sica and each of them, as
his, her or its, as the case may be, true and lawful attorneys-in-fact,
and agents, with full power of substitution and resubstitution, for
Litchfield Financial or such Trustee or in Litchfield Financial' or such
Trustee's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as Litchfield
Financial or such Trustee might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and
25
agents or any of them, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Section 3.14. Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the
State of Delaware on April 12, 1999, is attached hereto as Exhibit A. On
or after the date of execution of this Declaration, the Trustees shall
cause the filing with the Secretary of State of the State of Delaware of
such amendments, if any, to the Certificate of Trust as the Trustees
shall deem necessary or desirable.
Section 3.15. Execution of Documents by the Regular Trustees.
Except as otherwise required by the Business Trust Act with respect to
the Certificate of Trust or otherwise and except as provided in Sections
7.01(c) and 9.08, any Regular Trustee, or if there is only one, such
Regular Trustee is authorized to execute and deliver on behalf of the
Trust any documents which the Regular Trustees have the power and
authority to execute or deliver pursuant to this Declaration.
Section 3.16. Trustees Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Securities.
Section 3.17. Duration of the Trust.
The Trust, absent dissolution pursuant to the provisions of Article 8
hereof, shall continue without dissolution until June 30, 2029.
Section 3.18. Mergers.
(a) The Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, except
as described in Section 3.18(b) and (c) of this Declaration or Section 3
of Exhibit B or Exhibit C.
(b) The Trust may, at the request of the Sponsor, with the consent of the
Regular Trustees or, if there are more than two, a majority of the
Regular Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, convert into,
consolidate, amalgamate, or be replaced by, or convey, transfer or lease
its properties and assets
26
as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
Securities and this Declaration; or
(B) substitutes for the Securities other securities having substantially
the same terms as the Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Securities rank with
respect to Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity
that possesses the same powers and duties as the Property Trustee as the
holder of the Debentures;
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
with another organization in which the Preferred Securities are then listed or
quoted, if any;
(iv) if the Preferred Securities (including any Successor Securities) are
rated by any nationally recognized statistical rating organization prior
to such transaction, such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause
the Preferred Securities (including any Successor Securities), or if the
Debentures are so rated, the Debentures, to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of such Holders' interests in the new entity);
(vi) such Successor Entity has a purpose substantially identical to that
of the Trust;
(vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an Opinion
of Counsel experienced in such matters that:
(A) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of the Holders' interest in the new entity);
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(B) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor the
Successor Entity will be required to register as an Investment Company;
and
(C) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for United
States Federal income tax purposes;
(viii) the Sponsor or any permitted successor or assignee owns all of the common
securities of such Successor Entity and guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent provided
by the Preferred Guarantee; and
(ix) there shall have been furnished to the Property Trustee an Officers'
Certificate and an Opinion of Counsel, each to the effect that all
conditions precedent in this Declaration to such transaction have been
satisfied.
(c) Notwithstanding Section 3.18(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced
by, or convey, transfer or lease its properties and assets as an entirety
or substantially as an entirety to, any other Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the Successor
Entity not to be classified as a grantor trust for United States Federal
income tax purposes or would cause the Holders of the Securities not to
be treated as owning an undivided interest in the Debentures.
Section 3.19. Property Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor
upon the Securities or the property of the Trust or of such other obligor
or their creditors, the Property Trustee (irrespective of whether any
Distributions on the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Property Trustee shall have made any demand on the Trust for the payment
of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Securities (or, if the Securities are
original issue discount Securities, such portion of the liquidation
amount as may be specified in the terms of such Securities) and to file
such other papers or documents as may be necessary or advisable in order
to have the claims of the Property Trustee (including any claim for the
reasonable compensation, expenses,
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disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) 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 Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or compensation affecting the Securities
or the rights of any Holder thereof to authorize the Property Trustee to vote in
respect of the claim of any Holder in any such proceeding.
ARTICLE 4
Sponsor
Section 4.01. Purchase of Common Securities by the Sponsor.
On the Closing Date, the Sponsor will purchase all of the Common
Securities issued by the Trust at the same time as the Preferred
Securities to be issued on such date are issued, such purchase to be in
an amount equal to 3% of the total capital of the Trust.
Section 4.02. Expenses.
(a) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, shall be
responsible for and shall pay for all debts and obligations (other than
with respect to the Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the
organization of the Trust, the issuance of the Preferred Securities to
initial purchasers thereof, the fees and expenses (including reasonable
counsel fees and expenses) of the Trustees (including any amounts payable
under Article 10), the costs and expenses relating to the operation of
the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying
agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses
incurred in connection with the disposition of Trust assets).
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(b) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, will pay any and
all taxes (other than United States withholding taxes attributable to the
Trust or its assets) and all liabilities, costs and expenses with respect
to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such
debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice hereof. Any such
Creditor may enforce the Sponsor's obligations under this Section 4.02
directly against the Sponsor and the Sponsor irrevocably waives any right
or remedy to require that any such Creditor take any action against the
Trust or any other Person before proceeding against the Sponsor.
(d) The Sponsor shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to any Creditor by the Sponsor under this
Section 4.02.
ARTICLE 5
Trustees
Section 5.01. Number of Trustees; Qualifications.
(a) The number of Trustees initially shall be five (5). At any time (i)
before the issuance of the Securities, the Sponsor may, by written
instrument, increase or decrease the number of, and appoint, remove and
replace, the Trustees, and (ii) after the issuance of the Securities the
number of Trustees may be increased or decreased solely by, and Trustees
may be appointed, removed or replaced solely by, vote of Holders of
Common Securities representing a Majority in liquidation amount of the
Common Securities voting as a class; provided that in any case:
(1) the number of Trustees shall be at least five (5) unless the Trustee
that acts as the Property Trustee also acts as the Delaware Trustee, in
which case the number of Trustees shall be at least four (4);
(2) at least a majority of the Trustees shall at all times be officers,
directors or employees of Litchfield Financial;
(3) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and otherwise is
permitted to act as a Trustee hereunder under the laws of the State of
Delaware, except that if the Property Trustee has its principal place of
business in the State of Delaware and otherwise is permitted to act as a
Trustee hereunder under the laws of the State of Delaware, then the
Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application; and
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(4) there shall at all times be a Property Trustee hereunder which shall
satisfy the requirements of Section 5.01(c).
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
John J. Malloy, Heather A. Sica and Ronald E. Rabidou
c/o LITCHFIELD FINANCIAL CORPORATION, 430 Main Street, Williamstown,
Massachusetts 01267
(c) There shall at all times be one Trustee which shall act as the Property
Trustee. In order to act as the Property Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation or national banking association organized and
doing business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation, national
banking association or Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation or national
banking association publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority referred
to above, then for the purposes of this Section 5.01(c)(ii), the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published; and
(iii) if the Trust is excluded from the definition of an Investment
Company solely by reason of Rule 3a-7 and to the extent Rule 3a-7 requires a
trustee having certain qualifications to hold title to the "eligible assets" (as
defined in Rule 3a-7) of the Trust, the Property Trustee shall possess those
qualifications.
If at any time the Property Trustee shall cease to satisfy the requirements of
clauses (i)-(iii) above, the Property Trustee shall immediately resign in the
manner and with the effect set out in Section 5.02(d). If the Property Trustee
has or shall acquire any "conflicting interest" within the meaning of (S) 310(b)
of the Trust Indenture Act, the Property Trustee and the Holders of the Common
Securities (as if such Holders were the obligor referred to in (S) 310(b) of the
Trust Indenture Act) shall in all respects comply with the provisions of (S)
310(b) of the Trust Indenture Act. The
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Preferred Guarantee and the Indenture shall be deemed to be specifically
described in this Declaration for the purposes of clause (i) of the first
proviso contained in (S) 310(b) of the Trust Indenture Act.
The initial Trustee which shall serve as the Property Trustee is The Bank of New
York, a New York banking corporation, whose address is as set forth in Section
14.01(b).
(d) The initial Trustee which shall serve as the Delaware Trustee is The
Bank of New York (Delaware), a Delaware banking corporation, whose
address is as set forth in Section 14.01(c).
(e) Any action taken by the Holders of Common Securities pursuant to this
Article 5 shall be taken at a meeting of the Holders of Common Securities
convened for such purpose or by written consent as provided in Section
12.02.
(f) No amendment may be made to this Section 501 which would change any
rights with respect to the number, existence or appointment and removal
of Trustees, except with the consent of each Holder of Common Securities.
Section 5.02. Appointment, Removal and Resignation of the Trustees.
(a) Subject to Section 5.02(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of the Securities, by written instrument executed
by the Sponsor; and
(ii) after the issuance of the Securities by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a
class.
(b) (i) The Trustee that acts as the Property Trustee shall not be
removed in accordance with Section 5.02(a) until a successor Trustee
possessing the qualifications to act as the Property Trustee under
Section 5.01(c) (a "Successor Property Trustee") has been appointed and
has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Regular Trustees, the
Sponsor and the Property Trustee being removed; and
(ii) the Trustee that acts as the Delaware Trustee shall not be removed
in accordance with Section 5.02(a) until a successor Trustee possessing
the qualifications to act as the Delaware Trustee under Section
5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the Delaware Trustee being removed.
(c) A Trustee appointed to office shall hold such office until his
successor shall have been appointed or until his death, removal or
resignation.
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(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Trustee and delivered to the Sponsor and the Trust,
which resignation shall take effect upon such delivery or upon such later
date as is specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the Property Trustee
shall be effective until:
(A) a Successor Property Trustee has been appointed and has accepted such
appointment by instrument executed by such Successor Property Trustee and
delivered to the Regular Trustees, the Sponsor and the resigning Property
Trustee; or
(B) if the Trust is excluded from the definition of an Investment Company
solely by reason of Rule 3a-7, until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to the Holders
of the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware Trustee
shall be effective until a Successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the resigning Delaware Trustee.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section
5.02 within 60 days after delivery of a notice of removal or a
Resignation Request, the Property Trustee or Delaware Trustee being
removed or resigning as the case may be may petition, at the expense of
the Sponsor, any court of competent jurisdiction for appointment of a
Successor Property Trustee or Successor Delaware Trustee, as the case may
be. Such court may thereupon after prescribing such notice, if any, as it
may deem proper and prescribe, appoint a Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
Section 5.03. Vacancies among the Trustees.
If a Trustee ceases to hold office for any reason and the number of Trustees is
not reduced pursuant to Section 5.01 or if the number of Trustees is increased
pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the
existence of such vacancy by a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with the requirements of this
Article 5.
Section 5.04. Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee, or
any one of them, shall not operate to dissolve, terminate or annul the Trust.
Whenever a vacancy in the number of Regular Trustees shall occur until such
vacancy is filled as provided in this Article 5, the Regular Trustees in office,
regardless
33
of their number, shall have all the powers granted to the Regular Trustees and
shall discharge all the duties imposed upon the Regular Trustees by this
Declaration.
Section 5.05. Meetings.
Meetings of the Regular Trustees shall be held from time to time upon the call
of any Regular Trustee. Regular meetings of the Regular Trustees may be held at
a time and place fixed by resolution of the Regular Trustees. Notice of any in-
person meeting of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meeting of the Regular Trustees or any committee thereof shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before such meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless otherwise provided in this Declaration, any action of
the Regular Trustees may be taken at a meeting by vote of a majority of the
Regular Trustees present (whether in person or by telephone) and eligible to
vote with respect to such matter, provided that a Quorum is present, or without
a meeting by the unanimous written consent of the Regular Trustees.
Section 5.06. Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purpose of executing any registration statement or amendment thereto
or other document or schedule filed with the Commission or making any other
governmental filing (including, without limitation, the filings referred to
in Section 3.13).
(b) The Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the
names of the
Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary to the
provisions of the Trust, as set forth herein.
Section 5.07. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee or any
Regular Trustee that is not a natural person, as the case may be, may be merged
or converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the
34
Property Trustee or the Delaware Trustee or the Regular Trustees, as the case
may be, shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Property Trustee or the Delaware Trustee
or the Regular Trustee, as the case may be, shall be the successor of the
Property Trustee or the Delaware Trustee or the Regular Trustees, as the case
may be, hereunder, provided that such Person shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
ARTICLE 6
Distributions
Section 6.01. Distributions.
Holders shall receive periodic distributions, redemption payments and
liquidation distributions in accordance with the applicable terms of the
relevant Holder's Securities as set forth in Exhibits B and C hereto
("Distributions"). If and to the extent that Litchfield Financial makes a
payment of interest (including Additional Interest (as defined in the
Indenture)), premium and/or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to promptly make a Distribution of the Payment Amount to
Holders in accordance with the terms of the Securities as set forth in
Exhibits B and C hereto.
ARTICLE 7
Issuance of the Securities
Section 7.01. General Provisions Regarding the Securities.
(a) The Regular Trustees shall issue on behalf of the Trust Securities in
fully registered form representing undivided beneficial interests in the
assets of the Trust in accordance with Section 7.01(b) and for the
consideration specified in Section 3.03.
(b) The Regular Trustees shall issue on behalf of the Trust one class of
preferred securities representing preferred undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Exhibit B (the
"Preferred Securities") hereto, which terms are incorporated by reference in,
and made a part of, this Declaration as if specifically set forth herein, and
one class of common securities representing common undivided beneficial
interests in the assets of the Trust having such terms as are set forth in
Exhibit C (the "Common Securities") hereto, which terms are incorporated by
reference in, and made a part of, this Declaration as if specifically set
forth herein. The Trust shall have no securities or other interests in the
assets of the Trust other than the Preferred Securities and the Common
Securities.
35
(c) The Certificates shall be signed on behalf of the Trust by the Regular
Trustees (or if there are more than two Regular Trustees by any two of the
Regular Trustees). Such signatures may be the manual or facsimile signatures
of the present or any future Regular Trustee. Typographical and other minor
errors or defects in any such reproduction of any such signature shall not
affect the validity of any Certificate. In case any Regular Trustee who shall
have signed any of the Certificates shall cease to be such Regular Trustee
before the Certificate so signed shall be delivered by the Trust, such
Certificate nevertheless may be delivered as though the person who signed
such Certificate had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Certificate, shall be the Regular
Trustees, although at the date of the execution and delivery of this
Declaration any such person was not a Regular Trustee. Certificates shall be
typewritten, printed, lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements
as the Regular Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or automated quotation system on
which Securities may be listed or traded, or with any rule or regulation of
the Clearing Agency, or to conform to usage. Pending the preparation of
definitive Certificates, the Regular Trustees on behalf of the Trust may
execute temporary Certificates (printed, lithographed or typewritten), in
substantially the form of the definitive Certificates in lieu of which they
are issued, but with such omissions, insertions and variations as may be
appropriate for temporary Certificates, all as may be determined by the
Regular Trustees. Each temporary Certificate shall be executed by the Regular
Trustees (or, if there are more than two Regular Trustees, by any two of the
Regular Trustees) on behalf of the Trust upon the same conditions and in
substantially the same manner, and with like effect, as definitive
Certificates. Without unnecessary delay, the Regular Trustees on behalf of
the Trust will execute and furnish definitive Certificates and thereupon any
or all temporary Certificates may be surrendered to the transfer agent and
registrar in exchange therefor (without charge to the Holders). Each
Preferred Security Certificate whether in temporary or definitive form shall
be countersigned, upon receipt of a written order of the Trust signed by one
Regular Trustee, by the manual signature of an authorized signatory of the
Person acting as registrar and transfer agent for the Preferred Securities,
which shall initially be the Property Trustee.
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non- assessable.
(f) Every Person, by virtue of having become a Holder or a Preferred Security
Beneficial Owner in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be
bound by this Declaration.
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(g) Upon issuance of the Securities as provided in this Declaration, the
Regular Trustees on behalf of the Trust shall return to Litchfield Financial
the $10 constituting initial trust assets as set forth in the Original
Declaration.
ARTICLE 8
Dissolution of the Trust
Section 8.01. Dissolution of the Trust.
The Trust shall dissolve:
(i) when all of the Securities shall have been called for redemption and the
amounts necessary for redemption thereof shall have been paid to the Holders
of the Securities in accordance with the terms of the Securities; or
(ii) when all of the Debentures shall have been distributed to the Holders of
the Securities in exchange for all of the Securities in accordance with the
terms of the Securities;
(iii) upon the expiration of the term of the Trust as set forth in Section 3.17;
or
(iv) upon a decree of judicial dissolution.
Upon dissolution and the completion of the winding up of the affairs of the
Trust, the Trust and this Declaration shall terminate when a certificate of
cancellation is filed by the Trustees with the Secretary of State of the State
of Delaware. The Trustees shall so file such a certificate as soon as
practicable after the occurrence of an event referred to in this Section 8.01.
The provisions of Sections 3.12 and 4.02 and Article 10 shall survive the
termination of the Trust and this Declaration.
ARTICLE 9
Transfer of Interests
Section 9.01. Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms
of the Securities. To the fullest extent permitted by law, any transfer or
purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Subject to this Article 9, Preferred Securities shall be freely
transferable.
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(c) The Holder of the Common Securities may not transfer the Common
Securities except (a) in connection with transactions permitted under Section
10.01 of the Indenture, or (b) to the Sponsor or an Affiliate thereof in
compliance with applicable law (including the Securities Act and applicable
state securities and blue sky laws). To the fullest extent permitted by law,
any attempted transfer of the Common Securities other than as set forth in
the immediately preceding sentence shall be void.
Section 9.02. Transfer of Certificates.
The Regular Trustees shall provide for the registration of Certificates and
of transfers of Certificates, which will be effected without charge but only
upon payment (with such indemnity as the Regular Trustees may require) in
respect of any tax or other government charges which may be imposed in
relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by
a written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by
this Declaration.
Section 9.03. Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for
purposes of receiving Distributions and for all other purposes whatsoever
and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such Certificate or in the Securities represented by
such Certificate on the part of any Person, whether or not the Trustees shall
have actual or other notice thereof.
Section 9.04. Book Entry Interests.
Unless otherwise specified in the terms of the Preferred Securities, the
Preferred Security Certificates, on original issuance, will be issued in the
form of one or more, fully registered, global Preferred Security Certificates
(each a "Global Certificate"), to be delivered to DTC, the initial Clearing
Agency, by, or on behalf of, the Trust. Such Global Certificates shall
initially be registered on the books and records of the Trust in the name of
Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner
will receive a definitive Preferred Security Certificate representing such
Preferred Security Beneficial Owner's interests in such Global Certificates,
except as provided in Section 9.07. Unless and until definitive, fully
registered Preferred Security
38
Certificates (the "Definitive Preferred Security Certificates") have been
issued to the Preferred Security Beneficial Owners pursuant to Section 9.07:
(i) the provisions of this Section 9.04 shall be in full force and effect;
(ii) the Trust and the Trustees shall be entitled to deal with the Clearing
Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificates and, except as set forth herein in Section
9.07 or in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) with respect to the
Property Trustee, shall have no obligation to the Preferred Security
Beneficial Owners;
(iii) to the extent that the provisions of this Section 9.04 conflict with any
other provisions of this Declaration, the provisions of this Section 9.04 shall
control; and
(iv) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC
will make book entry transfers among the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants, provided, that solely for the purposes of
determining whether the Holders of the requisite amount of Preferred
Securities have voted on any matter provided for in this Declaration, so long
as definitive Preferred Security Certificates have not been issued (pursuant
to Section 9.07 hereof), the Trustees may conclusively rely on, and shall be
protected in relying on,
any written instrument (including a proxy) delivered to the Trustees by the
Clearing Agency setting forth the Preferred Security Beneficial Owners' votes or
assigning the right to vote on any matter to any other Persons either in whole
or in part.
Section 9.05. Notices to Holders of Certificates.
Whenever a notice or other communication to the Holders is required to be
given under this Declaration, unless and until Definitive Preferred Security
Certificates shall have been issued pursuant to Section 9.07, the relevant
Trustees shall give all such notices and communications, specified herein to
be given to Holders of Preferred Securities, to the Clearing Agency and, with
respect to any Preferred Security Certificate registered in the name of a
Clearing Agency or the nominee of a Clearing Agency, the Trustees shall,
except in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) with respect to the
Property Trustee, have no notice obligations to the Preferred Security
Beneficial Owners.
Section 9.06. Appointment of Successor Clearing Agency.
39
If any Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities, the Regular Trustees
may, in their sole discretion, appoint a successor Clearing Agency with
respect to the Preferred Securities.
Section 9.07. Definitive Preferred Securities Certificates.
If (i) a Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.06 or (ii) the Regular Trustees elect after consultation with the
Sponsor to terminate the book entry system through the Clearing Agency with
respect to the Preferred Securities, then (x) Definitive Preferred Security
Certificates shall be prepared by the Regular Trustees on behalf of the Trust
with respect to such Preferred Securities and (y) upon surrender of the
Global Certificates by the Clearing Agency, accompanied by registration
instructions, the Regular Trustees shall cause Definitive Preferred Security
Certificates to be delivered to Preferred Security Beneficial Owners in
accordance with the instructions of the Clearing Agency. Neither the Trustees
nor the Trust shall be liable for any delay in delivery of such instructions
and each of them may conclusively rely on, and shall be protected in relying
on, such instructions.
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and (b)
there shall be delivered to the Regular Trustees such security or indemnity
as may be required by them to keep each of them harmless, then in the absence
of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Regular Trustees (or if there are more than two Regular
Trustees by any two of the Regular Trustees) on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under
this Section 9.08, the Regular Trustees may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
ARTICLE 10
Limitation of Liability; Indemnification
Section 10.01. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or
40
omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such
Indemnified Person by this Declaration or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason
of such Indemnified Person's gross negligence (or, in the case of the
Property Trustee, negligence) or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Trust, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders of Securities might properly be paid.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of
Securities, in their capacities as Holders, shall be entitled to the same
limitation of liability that is extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
Section 10.02. Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor shall
indemnify and hold harmless each Indemnified Person from and against any
loss, liability, expense, damage or claim incurred by such Indemnified Person
by reason of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Declaration, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, liability,
expense, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions.
(b) The provisions of this Section 10.02 shall survive the termination of
this Declaration or the resignation or removal of any Trustee.
Section 10.03. Outside Business.
The Sponsor and any Trustee (in the case of the Property Trustee, subject to
Section 5.01(c)) may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar
or dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or
41
improper. Neither the Sponsor nor any Trustee shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken
by the Trust, and the Sponsor or any Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment or other opportunity. Any Trustee
may engage or be interested in any financial or other transaction with the
Sponsor or any Affiliate of the Sponsor or may act as depository for, trustee
or agent for, or act on any committee or body of holders of, securities or
other obligations of the Sponsor or any of its Affiliates.
ARTICLE 11
Accounting
Section 11.01. Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or
such other year as is required by the Code.
Section 11.02. Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted
accounting principles, consistently applied. The Trust shall use the accrual
method of accounting for United States Federal income tax purposes.
(b) If required by applicable law, the Regular Trustees shall, as soon as
available after the end of each Fiscal Year of the Trust, cause to be
prepared and mailed to each Holder of Securities unaudited financial
statements of the Trust for such Fiscal Year, prepared in accordance with
generally accepted accounting principles; provided that if the Trust is
required to comply with the periodic reporting requirements of Section 13(a)
or 15(d) of the Exchange Act, such financial statements for such Fiscal Year
shall be examined and reported on by a firm of independent certified public
accountants selected by the Regular Trustees (which firm may be the firm used
by the Sponsor).
(c) The Regular Trustees shall cause to be duly prepared and mailed to each
Holder of Securities any annual United States Federal income tax information
statement required by the Code, containing such information with regard to
the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to
deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.
42
(d) The Regular Trustees shall cause to be duly prepared and filed with the
appropriate taxing authority an annual United States Federal income tax
return, on such form as is required by the Code, and any other annual income
tax returns required to be filed by the Regular Trustees on behalf of the
Trust with any state or local taxing authority.
Section 11.03. Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly
to the Property Account and no other funds from the Trust shall be deposited
in the Property Account. The sole signatories for such accounts shall be
designated by the Regular Trustees; provided, however, that the Property
Trustee shall designate the sole signatories for the Property Account.
Section 11.04. Withholding.
The Trust and the Trustees shall comply with all withholding requirements
under United States Federal, State and local law. The Regular Trustees shall
request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Regular Trustees to assist them in determining the extent
of, and in fulfilling, the Trust's withholding obligations. The Trust shall
file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the
extent that the Trust is required to withhold and pay over any amounts to any
authority with respect to Distributions or allocations to any Holder, the
amount withheld shall be deemed to be a Distribution in the amount of the
withholding to the Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount to be withheld was not withheld from a Distribution, the Trust may
reduce subsequent Distributions by the amount of such withholding.
ARTICLE 12
Amendments and Meetings
Section 12.01. Amendments.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may be amended by, and only by, a
written instrument executed by a majority of the Regular Trustees; provided,
however, that (i) no amendment or modification to this Declaration shall be
made, and any such purported amendment shall be void and ineffective: (A)
unless the Regular Trustees shall have first received: (x) an Officers'
Certificate that such amendment is permitted by, and conforms to, the terms
of this Declaration; and
43
(y) an Opinion of Counsel that such amendment is permitted by, and conforms to,
the terms of this Declaration and that all conditions precedent, if any, in this
Declaration to the execution and delivery of such amendment have been satisfied;
and (B) to the extent the result of such amendment would be to: (x) cause the
Trust to fail to continue to be classified for purposes of United States Federal
income taxation as a grantor trust; (y) reduce or otherwise adversely affect the
rights or powers of the Property Trustee in contravention of the Trust Indenture
Act; or (z) cause the Trust to be deemed to be an Investment Company required to
be registered under the Investment Company Act; (ii) at such time after the
Trust has issued any Securities which remain outstanding, any amendment which
would adversely affect the rights, privileges or preferences of any Holder of
Securities may be effected only with such additional requirements as may be set
forth in the terms of such Securities; (iii) Section 4.02, Section 9.01(c) and
this Section 12.01 shall not be amended without the consent of all of the
Holders of the Securities; (iv) no amendment which adversely affects the rights,
powers and privileges of the Property Trustee or the Delaware Trustee shall be
made without the consent of the Property Trustee or the Delaware Trustee,
respectively; (v) Article 4 shall not be amended without the consent of the
Sponsor; and (vi) the rights of the Holders of Common Securities under Article 5
to increase or decrease the number of, and to appoint, replace or remove,
Trustees shall not be amended without the consent of each Holder of Common
Securities.
(b) Notwithstanding Section 12.02(a), this Declaration may be amended without
the consent of the Holders of the Securities to (i) cure any ambiguity, (ii)
correct or supplement any provision in this Declaration that may be defective
or inconsistent with any other provision of this Declaration, (iii) add to
the covenants, restrictions or obligations of the Sponsor, (iv) conform to
any changes in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) or any change in
interpretation or application of Rule 3a-7 (if the Trust is excluded from the
definition of an Investment Company solely by reason of Rule 3a-7) by the
Commission, (v) make any other provisions with respect to matters or
questions arising under this Declaration which shall not be inconsistent with
the other provisions of this Declaration, (vi) modify, eliminate or add to
any provisions of this Declaration to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Securities are outstanding
or to ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act, and (vii) pursuant to Section 5.02,
evidence the acceptance of the appointment of a successor Trustee or fill a
vacancy created by an increase in the number of Regular Trustees, which
amendment does not adversely affect in any material respect the rights,
preferences or privileges of the Holders.
Section 12.02. Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of Preferred Securities and/or Common Securities
may be called at any time by the Regular Trustees (or as provided in the
terms of the Securities) to consider and act on any matter on which the
Holders of such class of Securities are entitled to act under the terms of
this Declaration, the terms of the Securities or the rules of any stock
exchange or automated quotation system on which the Preferred Securities are
then listed, traded or quoted. The Regular Trustees shall call a meeting of
the Holders of Preferred Securities or Common Securities, if
44
directed to do so by Holders of at least 10% in liquidation amount of such
class of Securities. Such direction shall be given by delivering to the
Regular Trustees one or more notices in writing stating that the signing
Holders of Securities wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders of
Securities calling a meeting shall specify in writing the Certificates held
by the Holders of Securities exercising the right to call a meeting and only
those specified Certificates shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of this
paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities,
the following provision shall apply to meetings of the Holders of Securities:
(i) Notice of any such meeting shall be given by mail to all the Holders of
Securities having a right to vote thereat not less than seven (7) days nor
more than sixty (60) days prior to the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or required
under this Declaration or the rules of any stock exchange or automated
quotation system on which the Preferred Securities are then listed, traded or
quoted, such vote, consent or approval may be given at a meeting of the
Holders of Securities. Any action that may be taken at a meeting of the
Holders of Securities may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is signed by
Holders of Securities owning not less than the minimum aggregate liquidation
amount of Securities that would be necessary to authorize or take such action
at a meeting at which all Holders of Securities having a right to vote
thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders of Securities entitled to
vote who have not consented in writing. The Regular Trustees may specify that
any written ballot submitted to the Holders of Securities for the purpose of
taking any action without a meeting shall be returned to the Trust within the
time specified by the Regular Trustees.
(ii) Each Holder of a Security may authorize any Person to act for it by
proxy on all matters in which a Holder of a Security is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of the Security
executing it. Except as otherwise provided herein or in the terms of the
Securities, all matters relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the Trust
were a Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation.
(iii) Each meeting of the Holders of the Securities shall be conducted by the
Regular Trustees or by such other Person that the Regular Trustees may
designate.
(iv) Unless otherwise provided in the Business Trust Act, this Declaration or
the rules of any stock exchange or automated quotation system on which the
Preferred Securities are then listed, traded or quoted, the Regular Trustees,
in their sole discretion, shall establish all other provisions
45
relating to meetings of Holders of Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any
such right to vote.
ARTICLE 13
Representations of the Property Trustee and the Delaware Trustee
Section 13.01. Representations and Warranties of the Property Trustee.
The Trustee which acts as the initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as the Property Trustee that:
(i) The Property Trustee is a national banking association or a banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the United States or the laws of the state of its
incorporation, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee of this
Declaration have been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and
to general principles of equity and the discretion of the court (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(iii) The execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee.
(iv) No consent, approval or authorization of, or registration with or notice
to, any banking authority which supervises or regulates the Property Trustee
is required for the execution, delivery or performance by the Property
Trustee of this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in Section
5.01(c).
Section 13.02. Representations and Warranties of the Delaware Trustee.
46
The Trustee which acts as the initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as the Delaware Trustee, that:
(i) The Delaware Trustee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with corporate
power and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Delaware Trustee of this
Declaration have been duly authorized by all necessary corporate action on
the part of the Delaware Trustee. This Declaration has been duly executed and
delivered by the Delaware Trustee and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and
to general principles of equity and the discretion of the court (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(iii) No consent, approval or authorization of, or registration with or
notice to, any banking authority which supervises or regulates the Delaware
Trustee, if any, is required for the execution, delivery or performance by
the Delaware Trustee of this Declaration.
(iv) The Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and is a Person that satisfies for
the Trust (S) 3807(a) of the Business Trust Act.
ARTICLE 14
Miscellaneous
Section 14.01. Notices.
All notices provided for in this Declaration shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed
by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Regular
Trustees on behalf of the Trust may give notice of to the Holders of the
Securities):
Litchfield Capital Trust I c/o Litchfield Financial Corporation, 430 Main
Street, Williamstown, MA 01267 Attention: Treasurer, Telecopy: (413) 458-1020
47
(b) if given to the Property Trustee, at the mailing address of the Property
Trustee set forth below (or such other address as the Property Trustee may
give notice of to the Holders of the Securities):
101 Barclay Street Floor 21 West New York, New York 10286 Attention:
Corporate Trust Trustee Administration Telecopy: (212) 815-5915
(c) if given to the Delaware Trustee, at the mailing address of the Delaware
Trustee set forth below (or such other address as the Delaware Trustee may
give notice of to the Holders of the Securities):
White Clay Center Route 273 Newark, Delaware 19711 Attention: Corporate
Trust Department
(d) if given to the Holder of the Common Securities, at the mailing address
of the Sponsor set forth below (or such other address as the Holder of the
Common Securities may give notice of to the Trust):
Litchfield Financial Corporation, 430 Main Street, Williamstown,
Massachusetts 01267, Attention: Treasurer, Telecopy: (413) 458-1020
(e) if given to any other Holder, at the address set forth on the books and
records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee shall also
be sent to the Trust. All notices shall be deemed to have been given, when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
Section 14.02. Undertaking for Costs.
All parties to this Declaration agree, and each Holder of any Securities by
his or her 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 Declaration, or in any suit against the Property Trustee
for any action taken or omitted by it as Property Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 1402
shall not apply to any suit instituted by the Property Trustee, to any suit
instituted by any Holder of Preferred Securities, or group of Holders of
Preferred Securities, holding more than 10% in aggregate liquidation amount
of the outstanding Preferred Securities, or to any suit instituted by any
Holder of Preferred Securities for the enforcement of the payment of the
principal of (or premium, if any) or interest on the Debentures, on or after
the respective due dates expressed in such Debentures.
48
Section 14.03. Governing Law.
This Declaration, the Securities and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State
of Delaware and all rights and remedies shall be governed by such laws
without regard to principles of conflict of laws.
Section 14.04. Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or
any provision hereof.
Section 14.05. Partial Enforceability.
If any provision of this Declaration, or the application of such provision to
any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to Persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
Section 14.06. Counterparts.
This Declaration may contain more than one counterpart of the signature pages
and this Declaration may be executed by the affixing of the signature of the
Sponsor and each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed
a single signature page.
Section 14.07. Intention of the Parties.
It is the intention of the parties hereto that the Trust not be classified
for United States Federal income tax purposes as an association taxable as a
corporation or partnership but that the Trust be treated as a grantor trust
for United States federal income tax purposes. The provisions of this
Declaration shall be interpreted to further this intention of the parties.
Section 14.08. Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included,
and all covenants and agreements in this Declaration by the Sponsor and the
Trustees shall bind and inure to the benefit of their respective successors
and assigns, whether so expressed.
Section 14.09. No Recourse.
49
The Trust's obligations hereunder are intended to be the obligations of the
Trust and no recourse for the payment of Distributions, or for any claim upon
the Securities or otherwise in respect thereof, shall be had against any Holder
of Securities or any Affiliate of a Holder of Securities, solely by reason of
such Person's being a Holder of Securities or an Affiliate of a Holder of
Securities, it being understood that the Holder of Securities, solely by reason
of being a Holder of Securities, has limited liability (in accordance with the
provisions of the Business Trust Act) for the liabilities and obligations of the
Trust. Nothing contained in this Section 14.09 shall be construed to limit the
exercise or enforcement, in accordance with the terms of this Declaration, the
Preferred Guarantee and the Indenture, of the rights and remedies against the
Trust or the Sponsor.
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as
of the day and year first above written.
LITCHFIELD FINANCIAL CORPORATION,
as Sponsor
By: /s/ R.A. Stratton
Name: Richard A. Stratton
Title: President and Chief Executive Officer
/s/ Ronald E. Rabidou
Ronald E. Rabidou, as Regular Trustee
/s/ Heather A. Sica
Heather A. Sica, as Regular Trustee
/s/ John J. Malloy
John J. Malloy, as Regular Trustee
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Michael Culhane
Name: Michael Culhane
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
Name: Walter N. Gitlin
Title: Authorized Signatory
50
EXHIBIT A
CERTIFICATE OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Litchfield Capital Trust I (the "Trust"), dated as
of April ___, 1999, is being duly executed and filed by the undersigned, as
trustees, with the Secretary of State of the State of Delaware to form a
business trust under the Delaware Business Trust Act (12 Del.
Code (S) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is Litchfield
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are The
Bank of New York (Delaware), a Delaware banking corporation, White Clay
Center, Route 273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective at the time of
its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust at
the time of filing this Certificate of Trust, have executed this Certificate of
Trust as of the date first above written.
LITCHFIELD FINANCIAL
CORPORATION,
as Sponsor
By:______________________________
Name:
Title:
- --------------------------------
John J. Malloy, not in his individual
capacity, but solely as Regular Trustee
- --------------------------------
Heather A. Sica, not in her individual
capacity, but solely as Regular Trustee
- --------------------------------
Ronald E. Rabidou, not in his individual capacity, but solely as Regular Trustee
THE BANK OF NEW YORK, not in its individual capacity, but solely as Property
Trustee
By:______________________________
Name:
Title:
THE BANK OF NEW YORK
(DELAWARE),
not in its individual capacity, but solely
as Delaware Trustee
By:______________________________
Name:
Title:
51
EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust of
Litchfield Capital Trust I dated as of May 19, 1999 (as amended from time to
time, the "Declaration"), the designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth below (each capitalized term used but not defined herein having the
meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER. 10% Series A Preferred Securities of the Trust with
an aggregate liquidation amount at any time outstanding with respect to the
assets of the Trust of Twenty-Five Million Dollars ($25,000,000) and 375,000
Preferred Securities of the Trust with an aggregate liquidation amount at any
time outstanding with respect to the assets of the Trust of Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000), each with a liquidation amount with
respect to the assets of the Trust of $10 per Preferred Security, are hereby
designated as "10% Series A Trust Preferred Securities,." The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in the
form attached hereto as Annex I, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice or
to conform to the rules of any stock exchange or automated quotation system on
which the Preferred Securities are then listed, traded or quoted. In connection
with the issuance and sale of the Preferred Securities and the Common
Securities, the Trust will purchase as trust assets Debentures of Litchfield
Financial having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities so
issued and bearing interest at an annual rate equal to the annual Distribution
rate on the Preferred Securities and the Common Securities and having payment
and redemption provisions which correspond to the payment and redemption
provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Preferred Security will be
fixed at a rate per annum of ____% (the "Coupon Rate") of the stated liquidation
amount of $10 per Preferred Security, such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one calendar quarter will accumulate additional
distributions thereon at the Coupon Rate per annum (to the extent permitted by
applicable law), compounded quarterly. The term "Distributions" as used herein
means such periodic cash distributions and any such additional distributions
payable unless otherwise stated. A Distribution will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Debentures held by the Property Trustee and to the extent the Trust has funds on
hand legally available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
(b) Distributions on the Preferred Securities will accumulate from May 19,
1999, and will be payable quarterly in arrears, on June 30, September 30,
December 31, and March 31 of each year, commencing
52
on June 30, 1999, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Debentures held by
the Property Trustee. So long as Litchfield Financial shall not be in default
in the payment of interest on the Debentures, Litchfield Financial has the
right under the Indenture for the Debentures to defer payments of interest on
the Debentures by extending the interest payment period at any time and from
time to time on the Debentures for a period not exceeding 20 consecutive
quarterly interest periods (each, an "Extension Period"), during which
Extension Period no interest shall be due and payable on the Debentures. As a
consequence of such deferral, Distributions shall also be deferred. Despite
such deferral, Distributions will continue to accumulate with additional
distributions thereon (to the extent permitted by applicable law but not at a
rate greater than the rate at which interest is then accruing on the
Debentures) at the Coupon Rate compounded quarterly during any such Extension
Period; provided that no Extension Period shall extend beyond the stated
maturity of the Debentures. Prior to the termination of any such Extension
Period, Litchfield Financial may further extend such Extension Period;
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarterly interest
periods. Upon the termination of any Extension Period and the payment of all
amounts then due, Litchfield Financial may commence a new Extension Period,
subject to the above requirements. Payments of accumulated Distributions will
be payable to Holders of Preferred Securities as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period.
(c) Distributions on the Preferred Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and
records of the Trust on the relevant record dates. While the Preferred
Securities remain in book-entry only form, the relevant record dates shall be
one business day prior to the relevant Distribution date, and if the
Preferred Securities are no longer in book-entry only form, the relevant
record dates will be the fifteenth (15th) day of the month prior to the
relevant Distribution date, which record and payment dates correspond to the
record and interest payment dates on the Debentures. Distributions payable on
any Preferred Securities that are not punctually paid on any Distribution
payment date as a result of Litchfield Financial' having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the person in whose name such Preferred Security is registered on
the relevant record date, and such defaulted Distribution will instead be
payable to the person in whose name such Preferred Security is registered on
the special record date established by the Regular Trustees, which record
date shall correspond to the special record date or other specified date
determined in accordance with the Indenture; provided, however, that
Distributions shall not be considered payable on any Distribution payment
date falling within an Extension Period unless Litchfield Financial has
elected to make a full or partial payment of interest accrued on the
Debentures on such Distribution payment date. Subject to any applicable laws
and regulations and the provisions of the Declaration, each payment in
respect of the Preferred Securities will be made as described in paragraph 8
hereof. If any date on which Distributions are payable on the Preferred
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
53
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such payment was
originally payable.
(d) All Distributions paid with respect to the Preferred Securities and the
Common Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for the
Trust that is not accounted for under the Declaration, such money or property
shall be distributed Pro Rata among the Holders of the Preferred Securities
and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any voluntary
or involuntary dissolution of the Trust, the Holders of the Preferred Securities
and the Common Securities will be entitled to receive Pro Rata solely out of the
assets of the Trust legally available for distribution to Holders of Preferred
Securities and Common Securities after satisfaction of liabilities to the
creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $10 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets on hand legally available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct the
Property Trustee in writing at any time to dissolve the Trust and to
distribute Debentures to Holders in exchange for Securities (which direction
is optional and wholly within the discretion of the Holder of the Common
Securities). Upon the receipt of any such written direction, the Property
Trustee shall promptly (i) distribute Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of the Preferred
Securities and the Common Securities held by each Holder, which Debentures
bear accrued and unpaid interest in an amount equal to the accumulated and
54
unpaid Distributions on the Preferred Securities and the Common Securities of
such Holder, in exchange for the Preferred Securities and Common Securities
of such Holder and (ii) dissolve the Trust.
(c) On the date fixed for any distribution of Debentures, upon dissolution of
the Trust, (i) the Preferred Securities will no longer be deemed to be
outstanding and may be canceled by the Regular Trustees, and (ii)
Certificates representing Preferred Securities will be deemed to represent
beneficial interests in the Debentures having an aggregate principal amount
equal to the stated liquidation amount of, and bearing accrued and unpaid
interest equal to accumulated and unpaid Distributions on, such Preferred
Securities until such Certificates are presented to Litchfield Financial or
its agent for transfer or reissuance.
(d) If Debentures are distributed to Holders of the Preferred Securities,
Litchfield Financial, pursuant to the terms of the Indenture, will use its
best efforts to have the Debentures listed on the New York Stock Exchange or
on such other exchange as the Preferred Securities were listed immediately
prior to the distribution of the Debentures.
4. REDEMPTION OF DEBENTURES. The Preferred Securities may be redeemed only if
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities are
repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after June
30, 2004, the proceeds of such repayment will be promptly applied to redeem
Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice,
at a redemption price of $10 per Preferred Security and Common Security plus
an amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Preferred Securities will be
redeemed as described in paragraph 4(f)(ii) below. If a partial redemption
would result in the delisting of the Preferred Securities by any national
securities exchange or other organization on which the Preferred Securities
are then listed or traded, Litchfield Financial pursuant to the Indenture
will redeem Debentures only in whole and, as a result, the Trust may redeem
the Preferred Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be
continuing, Litchfield Financial shall have the right at any time, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures in whole
55
or in part for cash at the Redemption Price within 90 days following the
occurrence of such Special Event, and promptly following such redemption,
Preferred Securities and Common Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Debentures so redeemed
will be redeemed by the Trust at the Redemption Price on a Pro Rata basis.
The Common Securities will be redeemed Pro Rata with the Preferred
Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities will have a priority over the Common
Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
obtained an Opinion of Counsel experienced in such matters (a "Dissolution
Tax Opinion") to the effect that on or after May 19, 1999, as a result of (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after May 19, 1999, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States Federal income tax with respect
to income accrued or received on the Debentures, (ii) the Trust is, or will
be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest
payable by Litchfield Financial to the Trust on the Debentures is not, or
within 90 days of the date thereof will not be, deductible by Litchfield
Financial for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after May 19, 1999.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accumulated and unpaid Distributions have been paid on
all Preferred Securities for all quarterly Distribution periods terminating
on or prior to the date of redemption.
(e) [Intentionally omitted.]
56
(f) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 30 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this paragraph 4(f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first- class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding Preferred Securities
are to be redeemed, the Preferred Securities to be redeemed will be redeemed
Pro Rata from each Holder of Preferred Securities, it being understood that,
in respect of Preferred Securities registered in the name of and held of
record by DTC (or successor Clearing Agency) or any other nominee, the
Preferred Securities will be redeemed from, and the distribution of the
proceeds of such redemption will be made to, DTC (or successor Clearing
Agency).
(iii) Subject to paragraph 8 hereof, if the Trust gives a
Redemption/Distribution Notice in respect of a redemption of Preferred
Securities as provided in this paragraph 4 then (A) while the Preferred
Securities are in book-entry only form, with respect to the Preferred
Securities, by 10:00 a.m., New York City time, on the redemption date, provided
that Litchfield Financial has paid the Property Trustee, in immediately
available funds, a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will deposit
irrevocably with DTC (or successor Clearing Agency) funds sufficient to pay the
applicable Redemption Price with respect to the Preferred Securities and will
give DTC (or successor Clearing Agency) irrevocable instructions and authority
to pay the Redemption Price to the Holders of the Preferred Securities and (B)
if the Preferred Securities are issued in definitive form, with respect to the
Preferred Securities and provided that Litchfield Financial has paid the
Property Trustee, in immediately available funds, a sufficient amount of cash in
connection with the related redemption or maturity of the Debentures, the
Property Trustee will pay the relevant Redemption Price to the Holders of such
Preferred Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
redemption date, Distributions will cease to accumulate on the Preferred
Securities called for redemption, such Preferred Securities will no longer be
deemed to be outstanding and all rights of Holders of such Preferred Securities
so called for redemption will cease, except the right of the Holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Securities
which have been so called for redemption. If any
57
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid either by
the Property Trustee or by Litchfield Financial pursuant to the Preferred
Guarantee, Distributions on such Preferred Securities will continue to
accumulate, from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on
behalf of the Trust to DTC or its nominee (or any successor Clearing Agency
or its nominee) if the Global Certificates have been issued or, if Definitive
Preferred Security Certificates have been issued, to the Holders of the
Preferred Securities.
(v) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Litchfield Financial or
any of its Affiliates may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.
5. VOTING RIGHTS. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Securities, whether
by way of amendment to the Declaration, other than as described in Section
12.01(b) of the Declaration, or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section
8.01 of the Declaration, then the Holders of outstanding Securities will be
entitled to vote on such amendment or proposal as a single class and such
amendment or proposal shall not be effective except with the approval of the
Holders of Securities of at least a Majority in liquidation amount of the
Securities, voting together as a single class; provided, however, that (A) if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Preferred Securities or the Common Securities, then only the
affected class of Securities will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with
the approval of at least a Majority in liquidation amount of such class of
Securities and (B) amendments to the Declaration shall be subject to such
further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
58
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the Securities, or, in the case of clause (2) above, each
Holder of Securities; and provided, further, that the Property Trustee shall be
under no obligation to take any action in accordance with the directions of the
Holders of Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an Opinion of Counsel experienced in such matters to the
effect that the Trust will not be classified for United States Federal income
tax purposes as other than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the Indenture (the "Debenture Trustee"), or
exercising any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
6.06 of the Indenture or (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures,
without, in each case, obtaining the prior approval of the Holders of a Majority
in liquidation amount of all outstanding Preferred Securities and Common
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities except by
subsequent vote of such Holders. The Property Trustee shall notify each Holder
of Preferred Securities of any notice of default with respect to the Debentures.
In addition to obtaining the foregoing approvals of such Holders of the
Preferred Securities and Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an Opinion of Counsel experienced in such
matters to the effect that for United States Federal income tax purposes the
Trust will not be classified as other than a grantor trust on account of such
action.
If an Event of Default has occurred and is continuing, then the Holders of a
Majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it as
a holder of the Debentures. If the Property Trustee fails to enforce its rights
under the Debentures, a Holder of Preferred Securities, to the extent permitted
by applicable law, may, after a period of 30 days has elapsed since such
Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Sponsor to enforce the
Property Trustee's rights under the Debentures without first instituting any
legal proceeding against the Property Trustee or any other Person; provided
further, that, if an Event of Default has occurred and is continuing and such
event is attributed to the failure of the Sponsor to pay interest or principal
on the Debentures on the date such
59
interest or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder (a "Holder Direct
Action") on or after the respective due date specified in the Debentures. In
connection with such Holder Direct Action, the Sponsor will be subrogated to the
rights of such Holder of Preferred Securities to the extent of any payment made
by the Sponsor to such Holders of Preferred Securities in such Holder Direct
Action. Except as provided in the preceding sentences, the Holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the Holders of the Debentures.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Preferred Securities are entitled to vote to be mailed to each Holder
of record of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.
No vote or consent of the Holders of Preferred Securities will be required for
the Trust to redeem and cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration.
Notwithstanding that Holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by Litchfield Financial or by any
Affiliate of Litchfield Financial shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
Except as provided in this paragraph 5, Holders of the Preferred Securities will
have no rights to increase or decrease the number of Trustees or to appoint,
remove or replace a Trustee, which voting rights are vested exclusively in the
Holders of the Common Securities.
6. PRO RATA TREATMENT. A reference in these terms of the Preferred Securities to
any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities
60
pro rata according to the aggregate liquidation amount of Common Securities held
by the relevant Holder relative to the aggregate liquidation amount of all
Common Securities outstanding.
7. RANKING. The Preferred Securities rank pari passu and payment thereon will be
made Pro Rata with the Common Securities, except that when an Event of Default
occurs and is continuing, the rights of Holders of Preferred Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise rank in priority to the rights of Holders of the Common Securities.
8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and
payments on redemption of the Preferred Securities will be payable, the transfer
of the Preferred Securities will be registrable, and Preferred Securities will
be exchangeable for Preferred Securities of other denominations of a like
aggregate liquidation amount, at the corporate trust office of the Property
Trustee in The City of New York; provided that payment of Distributions may be
made at the option of the Regular Trustees on behalf of the Trust by check
mailed to the address of the persons entitled thereto and that the payment on
redemption of any Preferred Security will be made only upon surrender of such
Preferred Security to the Property Trustee.
9. ACCEPTANCE OF INDENTURE AND PREFERRED GUARANTEE. Each Holder of
Preferred Securities, by the acceptance thereof, agrees to the provisions of (i)
the Preferred Guarantee, including the subordination provisions therein, and
(ii) the Indenture and the Debentures, including the subordination provisions of
the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Preferred Securities shall have no
preemptive or similar rights to subscribe to any additional Preferred Securities
or Common Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration. The
Trust will provide a copy of the Declaration and the Indenture to a Holder of
Preferred Securities without charge on written request to the Trust at its
principal place of business.
61
Annex I
FORM OF PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - THIS PREFERRED
SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR
PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO
TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO LITCHFIELD
CAPITAL TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Certificate Number Number of Preferred Securities: ____________
__________________
Aggregate Liquidation Amount: $____________
CUSIP NO. ____________
Certificate Evidencing Preferred Securities
of
Litchfield Capital Trust I
____% Series A Trust Preferred Securities
(liquidation amount $10 per Preferred Security)
Litchfield Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that _________ (the
"Holder") is the registered owner of _____
62
(______) preferred securities of the Trust representing preferred undivided
beneficial interests in the assets of the Trust and designated the ____% Series
A Trust Preferred Securities (liquidation amount $10 per Preferred Security)
(the "Preferred Securities"). The Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this Certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this Certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of ___________, ____, as the same may
be amended from time to time (the "Declaration") including the designation of
the terms of Preferred Securities as set forth in Exhibit B thereto. The
Preferred Securities and the Common Securities issued by the Trust pursuant to
the Declaration represent undivided beneficial interests in the assets of the
Trust, including the Debentures (as defined in the Declaration) issued by
Litchfield Financial Corporation, a Massachusetts corporation ("Litchfield
Financial"), to the Trust pursuant to the Indenture referred to in the
Declaration. The Holder is entitled to the benefits of the Guarantee Agreement
of Litchfield Financial dated as of __________, ____, as the same may be amended
from time to time (the "Guarantee") to the extent provided therein. The Trust
will furnish a copy of the Declaration, the Guarantee and the Indenture to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is deemed to have
(i) agreed to the terms of the Indenture and the Debentures, including that the
Debentures are subordinate and junior in right of payment to all Senior Debt (as
defined in the Indenture) as and to the extent provided in the Indenture, and
(ii) agreed to the terms of the Guarantee, including that the Guarantee is
subordinate and junior in right of payment to all other liabilities of
Litchfield Financial, including the Debentures, except those made pari passu or
subordinate by their terms, and senior to all capital stock (other than the most
senior preferred stock issued, from time to time, if any, by Litchfield
Financial, which preferred stock will rank pari passu with the Guarantee) now or
hereafter issued by Litchfield Financial and to any guarantee now or hereafter
entered into by Litchfield Financial in respect of any of its capital stock
(other than the most senior preferred stock issued, from time to time, if any,
by Litchfield Financial).
Upon receipt of this Certificate, the Holder is bound by the Declaration and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this Certificate.
LITCHFIELD CAPITAL TRUST I
--------------------------------
Ronald E. Rabidou, as Regular Trustee
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--------------------------------
Heather A. Sica, as Regular Trustee
--------------------------------
John J. Malloy, as Regular Trustee
Dated:
Countersigned and Registered:
Transfer Agent and Registrar
By:___________________________
Authorized Signatory
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[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a rate per
annum of ___ % (the "Coupon Rate") of the stated liquidation amount of $10 per
Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will accumulate additional distributions thereon at the Coupon
Rate per annum (to the extent permitted by applicable law), compounded
quarterly. The term "Distributions" as used herein means such periodic cash
distributions and any such additional distributions payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Property Trustee and to the extent the
Trust has funds on hand legally available therefor. The amount of Distributions
payable for any period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution period for which Distributions
are computed, Distributions will be computed on the basis of the actual number
of days elapsed per 90-day quarter.
Distributions on the Preferred Securities will accumulate from _________, ____,
and will be payable quarterly in arrears, on ______, ______, ______ and ______
of each year, commencing on ________, ____, but only if and to the extent that
interest payments are made in respect of the Debentures held by the Property
Trustee. So long as Litchfield Financial shall not be in default in the payment
of interest on the Debentures, Litchfield Financial has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 20 consecutive quarterly interest periods
(each an "Extension Period"), during which Extension Period no interest shall be
due and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions will
continue to accumulate with additional distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
quarterly during any such Extension Period; provided that no Extension Period
shall extend beyond the stated maturity of the Debentures. Prior to the
termination of any such Extension Period, Litchfield Financial may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods. Upon the termination of any Extension Period and the
payment of all amounts then due, Litchfield Financial may commence a new
Extension Period, subject to the above requirements. Payments of accumulated
Distributions will be payable to Holders of Preferred Securities as they appear
on the books and records of the Trust on the first record date after the end of
the Extension Period.
The Preferred Securities shall be redeemable as provided in the Declaration.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: ______________________________________
Signature: _________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THIS PREFERRED SECURITY
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
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EXHIBIT C
TERMS OF
COMMON SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust of
Litchfield Capital Trust I dated as of May 19, 1999 (as amended from time to
time, the "Declaration"), the designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth below (each capitalized term used but not defined herein having the
meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER. 10% Series A Common Securities of the Trust with an
aggregate liquidation amount at any time outstanding with respect to the assets
of the Trust of Seven Hundred Seventy-Three Thousand Two Hundred Dollars
($773,200), and each with a liquidation amount with respect to the assets of the
Trust of $10 per Common Security, and 77,320 Common Securities of the Trust with
an aggregate liquidation amount at any time outstanding with respect to the
assets of the Trust of Seven Hundred Seventy-Three Thousand Two Hundred Dollars
($773,200), and each with a liquidation amount with respect to the assets of the
Trust of $10 per Common Security for issuance upon the exercise of the option
granted to the Underwriters, solely to cover over-allotments, if any, are hereby
designated as "10% Series A Trust Common Securities." The Common Security
Certificates evidencing the Common Securities shall be substantially in the form
attached hereto as Annex I, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice. The Common
Securities are to be issued and sold to Litchfield Financial in consideration of
$773,200 in cash. In connection with the issuance and sale of the Preferred
Securities and the Common Securities, the Trust will purchase as trust assets
Debentures of Litchfield Financial having an aggregate principal amount equal to
the aggregate liquidation amount of the Preferred Securities and the Common
Securities so issued, and bearing interest at an annual rate equal to the annual
Distribution rate on the Preferred Securities and the Common Securities and
having payment and redemption provisions which correspond to the payment and
redemption provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Common Security will be
fixed at a rate per annum of 10% (the "Coupon Rate") of the stated liquidation
amount of $10 per Common Security, such rate being the rate of interest payable
on the Debentures to be held by the Property Trustee. Distributions in arrears
for more than one calendar quarter will accumulate additional distributions
thereon at the Coupon Rate per annum (to the extent permitted by applicable
law), compounded quarterly. The term "Distributions" as used herein means such
periodic cash distributions and any such additional distributions payable unless
otherwise stated. A Distribution will be made by the Property Trustee only to
the extent that interest payments are made in respect of the Debentures held by
the Property Trustee and to the extent the Trust has funds on hand legally
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
67
(b) Distributions on the Common Securities will accumulate from May 19, 1999,
and will be payable quarterly in arrears, on June 30, September 30, December
31, and March 31 of each year commencing on June 30, 1999, except as
otherwise described below, but only if and to the extent that interest
payments are made in respect of the Debentures held by the Property Trustee.
So long as Litchfield Financial shall not be in default in the payment of
interest on the Debentures, Litchfield Financial has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures
by extending the interest payment period at any time and from time to time on
the Debentures for a period not exceeding 20 consecutive quarterly interest
periods (each, an "Extension Period"), during which Extension Period no
interest shall be due and payable on the Debentures. As a consequence of such
deferral, Distributions shall also be deferred. Despite such deferral,
Distributions will continue to accumulate with additional distributions
thereon (to the extent permitted by applicable law but not at a rate greater
than the rate at which interest is then accruing on the Debentures) at the
Coupon Rate compounded quarterly during any such Extension Period; provided
that no Extension Period shall extend beyond the stated maturity of the
Debentures. Prior to the termination of any such Extension Period, Litchfield
Financial may further extend such Extension Period; provided that such
Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarterly interest periods. Upon the
termination of any Extension Period and the payment of all amounts then due,
Litchfield Financial may commence a new Extension Period, subject to the
above requirements. Payments of accumulated Distributions will be payable to
Holders of Common Securities as they appear on the books and records of the
Trust on the first record date after the end of the Extension Period.
(c) Distributions on the Common Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and
records of the Trust on the relevant record dates. While the Preferred
Securities remain in book-entry only form, the relevant record dates for the
Common Securities shall be one business day prior to the relevant
Distribution date, and if the Preferred Securities are no longer in
book-entry only form, the relevant record dates for the Common Securities
will be the fifteenth (15th) day of the month prior to the relevant
Distribution date, which record and payment dates correspond to the record
and interest payment dates on the Debentures. Distributions payable on any
Common Securities that are not punctually paid on any Distribution payment
date as a result of Litchfield Financial' having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the person in whose name such Common Security is registered on the
relevant record date, and such defaulted Distribution will instead be payable
to the person in whose name such Common Security is registered on the special
record date established by the Regular Trustees, which record date shall
correspond to the special record date or other specified date determined in
accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless Litchfield Financial has elected to make a full or
partial payment of interest accrued on the Debentures on such Distribution
payment date. Subject to any applicable laws and regulations and the
provisions of the Declaration, each payment in respect of the Common
Securities will be made as described in paragraph 8 hereof. If any date on
which Distributions are payable on the Common Securities is not a Business
Day, then payment of the
68
Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on the date such payment was originally payable.
(d) All Distributions paid with respect to the Common Securities and the
Preferred Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for the
Trust that is not accounted for under the Declaration, such money or property
shall be distributed Pro Rata among the Holders of the Preferred Securities
and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any voluntary
or involuntary dissolution of the Trust, the Holders of the Preferred Securities
and the Common Securities will be entitled to receive Pro Rata solely out of the
assets of the Trust legally available for distribution to Holders of Preferred
Securities and Common Securities after satisfaction of liabilities to the
creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $10 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets on hand legally available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct
the Property Trustee in writing at any time to dissolve the Trust and
to distribute Debentures to Holders in exchange for Securities (which
direction is optional and wholly within the discretion of the Holder of
the Common Securities). Upon the receipt of any such written direction,
the Property Trustee shall promptly (i) distribute Debentures in an
aggregate principal amount
69
equal to the aggregate stated liquidation amount of the Preferred
Securities and the Common Securities held by each Holder, which
Debentures bear accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on the Preferred Securities and
the Common Securities of such Holder, in exchange for the Preferred
Securities and Common Securities of such Holder and (ii) dissolve the
Trust.
(c) On the date fixed for any distribution of Debentures, upon
dissolution of the Trust, (i) the Common Securities will no longer be
deemed to be outstanding and may be canceled by the Regular Trustees,
and (ii) Certificates representing Common Securities will be deemed to
represent beneficial interests in the Debentures having an aggregate
principal amount equal to the stated liquidation amount of, and bearing
accrued and unpaid interest equal to accumulated and unpaid
Distributions on, such Common Securities until such Certificates are
presented to Litchfield Financial or its agent for transfer or
reissuance.
4. REDEMPTION OF DEBENTURES. The Common Securities may be redeemed only
if Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Preferred Securities and the Common
Securities are repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after June
30, 2004, the proceeds of such repayment will be promptly applied to redeem
Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice,
at a redemption price of $10 per Preferred Security and Common Security plus
an amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Common Securities will be
redeemed as described in paragraph 4(e)(ii) below. If a partial redemption
would result in the delisting of the Preferred Securities by any national
securities exchange or other organization on which the Preferred Securities
are then listed or traded, Litchfield Financial pursuant to the Indenture
will redeem Debentures only in whole and, as a result, the Trust may redeem
the Common Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each, a "Special Event") shall occur and be
continuing, Litchfield Financial shall have the right at any time, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures in whole
or in part for cash at the Redemption Price within 90 days following the
occurrence of such Special Event, and promptly following such redemption,
Preferred Securities and Common
70
Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so redeemed will be redeemed by the Trust
at the Redemption Price on a Pro Rata basis. The Common Securities will be
redeemed Pro Rata with the Preferred Securities, except that if an Event of
Default has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
obtained an Opinion of Counsel experienced in such matters (a "Dissolution
Tax Opinion") to the effect that on or after May 19, 1999, as a result of (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after May 19, 1999, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States Federal income tax with respect
to income accrued or received on the Debentures, (ii) the Trust is, or will
be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest
payable by Litchfield Financial to the Trust on the Debentures is not, or
within 90 days of the date thereof will not be, deductible by Litchfield
Financial for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after May 19, 1999.
(d) The Trust may not redeem fewer than all the outstanding Common Securities
unless all accumulated and unpaid Distributions have been paid on all Common
Securities for all quarterly Distribution periods terminating on or prior to
the date of redemption.
(e) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 30 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date
71
<PAGE>
of redemption or exchange and the dates on which notices are given pursuant
to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed
to be given on the day such notice is first mailed by first- class mail,
postage prepaid, to Holders of Preferred Securities and Common Securities.
Each Redemption/Distribution Notice shall be addressed to the Holders of
Preferred Securities and Common Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common Securities are
to be redeemed, the Common Securities to be redeemed will be redeemed Pro
Rata from each Holder of Common Securities (subject to adjustment to
eliminate fractional Common Securities).
(iii) If the Trust gives a Redemption/Distribution Notice in respect of a
redemption of Common Securities as provided in this paragraph 4 (which notice
will be irrevocable), then immediately prior to the close of business on the
redemption date, provided that Litchfield Financial has paid to the Property
Trustee in immediately available funds a sufficient amount of cash in connection
with the related redemption or maturity of the Debentures, Distributions will
cease to accumulate on the Common Securities called for redemption, such Common
Securities will no longer be deemed to be outstanding and all rights of Holders
of such Common Securities so called for redemption will cease, except the right
of the Holders of such Common Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Common Securities which have been so called for redemption. If any date fixed
for redemption of Common Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of Common Securities
is improperly withheld or refused and not paid by the Property Trustee,
Distributions on such Common Securities will continue to accumulate, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on
behalf of the Trust to Holders of the Common Securities.
5. VOTING RIGHTS. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the
Common Securities will have no voting rights.
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(b) Holders of Common Securities have the sole right under the Declaration to
increase or decrease the number of Trustees, and to appoint, remove or
replace a Trustee, any such increase, decrease, appointment, removal or
replacement to be approved by Holders of Common Securities representing a
Majority in liquidation amount of the Common Securities.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration, other than as described in Section 12.01(b) of the
Declaration, or otherwise, or (ii) the dissolution, winding-up or termination of
the Trust, other than as described in Section 8.01 of the Declaration or Section
3 of this Exhibit C or Section 3 of Exhibit B, then the Holders of outstanding
Securities will be entitled to vote on such amendment or proposal as a single
class and such amendment or proposal shall not be effective except with the
approval of the Holders of Securities of at least a Majority in liquidation
amount of the Securities, voting together as a single class; provided, however,
that (A) if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class of Securities will be entitled to vote on such amendment
or proposal and such amendment or proposal shall not be effective except with
the approval of at least a Majority in liquidation amount of such class of
Securities, (B) the rights of Holders of Common Securities under Section 5.02 of
the Declaration to increase or decrease the number of, and to appoint, replace
or remove, Trustees shall not be amended without the consent of each Holder of
Common Securities, and (C) amendments to the Declaration shall be subject to
such further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the Securities, or, in the case of clause (2) above, each
Holder of Securities; and provided, further, that the Property Trustee shall be
under no obligation to take any action in accordance with the directions of the
Holders of Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an Opinion of Counsel experienced in such matters to the
effect that the Trust will not be classified for United States Federal income
tax purposes as other than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the
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Indenture (the "Debenture Trustee"), or exercising any trust or power conferred
on such Debenture Trustee with respect to the Debentures, (ii) waive any past
default that is waivable under Section 6.06 of the Indenture or (iii) exercise
any right to rescind or annul a declaration of acceleration of the maturity of
the principal of the Debentures, without, in each case, obtaining the prior
approval of the Holders of a Majority in liquidation amount of all outstanding
Common Securities and Preferred Securities. The Trustees shall not revoke any
action previously authorized or approved by a vote of the Holders of the Common
Securities except by subsequent vote of such Holders. The Property Trustee shall
notify each Holder of Common Securities of any notice of default with respect to
the Debentures. In addition to obtaining the foregoing approvals of such Holders
of the Common Securities and Preferred Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an Opinion of Counsel experienced
in such matters to the effect that for United States Federal income tax purposes
the Trust will not be classified as other than a grantor trust on account of
such action.
Notwithstanding any other provision of these terms, each Holder of Common
Securities will be deemed to have waived any Event of Default with respect to
the Common Securities and its consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived by the Holders of
Preferred Securities as provided in the Declaration or otherwise eliminated, and
until all Events of Default with respect to the Preferred Securities have been
so cured, waived by the Holders of Preferred Securities or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the Holders
of Preferred Securities and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee in accordance with the terms of
the Declaration or of the Securities. In the event that any Event of Default
with respect to the Preferred Securities is waived by the Holders of Preferred
Securities as provided in the Declaration, the Holders of Common Securities
agree that such waiver shall also constitute the waiver of such Event of Default
with respect to the Common Securities for all purposes under the Declaration
without any further act, vote or consent of the Holders of the Common
Securities.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities or pursuant to written consent.
The Regular Trustees will cause a notice of any meeting at which Holders of
Common Securities are entitled to vote to be mailed to each Holder of record of
Common Securities. Each such notice will include a statement setting forth (i)
the date of such meeting, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote and (iii)
instructions for the delivery of proxies.
No vote or consent of the Holders of Common Securities will be required for the
Trust to redeem and cancel Common Securities or to distribute the Debentures in
accordance with the Declaration.
74
6. PRO RATA TREATMENT. A reference in these terms of the Common Securities to
any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
7. RANKING. The Common Securities rank pari passu and payment thereon will be
made Pro Rata with the Preferred Securities, except that when an Event of
Default occurs and is continuing, the rights of Holders of Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise are subordinate to the rights of Holders of the Preferred Securities.
8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and payments
on redemption of the Common Securities will be payable, the transfer of the
Common Securities will be registrable, and Common Securities will be
exchangeable for Common Securities of other denominations of a like aggregate
liquidation amount, at the principal corporate trust office of the Property
Trustee in The City of New York; provided that payment of Distributions may be
made at the option of the Regular Trustees on behalf of the Trust by check
mailed to the address of the persons entitled thereto and that the payment on
redemption of any Common Security will be made only upon surrender of such
Common Security to the Property Trustee. Notwithstanding the foregoing,
transfers of Common Securities are subject to conditions set forth in Section
9.01(c) of the Declaration.
9. ACCEPTANCE OF INDENTURE. Each Holder of Common Securities, by the acceptance
thereof, agrees to the provisions of Indenture and the Debentures, including the
subordination provisions of the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Common Securities shall have no
preemptive or similar rights to subscribe to any additional Common Securities or
Preferred Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration. The
Trust will provide a copy of the Declaration and the Indenture to a Holder of
Common Securities without charge on written request to the Trust at its
principal place of business.
75
Annex I
FORM OF COMMON SECURITY CERTIFICATE
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
Litchfield Capital Trust I
____% Series A Trust Common Securities
(liquidation amount $10 per Common Security)
Litchfield Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of ____________________________ (_________)
common securities of the Trust representing common undivided beneficial
interests in the assets of the Trust and designated the "____% Series A Trust
Common Securities" (liquidation amount $10 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer and satisfaction of
the other conditions set forth in the Declaration (as defined below) including,
without limitation, Section 9.01(c) thereof. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this Certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Declaration of Trust of
the Trust dated as of __________, ____, as the same may be amended from time to
time (the "Declaration") including the designation of the terms of Common
Securities as set forth in Exhibit C thereto. The Common Securities and the
Preferred Securities issued by the Trust pursuant to the Declaration represent
undivided beneficial interests in the assets of the Trust, including the
Debentures (as defined in the Declaration) issued by Litchfield Financial
Corporation, a Massachusetts corporation ("Litchfield Financial"), to the Trust
pursuant to the Indenture referred to in the Declaration. The Trust will furnish
a copy of the Declaration and the Indenture to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
The Holder of this Certificate, by accepting this Certificate, is deemed to have
agreed to the terms of the Indenture and the Debentures, including that the
Debentures are subordinate and junior in right
76
of payment to all Senior Debt (as defined in the Supplemental Indenture) as and
to the extent provided in the Indenture.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this Certificate
this ___ day of -------------, ----.
LITCHFIELD CAPITAL TRUST I
--------------------------------
John J. Malloy, as Regular Trustee
--------------------------------
Heather A. Sica, as Regular Trustee
--------------------------------
Ronald E. Rabidou, as Regular Trustee
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per annum
of ___ % (the "Coupon Rate") of the stated liquidation amount of $10 per Common
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more than one quarter
will accumulate additional distributions thereon at the Coupon Rate per annum
(to the extent permitted by applicable law) compounded quarterly. The term
"Distributions" as used herein means such periodic cash distributions and any
such additional distributions payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Trust has funds on hand
legally available therefor. The amount of Distributions payable for any period
will be computed for any full quarterly Distribution period on the basis of a
360-day year of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
Distributions on the Common Securities will accumulate from _________, ____ and
will be payable quarterly in arrears, on _____________, ____________,
_____________ and _____________ of each year, commencing on ________, ____, but
only if and to the extent that interest payments are made in respect of the
Debentures held by the Property Trustee. So long as Litchfield Financial shall
not be in default in the payment of interest on the Debentures, Litchfield
Financial has the right under the Indenture for the Debentures to defer payments
of interest on the Debentures by extending the interest payment period at any
time and from time to time on the Debentures for a period not
77
exceeding 20 consecutive quarterly interest periods (each an "Extension
Period"), during which Extension Period no interest shall be due and payable on
the Debentures. As a consequence of such deferral, Distributions shall also be
deferred. Despite such deferral, Distributions will continue to accumulate with
additional distributions thereon (to the extent permitted by applicable law but
not at a rate greater than the rate at which interest is then accruing on the
Debentures) at the Coupon Rate compounded quarterly during any such Extension
Period; provided that no Extension Period shall extend beyond the stated
maturity of the Debentures. Prior to the termination of any such Extension
Period, Litchfield Financial may further extend such Extension Period; provided
that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarterly interest periods.
Upon the termination of any Extension Period and the payment of all amounts then
due, Litchfield Financial may commence a new Extension Period, subject to the
above requirements. Payments of accumulated Distributions will be payable to
Holders of Common Securities as they appear on the books and records of the
Trust on the first record date after the end of the Extension Period.
The Common Securities shall be redeemable as provided in the Declaration.
78
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
_____________________________________________________ agent to transfer this
Common Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date: ________________________
Signature: _________________________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
HWD2: 517541-1
79
Exhibit 4.15
AMENDED AND RESTATED DECLARATION OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
DATED AS OF MAY 19, 1999
TABLE OF CONTENTS
(This Table of Contents does not constitute part of the Amended and
Restated Declaration of Trust and should not have any bearing upon the
interpretation of any of its terms or provisions.)
<TABLE>
<CAPTION>
Page
ARTICLE 1
Definitions
<S> <C>
Section 1.01. Definitions............................................................. 2
Affiliate......................................................................... 2
Book Entry Interest............................................................... 2
Business Day...................................................................... 2
Business Trust Act................................................................ 2
Certificate....................................................................... 2
Certificate of Trust.............................................................. 3
Clearing Agency................................................................... 3
Clearing Agency Participant....................................................... 3
Closing Date...................................................................... 3
Code.............................................................................. 3
Commission........................................................................ 3
Common Securities................................................................. 3
Common Security Certificate....................................................... 3
Covered Person.................................................................... 3
Creditor.......................................................................... 3
Debenture Trustee................................................................. 3
Debentures........................................................................ 3
Definitive Preferred Security Certificates........................................ 3
Delaware Trustee.................................................................. 4
Depositary Agreement.............................................................. 4
Distribution...................................................................... 4
DTC............................................................................... 4
Event of Default.................................................................. 4
Exchange.......................................................................... 4
Exchange Act...................................................................... 4
Fiscal Year....................................................................... 4
Global Certificate................................................................ 4
Holder............................................................................ 4
Holder Direct Action.............................................................. 4
Litchfield Financial.............................................................. 4
Sponsor........................................................................... 4
Indemnified Person................................................................ 4
Indenture......................................................................... 4
Indenture Event of Default........................................................ 4
Investment Company................................................................ 5
Investment Company Act............................................................ 5
Legal Action...................................................................... 5
Liquidation Distribution.......................................................... 5
List of Holders................................................................... 5
Majority in liquidation amount of the Securities.................................. 5
NASD.............................................................................. 5
Nasdaq............................................................................ 5
1933 Act Registration Statement................................................... 5
1934 Act Registration Statement................................................... 5
Officers' Certificate............................................................. 5
Opinion of Counsel................................................................ 6
Original Declaration.............................................................. 6
Paying Agent...................................................................... 6
Payment Amount.................................................................... 6
Person............................................................................ 6
Preferred Guarantee............................................................... 6
Preferred Securities.............................................................. 6
Preferred Security Beneficial Owner............................................... 6
Preferred Security Certificate.................................................... 6
Property Trustee.................................................................. 7
Property Account.................................................................. 7
Quorum............................................................................ 7
Regular Trustee................................................................... 7
Related Party..................................................................... 7
Resignation Request............................................................... 7
Responsible Officer............................................................... 7
Rule 3a-7......................................................................... 7
Securities........................................................................ 7
Securities Act.................................................................... 7
Special Event..................................................................... 7
Successor Delaware Trustee........................................................ 7
Successor Entity.................................................................. 7
Successor Property Trustee........................................................ 7
Successor Securities.............................................................. 7
Super Majority.................................................................... 8
Supplemental Indenture............................................................ 8
10% in liquidation amount of the Securities....................................... 8
Treasury Regulations.............................................................. 8
Trust............................................................................. 8
Trustee........................................................................... 8
Trustees.......................................................................... 8
Trust Indenture Act............................................................... 8
Underwriting Agreement............................................................ 8
ARTICLE 2
Trust Indenture Act
Section 2.01. Trust Indenture Act; Application......................................... 8
Section 2.02. Lists of Holders of Preferred Securities................................. 9
Section 2.03. Reports by the Property Trustee.......................................... 9
Section 2.04. Periodic Reports to the Property Trustee................................. 10
Section 2.05. Evidence of Compliance with Conditions Precedent......................... 10
Section 2.06. Events of Default; Waiver................................................ 10
Section 2.07. Disclosure of Information................................................ 12
ARTICLE 3
Organization
Section 3.01. Name..................................................................... 12
Section 3.02. Office................................................................... 12
Section 3.03. Issuance of the Securities............................................... 12
Section 3.04. Purchase of Debentures................................................... 13
Section 3.05. Purpose.................................................................. 13
Section 3.06. Authority................................................................ 14
Section 3.07. Title to Property of the Trust........................................... 14
Section 3.08. Powers and Duties of the Regular Trustees................................ 14
Section 3.09. Prohibition of Actions by the Trust and the Trustees..................... 17
Section 3.10. Powers and Duties of the Property Trustee................................ 18
Section 3.11. Delaware Trustee......................................................... 21
Section 3.12. Certain Rights and Duties of the Property Trustee........................ 21
Section 3.13. Registration Statement and Related Matters............................... 25
Section 3.14. Filing of Amendments to Certificate of Trust............................. 26
Section 3.15. Execution of Documents by the Regular Trustees........................... 26
Section 3.16. Trustees Not Responsible for Recitals or Issuance of
Securities............................................................... 26
Section 3.17. Duration of the Trust.................................................... 26
Section 3.18. Mergers.................................................................. 26
Section 3.19. Property Trustee May File Proofs of Claim................................ 38
ARTICLE 4
Sponsor
Section 4.01. Purchase of Common Securities by the Sponsor............................. 29
Section 4.02. Expenses................................................................. 29
ARTICLE 5
Trustees
Section 5.01. Number of Trustees; Qualifications....................................... 30
Section 5.02. Appointment, Removal and Resignation of the Trustees..................... 32
Section 5.03. Vacancies among the Trustees............................................. 33
Section 5.04. Effect of Vacancies...................................................... 33
Section 5.05. Meetings................................................................. 34
Section 5.06. Delegation of Power...................................................... 34
Section 5.07. Merger, Conversion, Consolidation or Succession to
Business................................................................. 34
ARTICLE 6
Distributions
Section 6.01. Distributions............................................................ 35
ARTICLE 7
Issuance of the Securities
Section 7.01. General Provisions Regarding the Securities.............................. 35
ARTICLE 8
Dissolution of the Trust
Section 8.01. Dissolution of the Trust................................................. 37
ARTICLE 9
Transfer of Interests
Section 9.01. Transfer of Securities................................................... 37
Section 9.02. Transfer of Certificates................................................. 38
Section 9.03. Deemed Security Holders.................................................. 38
Section 9.04. Book Entry Interests..................................................... 38
Section 9.05. Notices to Holders of Certificates....................................... 39
Section 9.06. Appointment of Successor Clearing Agency................................. 39
Section 9.07. Definitive Preferred Securities Certificates............................. 40
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates........................ 40
ARTICLE 10
Limitation of Liability; Indemnification
Section 10.01. Exculpation............................................................. 40
Section 10.02. Indemnification......................................................... 41
Section 10.03. Outside Business........................................................ 41
ARTICLE 11
Accounting
Section 11.01. Fiscal Year............................................................. 42
Section 11.02. Certain Accounting Matters.............................................. 42
Section 11.03. Banking................................................................. 43
Section 11.04. Withholding............................................................. 43
ARTICLE 12
Amendments and Meetings
Section 12.01. Amendments.............................................................. 43
Section 12.02. Meetings of the Holders of Securities; Action by
Written Consent......................................................... 44
ARTICLE 13
Representations of the Property Trustee and the Delaware Trustee
Section 13.01. Representations and Warranties of the Property
Trustee................................................................. 46
Section 13.02. Representations and Warranties of the Delaware
Trustee................................................................. 46
ARTICLE 14
Miscellaneous
Section 14.01. Notices................................................................. 47
Section 14.02. Undertaking for Costs................................................... 48
Section 14.03. Governing Law........................................................... 49
Section 14.04. Headings................................................................ 49
Section 14.05. Partial Enforceability.................................................. 49
Section 14.06. Counterparts............................................................ 49
Section 14.07. Intention of the Parties................................................ 49
Section 14.08. Successors and Assigns.................................................. 49
Section 14.09. No Recourse............................................................. 49
SIGNATURES AND SEALS
EXHIBIT A: CERTIFICATE OF TRUST
EXHIBIT B: TERMS OF THE PREFERRED SECURITIES
EXHIBIT C: TERMS OF THE COMMON SECURITIES
</TABLE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated and
effective as of May 19, 1999, by John J. Malloy, an individual, Heather A. Sica,
an individual, and Ronald E. Rabidou, an individual, as Regular Trustees (the
"Regular Trustees"), The Bank of New York, a New York banking corporation, as
Property Trustee (the "Property Trustee") and The Bank of New York (Delaware), a
Delaware banking corporation, as Delaware Trustee (the "Delaware Trustee")
(together with all other Persons from time to time duly appointed and serving as
trustees in accordance with the provisions of this Declaration, the "Trustees"),
Litchfield Financial Corporation, a Massachusetts corporation, as trust sponsor
("Litchfield Financial" or the "Sponsor"), and by the holders, from time to
time, of undivided beneficial interests in the assets of the Trust to be issued
pursuant to this Declaration.
WHEREAS, the Sponsor and certain of the Trustees entered into a Declaration of
Trust dated as of May 19, 1999 (the "Original Declaration") in order to
establish Litchfield Capital Trust I, a statutory business trust (the "Trust"),
under the Business Trust Act (as hereinafter defined);
WHEREAS, the Certificate of Trust (the "Certificate of Trust") of the Trust was
filed with the office of the Secretary of State of the State of Delaware on
April 12, 1999; and
WHEREAS, the Trustees and the Sponsor desire to continue the Trust pursuant to
the Business Trust Act for the purpose of, as described more fully in Sections
303 and 304 hereof, (i) issuing and selling Preferred Securities (as hereinafter
defined) representing preferred undivided beneficial interests in the assets of
the Trust for cash and investing the proceeds thereof in Debentures (as
hereinafter defined) of Litchfield Financial issued under the Indenture (as
hereinafter defined) to be held as assets of the Trust and (ii) issuing and
selling Common Securities (as hereinafter defined) representing common undivided
beneficial interests in the assets of the Trust to Litchfield Financial in
exchange for cash and investing the proceeds thereof in additional Debentures
issued under the Indenture to be held as assets of the Trust;
NOW, THEREFORE, it being the intention of the parties hereto that the Trust
constitute a business trust under the Business Trust Act, that the Original
Declaration be amended and restated in its entirety as provided herein and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all Debentures referred to in clauses (i) and (ii) of the
previous paragraph purchased by the Trust will be held for the benefit of the
Holders (as hereinafter defined) from time to time, of the Certificates (as
hereinafter defined) representing undivided beneficial interests in the assets
of the Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE 1
Definitions
Section 1.01. Definitions.
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Amended and Restated Declaration of Trust (including Exhibits A, B and C
hereto (the "Exhibits")) as modified, supplemented or amended from time
to time;
(d) all references in this Declaration to Articles, Sections and Exhibits
are to Articles and Sections of and Exhibits to this Declaration unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Book Entry Interest" means a beneficial interest in a Global Certificate
registered in the name of a Clearing Agency or a nominee thereof,
ownership and transfers of which shall be maintained and made through
book entries by such Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the Borough of Manhattan, The City and
State of New York or Boston, Massachusetts are authorized or required by
law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code (S) 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Certificate" means a Common Security Certificate or a Preferred Security
Certificate.
2
"Certificate of Trust" has the meaning set forth in the second WHEREAS
clause above.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository
for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and
which shall undertake to effect book entry transfers and pledges of the
Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means the Closing Date as specified in the Underwriting
Agreement, which date is also the date of execution and delivery of this
Declaration.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation. A reference to a specific section
(Sec.) of the Code refers not only to such specific section but also to
any corresponding provision of any Federal tax statute enacted after the
date of this Declaration, as such specific section or corresponding
provision is in effect on the date of application of the provisions of
this Declaration containing such reference.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form
of Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder, partner,
member, representative, employee or agent of the Trust or of any of its
Affiliates, (ii) any officer, director, shareholder, employee,
representative or agent of Litchfield Financial or of any of its
Affiliates and (iii) the Holders from time to time of the Securities.
"Creditor" has the meaning specified in Section 4.02(c).
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture until a successor is
appointed thereunder and thereafter means such successor trustee.
"Debentures" means the series of junior subordinated debentures issued by
Litchfield Financial under the Indenture to the Property Trustee and
entitled the "10% Series A Junior Subordinated Debentures due 2029."
"Definitive Preferred Security Certificates" has the meaning set forth
in Section 9.04.
3
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(3).
"Depositary Agreement" means the agreement among the Trust, the Property
Trustee and DTC dated as of the Closing Date, as the same may be amended
or supplemented from time to time.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.01.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Securities means that an Indenture
Event of Default has occurred and is continuing with respect to the
Debentures.
"Exchange" has the meaning specified in Section 3.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"First Closing Date" means the First Closing Date as specified in the
Underwriting Agreement.
"Global Certificate" has the meaning set forth in Section 9.04.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Holder Direct Action" has the meaning specified in Section 3.10(e).
"Indemnified Person" means any Trustee, any Affiliate of any Trustee, any
Paying Agent, any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee or Paying Agent, or
any employee or agent of the Trust or of any of its Affiliates.
"Indenture" means the Junior Subordinated Indenture dated as of May 19,
1999, between Litchfield Financial and the Debenture Trustee as
supplemented by the Supplemental Indenture No. 1 thereto dated as of May
19, 1999, pursuant to which the Debentures are to be issued.
"Indenture Event of Default" means that an event or condition defined as
an "Event of Default" with respect to the Debentures under Section
6.01(a) of the Indenture has occurred and is continuing.
4
"Investment Company" means an "investment company" as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Legal Action" has the meaning specified in Section 3.08(g).
"Liquidation Distribution" has the meaning set forth in Exhibits B and C
hereto establishing the terms of the Securities.
"List of Holders" has the meaning specified in Section 2.02(a).
"Litchfield Financial" or " Sponsor" means Litchfield Financial
Corporation, a Massachusetts corporation, or any successor entity
resulting from any merger, consolidation, amalgamation or other business
combination, in its capacity as sponsor of the Trust.
"Majority in liquidation amount of the Securities" means, except as
otherwise required by the Trust Indenture Act and except as provided in
the penultimate paragraph of paragraph 6 of Exhibit B hereto, Holder(s)
of outstanding Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or
Common Securities voting separately as a class, who are the record owners
of a relevant class of Securities whose liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise,
plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) represents more than 50% of the
liquidation amount of all outstanding Securities of such class.
"NASD" has the meaning specified in Section 3.13.
"Nasdaq" has the meaning specified in Section 3.13.
"1933 Act Registration Statement" has the meaning specified in Section
3.13.
"1934 Act Registration Statement" has the meaning specified in Section
3.13.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President,
and by the Treasurer, an Associate Treasurer, an Assistant Treasurer, the
Comptroller, the Secretary or an Assistant Secretary of the Sponsor, and
delivered to the appropriate Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 2.04 shall be the
principal executive, financial or accounting officer of the Sponsor. Any
Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Declaration shall include:
5
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Sponsor, which may be
an employee of the Sponsor but not an employee of the Trust or the
Property Trustee, and who shall be reasonably acceptable to the Property
Trustee. Any Opinion of Counsel pertaining to Federal income tax matters
may rely on published rulings of the Internal Revenue Service.
"Option Closing Date" means the Option Closing Date as specified in the
Underwriting Agreement.
"Original Declaration" has the meaning set forth in the first WHEREAS
clause above.
"Paying Agent" has the meaning specified in Section 3.10(i).
"Payment Amount" has the meaning specified in Section 6.01.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated association, government
or any agency or political subdivision thereof, or any other entity of
whatever nature.
"Preferred Guarantee" means the Guarantee Agreement dated as of May 19,
1999, of Litchfield Financial in respect of the Preferred Securities.
"Preferred Securities" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in fully
registered form representing a Preferred Security substantially in the
form of Annex I to Exhibit B.
6
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.01(c) and having the duties set forth for the
Property Trustee herein.
"Property Account" has the meaning specified in Section 3.10(c)(i).
"Quorum" means a majority of the Regular Trustees or, if there are only
two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property Trustee and
the Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary of
Litchfield Financial or any other Person which owns, directly or
indirectly, 100% of the outstanding voting securities of Litchfield
Financial.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, when used with respect to the Property
Trustee, any officer within the corporate trust department of the
Property Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any other
officer of the Property Trustee who customarily performs functions
similar to those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of such Person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration
of this Declaration.
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any
successor rule thereunder.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Securities
as set forth in paragraph 4 of Exhibits B and C hereto.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Entity" has the meaning specified in Section 3.18(b)(i).
"Successor Property Trustee" has the meaning specified in Section
5.02(b)(i).
"Successor Securities" has the meaning specified in Section 3.18(b)(i)(B).
7
"Super Majority" has the meaning specified in Section 2.06(a)(ii).
"Supplemental Indenture" means the Supplemental Indenture No. 1 dated as
of May 19, 1999, between Litchfield Financial and the Debenture Trustee,
pursuant to which the Debentures are to be issued.
"10% in liquidation amount of the Securities" means, except as otherwise
required by the Trust Indenture Act and except as provided in the
penultimate paragraph of paragraph 6 of Exhibit B hereto, Holder(s) of
outstanding Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or
Common Securities, voting separately as a class, who are the record
owners of a relevant class of Securities whose liquidation amount
(including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accumulated and unpaid Distributions to
the date upon which the voting percentages are determined) represents 10%
or more of the liquidation amount of all outstanding Securities of such
class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Trust" has the meaning set forth in the first WHEREAS clause above.
"Trustee" or " Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office
in accordance with the terms hereof, and all other Persons who may from
time to time be duly appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and references herein to a Trustee
or the Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement dated as of May
13, 1999, among the Trust, the Sponsor and Tucker Anthony Incorporated,
as representatives of the several underwriters named therein.
ARTICLE 2
Trust Indenture Act
Section 2.01. Trust Indenture Act; Application.
8
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the
extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by (S)(S) 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control;
(c) the Property Trustee, to the extent permitted by applicable law
and/or the rules and regulations of the Commission, shall be the only
Trustee which is a trustee for the purposes of the Trust Indenture Act;
and
(d) the application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
Section 2.02. Lists of Holders of Preferred Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Property Trustee unless the Property Trustee is
registrar for the Securities, (i) within 14 days after each record date
for payment of Distributions, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the Holders
("List of Holders") as of such record date, provided that neither the
Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time that the List of
Holders does not differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Regular Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust
of a written request for a List of Holders as of a date no more than 14
days before such List of Holders is given to the Property Trustee. The
Property Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if acting in such
capacity) provided that the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under (S)(S)
310(b), 311 and 312(b) of the Trust Indenture Act.
Section 2.03. Reports by the Property Trustee.
Within 60 days after January 15 of each year, the Property Trustee shall
provide to the Holders of the Securities such reports as are required by
(S) 313 of the Trust Indenture Act, if any, in the form, in the manner
and at the times provided by (S) 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of (S) 313(d) of
the Trust Indenture Act. A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Property Trustee with the
Company, with each stock exchange upon which any Preferred
9
Securities are listed (if so listed) and also with the Commission. The
Company agrees to notify the Property Trustee when any Preferred
Securities become listed on any stock exchange and of any delisting
thereof.
Section 2.04. Periodic Reports to the Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee, the Commission and the Holders of the
Securities, as applicable, such documents, reports and information as
required by (S) 314(a)(1)-(3) (if any) of the Trust Indenture Act and the
compliance certificates required by (S) 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the
manner and at the times required by (S) 314(a)(4) and (c) of the Trust
Indenture Act (provided that any certificate to be provided pursuant to
(S) 314(a)(4) of the Trust Indenture Act shall be provided within 120
days of the end of each Fiscal Year). Delivery of such reports,
information and documents to the Property Trustee is for informational
purposes only and the Property Trustee's receipt of such shall not
constitute constructive notice of any information contained therein,
including the Company's compliance with any of its covenants hereunder
(as to which the Property Trustee is entitled to rely exclusively on
Officers' Certificates).
Section 2.05. Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration which relate to any
of the matters set forth in (S) 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to (S)
314(c) may be given in the form of an Officers' Certificate.
Section 2.06. Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, provided that, if the underlying Event
of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default under this
Declaration shall also not be waivable; or
(ii) requires the consent or vote of the holders of greater than a
majority in aggregate principal amount of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
this Declaration may only be waived by the vote of the Holders of at
least the proportion in aggregate liquidation amount of the Preferred
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
10
The foregoing provisions of this Section 2.06(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event
of Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of the
Common Securities are deemed to have waived such Event of Default under
the Declaration as provided above in Section 2.06(a) or below in this
Section 2.06(b), the Event of Default under this Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have
waived such Event of Default under this Declaration as provided above in
Section 2.06(a) or below in this Section 2.06(b), the Event of Default
under this Declaration may only be waived by the vote of the Holders of
at least the proportion in aggregate liquidation amount of the Common
Securities that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding;
provided, further, that the Holders of Common Securities will be deemed to have
waived any such Event of Default and all Events of Defaults with respect to the
Common Securities and their consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.06(b) shall be in lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. In the event that any Event
of Default with respect to the Preferred Securities is waived by the Holders of
Preferred Securities as provided in the Declaration, the Holders of Common
Securities agree that such waiver shall also constitute the waiver of such Event
of Default with respect to the Common Securities for all purposes under the
Declaration without any further
11
act, vote or consent of the Holders of the Common Securities. Subject to the
foregoing provisions of this Section 2.06(b), upon waiver, any such default
shall cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default with respect to the Common Securities or
impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee, at the direction of the Holders of Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.06(c) shall be in
lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S)
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from
this Declaration and the Securities, as permitted by the Trust Indenture
Act.
Section 2.07. Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Securities in accordance with (S) 312 of the Trust
Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or
any law hereafter enacted which does not specifically refer to (S) 312 of
the Trust Indenture Act, nor shall the Property Trustee be held
accountable by reason of mailing any material pursuant to a request made
under (S) 312(b) of the Trust Indenture Act.
ARTICLE 3
Organization
Section 3.01. Name.
The Trust continued by this Declaration is named "Litchfield Capital
Trust I" as such name may be modified from time to time by the Regular
Trustees following written notice to the Holders of the Securities. The
Trust's activities may be conducted under the name of the Trust or any
other name deemed advisable by the Regular Trustees.
Section 3.02. Office.
The address of the principal office of the Trust is c/o Litchfield
Financial Corporation, 430 Main Street, Williamstown, Massachusetts
01267. Upon ten days' written notice to the Holders, the Regular Trustees
may change the location of the Trust's principal office.
Section 3.03. Issuance of the Securities.
12
The Sponsor, on behalf of the Trust and pursuant to the Original
Declaration, executed and delivered the Underwriting Agreement.
On the First Closing Date and contemporaneously with the execution and
delivery of this Declaration, the Regular Trustees, on behalf of the
Trust, shall execute and deliver (i) one or more Global Certificates,
registered in the name of the nominee of the initial Clearing Agency as
specified in Section 9.04 for the benefit of the underwriters named in
the Underwriting Agreement, in an aggregate amount of 2,500,000 Preferred
Securities having an aggregate liquidation amount of $25,000,000, against
receipt of the aggregate purchase price of such Preferred Securities of
$25,000,000, and (ii) to the Sponsor, one or more Common Securities
Certificates, registered in the name of the Sponsor, in an aggregate
amount of 71,320 Common Securities having an aggregate liquidation amount
of $773,200, against receipt of the aggregate purchase price of such
Common Securities of $773,200.
On the Option Closing Date, if any, the Regular Trustees, on behalf of
the Trust, shall execute and deliver (i) one or more Global Certificates,
registered in the name of the nominee of the initial Clearing Agency as
specified in Section 9.04 for the benefit of the underwriters named in
the Underwiting Agreement, in an aggregate amount of up to 375,000
Preferred Securities having an aggregate liquidation amount of up to
$3,750,000, against receipt of the aggregate purchase price of such
Preferred Securities of up to $3,750,000 plus accrued interest from the
First Closing Date, and (ii) to the Sponsor, one or more Common
Securities Certificates, registered in the name of the Sponsor, in an
aggregate amount of up to 11,598 Common Securities having an aggregate
liquidation amount of up to $115,980, against receipt of the aggregate
purchase price of such Common Securities of up to $115,980.
Section 3.04. Purchase of Debentures.
On the First Closing Date and contemporaneously with the execution and
delivery of this Declaration, the Regular Trustees, on behalf of the
Trust, shall purchase from the Sponsor with the proceeds received by the
Trust from the sale of the Securities on such date pursuant to Section
3.03, at a purchase price of 100% of the principal amount thereof,
Debentures, registered in the name of the Property Trustee and having an
aggregate principal amount equal to $25,773,200, and, in satisfaction of
the purchase price for such Debentures, the Regular Trustee, on behalf of
the Trust, shall deliver or cause to be delivered to the Sponsor the sum
of $25,773,200.
On the Option Closing Date, if any, the Regular Trustees, on behalf of
the Trust, shall purchase from the Sponsor with the proceeds received by
the Trust from the sale of the Securities on such date pursuant to
Section 3.03, at a purchase price of 100% of the principal amount thereof
plus accrued interest from the First Closing Date, Debentures, registered
in the name of the Property Trustee and having an aggregate principal
amount equal to up to $3,750,000, and, in satisfaction of the purchase
price for such Debentures, the Regular Trustee, on behalf of the Trust,
shall deliver or cause to be delivered to the Sponsor the sum of up to
$3,750,000.
Section 3.05. Purpose.
The exclusive purposes and functions of the Trust are: (a)(i) to issue
and sell Preferred Securities for cash and use the proceeds of such sales
to acquire from Litchfield Financial Debentures issued under the
Indenture having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities so issued and sold; (ii)
to enter into such agreements and arrangements as may be necessary in
connection with the sale of Preferred Securities to the initial
purchasers thereof (including the Underwriting Agreement) and to take all
action, and exercise such discretion, as may be necessary or desirable in
connection therewith and to file such registration statements or make
such other filings under the Securities Act, the Exchange Act or state
securities or "Blue Sky" laws as may be necessary or desirable in
connection therewith and the issuance of the Preferred Securities; and
(iii) to issue and sell Common Securities to Litchfield Financial for
cash and use the proceeds of such sale to purchase as trust assets an
equal aggregate principal amount of Debentures issued under the
Indenture; and (b) except as otherwise limited herein, to engage in only
those other activities necessary, convenient or incidental thereto,
including such other activities specifically authorized in this
Declaration. The Trust shall not borrow money, issue debt or reinvest
proceeds derived from investments, mortgage or pledge any of its assets
or at any time while the Securities are outstanding, otherwise undertake
(or permit to be undertaken) any activity that would result in or cause
the Trust not to be classified for United States Federal income tax
purposes as a grantor trust.
13
Section 3.06. Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee on behalf of the Trust in accordance with
its powers shall constitute the act of and serve to bind the Trust. In
dealing with the Trustees acting on behalf of the Trust, no Person shall
be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively
on the power and authority of the Trustees as set forth in this
Declaration.
Section 3.07. Title to Property of the Trust.
Except as provided in Section 3.10 with respect to the Debentures and the
Property Account or unless otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The
Holders shall not have legal title to any part of the assets of the
Trust, but shall have undivided beneficial interests in the assets of the
Trust.
Section 3.08. Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, authority and duty
to cause the Trust, and shall cause the Trust, to engage in the following
activities:
(a) to issue Preferred Securities and Common Securities, in each case in
accordance with this Declaration; provided, however, that the Trust may
issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided further, that there shall
be no interests in the Trust other than the Securities and the issuance
of Securities shall be limited to a one-time, simultaneous issuance of
both Preferred Securities and Common Securities on the Closing Date;
(b) in connection with the issuance of the Preferred Securities, at the
direction of the Sponsor, to effect or cause to be effected the filings,
and to execute or cause to be executed, the documents, set forth in
Section 3.13 and to execute, deliver and perform on behalf of the Trust
the Depositary Agreement;
(c) to acquire as trust assets Debentures with the proceeds of the sale
of the Preferred Securities and the Common Securities; provided, however,
that the Regular Trustees shall cause legal title to all of the
Debentures to be vested in, and the Debentures to be held of record
14
in the name of, the Property Trustee for the benefit of the Holders of
the Preferred Securities and the Common Securities;
(d) if and to the extent that the Sponsor on behalf of the Trust has not
already done so, to cause the Trust to enter into the Underwriting
Agreement and such other agreements and arrangements as may be necessary
or desirable in connection with the sale of the Preferred Securities to
the initial purchasers thereof and the consummation thereof, and to take
all action, and exercise all discretion, as may be necessary or desirable
in connection with the consummation thereof;
(e) to give the Sponsor and the Property Trustee prompt written notice of
the occurrence of a Special Event; provided that the Regular Trustees
shall consult with the Sponsor and the Property Trustee before taking or
refraining to take any Ministerial Action in relation to a Special Event;
(f) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of (S) 316(c) of the Trust Indenture Act and with respect to
Distributions, voting rights, redemptions, and exchanges, and to issue
relevant notices to Holders of the Preferred Securities and Common
Securities as to such actions and applicable record dates;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.10(e), the Property
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate to the Property Trustee required by (S)
314(a)(4) of the Trust Indenture Act, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses which are necessary or incidental to carrying out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities, the Regular Trustees hereby initially
appointing the Property Trustee for such purposes;
(m) to take all actions and perform such duties as may be required of the
Regular Trustee pursuant to the terms of the Securities set forth in
Exhibits B and C hereto;
15
(n) to take all actions which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of
the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Securities or to enable the Trust to effect the purposes for which
the Trust has been created;
(o) to take all actions, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion
to be necessary or desirable in carrying out the purposes of the Trust
and the activities of the Trust as set out in this Section 3.08,
including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States Federal income
tax purposes as a grantor trust; and
(iii) cooperating with the Sponsor to ensure that the Debentures will be
treated as indebtedness of the Sponsor for United States Federal income
tax purposes;
(p) to take all actions necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of
the Trust, and to comply with any requirements imposed by any taxing
authority on holders of instruments treated as indebtedness for United
States Federal income tax purposes;
(q) subject to the requirements of Rule 3a-7 (if the Trust is excluded
from the definition of an Investment Company solely by reason of Rule
3a-7) and (S) 317(b) of the Trust Indenture Act, to appoint one or more
Paying Agents in addition to the Property Trustee; and
(r) to execute all documents or instruments, perform all duties and
powers and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.
The Regular Trustees must exercise the powers set forth in this Section 3.08 in
a manner which is consistent with the purposes and functions of the Trust set
out in Section 3.05, and the Regular Trustees shall not take any action which is
inconsistent with the purposes and functions of the Trust set forth in Section
3.05.
Subject to this Section 3.08, the Regular Trustees shall have none of the powers
or any of the authority of the Property Trustee set forth in Section 3.10.
The Regular Trustees shall take all actions on behalf of the Trust that are not
specifically required by this Declaration to be taken by any other Trustee.
16
Any expenses incurred by the Regular Trustees pursuant to this Section 3.08
shall be reimbursed by the Sponsor.
Section 3.09. Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property Trustee)
shall cause the Trust not to, engage in any activity other than in
connection with the purposes of the Trust or other than as required or
authorized by this Declaration. In particular, the Trust shall not and
the Trustees (including the Property Trustee) shall not cause the Trust
to:
(a) invest any proceeds received by the Trust from holding the Debentures
but shall promptly distribute from the Property Account all such proceeds
to Holders of Securities pursuant to the terms of this Declaration and of
the Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary the Trust
assets or the terms of the Securities in any way whatsoever, except as
otherwise expressly provided herein;
(f) issue any securities or other evidences of beneficial ownership of,
or beneficial interests in, the Trust other than the Securities;
(g) incur any indebtedness for borrowed money;
(h) (i) direct the time, method and place of conducting any proceeding
for any remedy available to the Debenture Trustee or exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section
6.06 of the Indenture, or (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the
Debentures, without, in each case, obtaining the prior approval of the
Holders of a Majority in liquidation amount of all outstanding
Securities;
(i) revoke any action previously authorized or approved by a vote of the
Holders of Preferred Securities except by subsequent vote of such
Holders;
(j) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required, unless
in the case of this clause (j) the Property Trustee shall have received
an Opinion of Counsel experienced in such matters to the effect that such
17
amendment, modification or termination will not cause more than an
insubstantial risk that for United States Federal income tax purposes the
Trust will not be classified as a grantor trust;
(k) take or consent to any action that would result in the placement of a
lien, pledge, charge, mortgage or other encumbrance on any of the Trust
property;
(l) vary the investment (within the meaning of Treasury Regulation
Section 301.7701-4(c)) of the Trust or of the Holders of Securities; or
(m) after the date hereof, enter into any contract or agreement (other
than any depositary agreement or any agreement with any securities
exchange or automated quotation system) that does not expressly provide
that the Holders of Preferred Securities, in their capacities as such,
have limited liability (in accordance with the provisions of the Business
Trust Act) for the liabilities and obligations of the Trust, which
express provision shall be in substantially the following form, "The
Holders of the Preferred Securities, in their capacities as such, shall
not be personally liable for any liabilities or obligations of the Trust
arising out of this Agreement, and the parties hereto hereby agree that
the Holders of the Preferred Securities, in their capacities as such,
shall be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware."
Section 3.10. Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the
Property Trustee to the Debentures shall vest automatically in each
Person who may hereafter be appointed as Property Trustee in accordance
with Article 5. Such vesting and cessation of title shall be effective
whether or not conveyancing documents with regard to the Debentures have
been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Debentures to the Regular Trustees or, if the Property Trustee
does not also act as the Delaware Trustee, the Delaware Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank account
(the "Property Account") in the name of and under the exclusive control
of the Property Trustee on behalf of the Holders of the Securities and on
the receipt of payments of funds made in respect of the Debentures held
by the Property Trustee, deposit such funds into the Property Account
and, without any further acts of the Property Trustee or the Regular
Trustees, promptly make payments to the Holders of the Preferred
Securities and Common Securities from the Property Account in accordance
with Section 6.01. Funds in the Property Account shall be held
18
uninvested, and without liability for interest thereon, until disbursed
in accordance with this Declaration. The Property Account shall be an
account which is maintained with a banking institution whose long term
unsecured indebtedness is rated by a "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act, at least investment grade;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities
and the Common Securities to the extent the Debentures are redeemed or
mature;
(iii) upon notice of distribution issued by the Regular Trustees in accordance
with the terms of the Preferred Securities and the Common Securities, engage in
such ministerial activities as shall be necessary or appropriate to effect
promptly pursuant to terms of the Securities the distribution of Debentures to
Holders of Securities upon the election of the Holder of Common Securities to
distribute the Debentures to Holders of Securities and dissolve the Trust; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Debentures under the Indenture and, if an
Event of Default occurs and is continuing, the Property Trustee, subject
to Section 3.10(e), shall for the benefit of the Holders of the
Securities, enforce its rights as holder of the Debentures under the
Indenture, subject to the rights of the Holders of the Preferred
Securities pursuant to the terms of this Declaration, the Business Trust
Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the
terms of the Securities set forth in Exhibits B and C hereto.
(e) If an Event of Default has occurred and is continuing, then the
Holders of a Majority in liquidation amount of the Preferred Securities
will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the
Debentures. If the Property Trustee fails to enforce its rights under the
Debentures, a Holder of Preferred Securities, to the extent permitted by
applicable law, may, after a period of 30 days has elapsed since such
Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Sponsor to enforce the
Property Trustee's rights under the Debentures without first instituting
any legal proceeding against the Property Trustee or any other Person;
provided further, that, if an Event of Default has occurred and is
continuing and such event is attributed to the failure of the Sponsor to
pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such Holder of the
principal of or interest on the Debentures having a principal amount
equal to the aggregate
19
liquidation amount of the Preferred Securities of such Holder (a "Holder
Direct Action") on or after the respective due date specified in the
Debentures. In connection with such Holder Direct Action, the Sponsor
will be subrogated to the rights of such Holder of Preferred Securities
to the extent of any payment made by the Sponsor to such Holders of
Preferred Securities in such Holder Direct Action. Except as provided in
the preceding sentences, the Holders of Preferred Securities will not be
able to exercise directly any other remedy available to the Holders of
the Debentures.
(f) All moneys deposited in the Property Account and all Debentures held
by the Property Trustee for the benefit of the Holders of the Securities
will not be subject to any right, charge, security interest, lien or
claim of any kind in favor of, or for the benefit of the Property Trustee
or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities actually known to a Responsible
Officer of the Property Trustee, transmit by mail, first class postage
prepaid, to the holders of the Securities, as their names and addresses
appear upon the register, notice of such defaults with respect to the
Securities known
20
to the
Property Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purposes of this
Section 3.10(g) being hereby defined to be an Indenture Event of Default,
not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided,
that, except in the case of default in the payment of the principal of
(or premium, if any) or interest on any of the Debentures, the Property
Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers, of the Property Trustee in good
faith determines that the withholding of such notice is in the interests
of the Holders of the Securities. The Property Trustee shall not be
deemed to have knowledge of any default, except (i) a default in the
payment of principal, premium or interest on the Debentures or (ii) any
default as to which the Property Trustee shall have received written
notice or a Responsible Officer charged with the administration of this
Declaration shall have obtained written notice.
(h) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and accepted
that appointment in accordance with Article 5.
(i) The Property Trustee shall act as paying agent in respect of the
Common Securities and, if the Preferred Securities are not in book entry
only form, the Preferred Securities and, subject to Section 3.08(q), may
authorize one or more Persons (each, a "Paying Agent") to pay
Distributions, redemption payments or liquidation payments on behalf of
the Trust with respect
20
to the Preferred Securities. Any such Paying Agent shall comply with (S)
317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the
Property Trustee, after consultation with the Regular Trustees, at any
time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Property Trustee, subject to Section
3.08(q).
(j) The Property Trustee shall give prompt written notice to the Holders
of the Securities of any notice received by it from Litchfield Financial
of its election to defer payments of interest on the Debentures by
extending the interest payment period with respect thereto.
(k) Subject to this Section 3.10, the Property Trustee shall have none of
the powers or the authority of the Regular Trustees set forth in Section
3.08.
(l) The Property Trustee shall exercise the powers, duties and rights set
forth in this Section 3.10 and Section 3.12 in a manner which is
consistent with the purposes and functions of the Trust set out in
Section 3.05, and the Property Trustee shall not take any action which is
inconsistent with the purposes and functions of the Trust set forth in
Section 3.05.
Section 3.11. Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.01(a)(3), the Delaware Trustee shall not be entitled to
exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of the Trustees described in this
Declaration. Except as set forth in Section 5.01(a)(3), the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling
the requirements of (S) 3807(a) of the Business Trust Act. No implied
covenants or obligations shall be read into this Declaration against the
Delaware Trustee.
Section 3.12. Certain Rights and Duties of the Property Trustee.
(a) The Property Trustee, before the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth
in this Declaration, and no implied covenants shall be read into this
Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06),
the Property Trustee shall exercise such of the rights and powers vested
in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
21
(i) prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration,
and the Property Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Declaration, and no implied covenants or obligations
shall be read into this Declaration against the Property Trustee;
and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this
Declaration; provided, however, that in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee, the
Property Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Declaration;
(ii) the Property Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property
Trustee hereunder or under the Indenture, or exercising any trust or
power conferred upon the Property Trustee under this Declaration; and
(iv) no provision of this Declaration shall require the Property Trustee
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of
any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or adequate indemnity
against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.12(a) and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part and, if the Trust is excluded from
the definition of Investment Company solely by means of Rule 3a-7,
subject to the requirements of Rule 3a-7,
22
request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Sponsor or the Regular
Trustees;
(ii) the Property Trustee (A) may consult with counsel (which may be
counsel to the Sponsor or any of its Affiliates and may include any of
its employees) selected by it in good faith and with due care and the
advice or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice and opinion and (B) shall have
the right at any time to seek instructions concerning the administration
of this Declaration from any court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Property Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed by it in good faith
and with due care;
(iv) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Declaration at the request or
direction of any Holder, unless such Holder shall have offered to the
Property Trustee security and indemnity satisfactory to the Property
Trustee against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with
such request or direction; provided that nothing contained in this clause
(iv) shall relieve the Property Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured or waived) to
exercise such of the rights and powers vested in it by this Declaration,
and to use the same degree of care and skill in this exercise, as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs; and
(v) any action taken by the Property Trustee or its agents hereunder
shall bind the Holders of the Securities, and the signature of the
Property Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire
as to the authority of the Property Trustee to so act, or as to its
compliance with any of the terms and provisions of this Declaration, both
of which shall be conclusively evidenced by the Property Trustee's or its
agent's taking such action.
(d) The recitals contained herein shall be taken as the statements of the
Sponsor, and the Property Trustee assumes no responsibility for the correctness
of the same. The Property Trustee makes no representations as to the validity or
sufficiency of this Declaration.
(e) The Property Trustee, in its individual or any other capacity, may become
the owner or pledgee of Preferred Securities and may otherwise deal with the
Sponsor with the same rights it would have if it were not the Property Trustee.
23
(f) All moneys received by the Property Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Property Trustee shall be under no liability for interest on any moneys
received by it hereunder except such as it may agree in writing to pay thereon.
(g) (i) The Sponsor covenants and agrees to pay to the Property Trustee from
time to time, and the Property Trustee shall be entitled to, such compensation
as the Sponsor and the Property Trustee shall from time to time agree in writing
(which shall not be limited by any provision of law in regard to the
compensation of a Property Trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Property
Trustee, and the Sponsor will pay or reimburse the Property Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee in accordance with any of the provisions of this
Declaration (including the reasonable compensation and the reasonable expenses
and disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Sponsor also covenants to indemnify each of the
Property Trustee or any predecessor Property Trustee and their officers, agents,
directors and employees for, and to hold them harmless against, any and all
loss, liability, damage, claim or expense including taxes (other than taxes
based upon, measured by or determined by the income of the Property Trustee)
incurred without negligence or bad faith on the part of the Property Trustee and
arising out of or in connection with the acceptance or administration of this
trust, including the reasonable costs and expenses of defending itself against
any claim (whether asserted by the Sponsor, any Holder or any other Person) of
liability in the premises. The provisions of this subpart (g) of this Section
3.12 shall survive the termination of this Declaration and resignation or
removal of the Property Trustee.
(ii) The obligations of the Sponsor under this subpart (g) of this
Section 3.12 to compensate and indemnify the Property Trustee and to pay
or reimburse the Property Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder. Such
additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Property
Trustee as such, except funds held in trust for the benefit of the
holders of particular Securities.
(h) Except as otherwise provided in this Section 3.12, whenever in the
administration of the provisions of this Declaration the Property Trustee shall
deem it necessary or desirable that a matter be proved or established prior to
taking or suffering or omitting to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Property
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Property Trustee and such certificate, in the
absence of negligence or bad faith on the part of the Property Trustee, shall be
full warrant to the Property Trustee for any action taken, suffered or omitted
to be taken by it under the provisions of this Declaration upon the faith
thereof.
24
(i) Whether or not expressly stated, every provision of this Declaration
pertaining to the Property Trustee shall be subject to this Section 3.12.
Section 3.13. Registration Statement and Related Matters.
In accordance with the Original Declaration, Litchfield Financial, as the
sponsor of the Trust, was authorized (i) to file with the Commission and
execute, in each case on behalf of the Trust, (a) the Registration
Statement on Form S-3 (File Nos. 333-76285, 333-76285-01, and 333-
76285-02) (the "1933 Act Registration Statement") including any
pre-effective or post-effective amendments thereto, relating to the
registration under the Securities Act of the Preferred Securities and (b)
if Litchfield Financial shall deem it desirable, a Registration Statement
on Form 8-A or other appropriate form (the "1934 Act Registration
Statement") (including all pre-effective and post-effective amendments
thereto) relating to the registration of the Preferred Securities under
Section 12 of the Exchange Act; (ii) if Litchfield Financial shall deem
it desirable, to prepare and file with the New York Stock Exchange or one
or more national securities exchange(s) (each, an "Exchange") or the
National Association of Securities Dealers, Inc. (the "NASD") and execute
on behalf of the Trust a listing application or applications and all
other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on any such Exchange or The Nasdaq Stock Market's
National Market ("Nasdaq"); (iii) to file and execute on behalf of the
Trust such applications, reports, surety bonds, irrevocable consents,
appointments of attorney for service of process and all other papers and
documents as Litchfield Financial, on behalf of the Trust, may deem
necessary or desirable to register the Preferred Securities under the
securities or "Blue Sky" laws of such jurisdictions as Litchfield
Financial on behalf of the Trust, may deem necessary or desirable; and
(iv) to negotiate the terms and execute on behalf of the Trust the
Underwriting Agreement. In the event that any filing referred to in
clauses (i)- (iii) above is required by the rules and regulations of the
Commission, any Exchange, Nasdaq, the NASD or state securities or blue
sky laws, to be executed on behalf of the Trust by one or more Trustees,
the Regular Trustees, in their capacities as Trustees of the Trust, and
Litchfield Financial are hereby authorized and directed to join in any
such filing and to execute on behalf of the Trust any and all of the
foregoing. In connection with all of the foregoing, Litchfield Financial
and each Trustee, solely in its capacity as Trustee of the Trust, have
constituted and appointed, and hereby confirm the appointment of, Richard
A. Stratton, Ronald E. Rabidou, and Heather A. Sica and each of them, as
his, her or its, as the case may be, true and lawful attorneys-in-fact,
and agents, with full power of substitution and resubstitution, for
Litchfield Financial or such Trustee or in Litchfield Financial' or such
Trustee's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as Litchfield
Financial or such Trustee might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and
25
agents or any of them, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Section 3.14. Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the
State of Delaware on April 12, 1999, is attached hereto as Exhibit A. On
or after the date of execution of this Declaration, the Trustees shall
cause the filing with the Secretary of State of the State of Delaware of
such amendments, if any, to the Certificate of Trust as the Trustees
shall deem necessary or desirable.
Section 3.15. Execution of Documents by the Regular Trustees.
Except as otherwise required by the Business Trust Act with respect to
the Certificate of Trust or otherwise and except as provided in Sections
7.01(c) and 9.08, any Regular Trustee, or if there is only one, such
Regular Trustee is authorized to execute and deliver on behalf of the
Trust any documents which the Regular Trustees have the power and
authority to execute or deliver pursuant to this Declaration.
Section 3.16. Trustees Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Securities.
Section 3.17. Duration of the Trust.
The Trust, absent dissolution pursuant to the provisions of Article 8
hereof, shall continue without dissolution until June 30, 2029.
Section 3.18. Mergers.
(a) The Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, except
as described in Section 3.18(b) and (c) of this Declaration or Section 3
of Exhibit B or Exhibit C.
(b) The Trust may, at the request of the Sponsor, with the consent of the
Regular Trustees or, if there are more than two, a majority of the
Regular Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, convert into,
consolidate, amalgamate, or be replaced by, or convey, transfer or lease
its properties and assets
26
as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
Securities and this Declaration; or
(B) substitutes for the Securities other securities having substantially
the same terms as the Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Securities rank with
respect to Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity
that possesses the same powers and duties as the Property Trustee as the
holder of the Debentures;
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
with another organization in which the Preferred Securities are then listed or
quoted, if any;
(iv) if the Preferred Securities (including any Successor Securities) are
rated by any nationally recognized statistical rating organization prior
to such transaction, such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause
the Preferred Securities (including any Successor Securities), or if the
Debentures are so rated, the Debentures, to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of such Holders' interests in the new entity);
(vi) such Successor Entity has a purpose substantially identical to that
of the Trust;
(vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an Opinion
of Counsel experienced in such matters that:
(A) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of the Holders' interest in the new entity);
27
(B) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor the
Successor Entity will be required to register as an Investment Company;
and
(C) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for United
States Federal income tax purposes;
(viii) the Sponsor or any permitted successor or assignee owns all of the common
securities of such Successor Entity and guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent provided
by the Preferred Guarantee; and
(ix) there shall have been furnished to the Property Trustee an Officers'
Certificate and an Opinion of Counsel, each to the effect that all
conditions precedent in this Declaration to such transaction have been
satisfied.
(c) Notwithstanding Section 3.18(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced
by, or convey, transfer or lease its properties and assets as an entirety
or substantially as an entirety to, any other Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the Successor
Entity not to be classified as a grantor trust for United States Federal
income tax purposes or would cause the Holders of the Securities not to
be treated as owning an undivided interest in the Debentures.
Section 3.19. Property Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor
upon the Securities or the property of the Trust or of such other obligor
or their creditors, the Property Trustee (irrespective of whether any
Distributions on the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Property Trustee shall have made any demand on the Trust for the payment
of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Securities (or, if the Securities are
original issue discount Securities, such portion of the liquidation
amount as may be specified in the terms of such Securities) and to file
such other papers or documents as may be necessary or advisable in order
to have the claims of the Property Trustee (including any claim for the
reasonable compensation, expenses,
28
disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) 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 Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or compensation affecting the Securities
or the rights of any Holder thereof to authorize the Property Trustee to vote in
respect of the claim of any Holder in any such proceeding.
ARTICLE 4
Sponsor
Section 4.01. Purchase of Common Securities by the Sponsor.
On the Closing Date, the Sponsor will purchase all of the Common
Securities issued by the Trust at the same time as the Preferred
Securities to be issued on such date are issued, such purchase to be in
an amount equal to 3% of the total capital of the Trust.
Section 4.02. Expenses.
(a) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, shall be
responsible for and shall pay for all debts and obligations (other than
with respect to the Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the
organization of the Trust, the issuance of the Preferred Securities to
initial purchasers thereof, the fees and expenses (including reasonable
counsel fees and expenses) of the Trustees (including any amounts payable
under Article 10), the costs and expenses relating to the operation of
the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying
agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses
incurred in connection with the disposition of Trust assets).
29
(b) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, will pay any and
all taxes (other than United States withholding taxes attributable to the
Trust or its assets) and all liabilities, costs and expenses with respect
to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such
debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice hereof. Any such
Creditor may enforce the Sponsor's obligations under this Section 4.02
directly against the Sponsor and the Sponsor irrevocably waives any right
or remedy to require that any such Creditor take any action against the
Trust or any other Person before proceeding against the Sponsor.
(d) The Sponsor shall be subrogated to all (if any) rights of the Trust
in respect of any amounts paid to any Creditor by the Sponsor under this
Section 4.02.
ARTICLE 5
Trustees
Section 5.01. Number of Trustees; Qualifications.
(a) The number of Trustees initially shall be five (5). At any time (i)
before the issuance of the Securities, the Sponsor may, by written
instrument, increase or decrease the number of, and appoint, remove and
replace, the Trustees, and (ii) after the issuance of the Securities the
number of Trustees may be increased or decreased solely by, and Trustees
may be appointed, removed or replaced solely by, vote of Holders of
Common Securities representing a Majority in liquidation amount of the
Common Securities voting as a class; provided that in any case:
(1) the number of Trustees shall be at least five (5) unless the Trustee
that acts as the Property Trustee also acts as the Delaware Trustee, in
which case the number of Trustees shall be at least four (4);
(2) at least a majority of the Trustees shall at all times be officers,
directors or employees of Litchfield Financial;
(3) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and otherwise is
permitted to act as a Trustee hereunder under the laws of the State of
Delaware, except that if the Property Trustee has its principal place of
business in the State of Delaware and otherwise is permitted to act as a
Trustee hereunder under the laws of the State of Delaware, then the
Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application; and
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(4) there shall at all times be a Property Trustee hereunder which shall
satisfy the requirements of Section 5.01(c).
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
John J. Malloy, Heather A. Sica and Ronald E. Rabidou
c/o LITCHFIELD FINANCIAL CORPORATION, 430 Main Street, Williamstown,
Massachusetts 01267
(c) There shall at all times be one Trustee which shall act as the Property
Trustee. In order to act as the Property Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation or national banking association organized and
doing business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation, national
banking association or Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation or national
banking association publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority referred
to above, then for the purposes of this Section 5.01(c)(ii), the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published; and
(iii) if the Trust is excluded from the definition of an Investment
Company solely by reason of Rule 3a-7 and to the extent Rule 3a-7 requires a
trustee having certain qualifications to hold title to the "eligible assets" (as
defined in Rule 3a-7) of the Trust, the Property Trustee shall possess those
qualifications.
If at any time the Property Trustee shall cease to satisfy the requirements of
clauses (i)-(iii) above, the Property Trustee shall immediately resign in the
manner and with the effect set out in Section 5.02(d). If the Property Trustee
has or shall acquire any "conflicting interest" within the meaning of (S) 310(b)
of the Trust Indenture Act, the Property Trustee and the Holders of the Common
Securities (as if such Holders were the obligor referred to in (S) 310(b) of the
Trust Indenture Act) shall in all respects comply with the provisions of (S)
310(b) of the Trust Indenture Act. The
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Preferred Guarantee and the Indenture shall be deemed to be specifically
described in this Declaration for the purposes of clause (i) of the first
proviso contained in (S) 310(b) of the Trust Indenture Act.
The initial Trustee which shall serve as the Property Trustee is The Bank of New
York, a New York banking corporation, whose address is as set forth in Section
14.01(b).
(d) The initial Trustee which shall serve as the Delaware Trustee is The
Bank of New York (Delaware), a Delaware banking corporation, whose
address is as set forth in Section 14.01(c).
(e) Any action taken by the Holders of Common Securities pursuant to this
Article 5 shall be taken at a meeting of the Holders of Common Securities
convened for such purpose or by written consent as provided in Section
12.02.
(f) No amendment may be made to this Section 501 which would change any
rights with respect to the number, existence or appointment and removal
of Trustees, except with the consent of each Holder of Common Securities.
Section 5.02. Appointment, Removal and Resignation of the Trustees.
(a) Subject to Section 5.02(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of the Securities, by written instrument executed
by the Sponsor; and
(ii) after the issuance of the Securities by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a
class.
(b) (i) The Trustee that acts as the Property Trustee shall not be
removed in accordance with Section 5.02(a) until a successor Trustee
possessing the qualifications to act as the Property Trustee under
Section 5.01(c) (a "Successor Property Trustee") has been appointed and
has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Regular Trustees, the
Sponsor and the Property Trustee being removed; and
(ii) the Trustee that acts as the Delaware Trustee shall not be removed
in accordance with Section 5.02(a) until a successor Trustee possessing
the qualifications to act as the Delaware Trustee under Section
5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the Delaware Trustee being removed.
(c) A Trustee appointed to office shall hold such office until his
successor shall have been appointed or until his death, removal or
resignation.
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(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Trustee and delivered to the Sponsor and the Trust,
which resignation shall take effect upon such delivery or upon such later
date as is specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the Property Trustee
shall be effective until:
(A) a Successor Property Trustee has been appointed and has accepted such
appointment by instrument executed by such Successor Property Trustee and
delivered to the Regular Trustees, the Sponsor and the resigning Property
Trustee; or
(B) if the Trust is excluded from the definition of an Investment Company
solely by reason of Rule 3a-7, until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to the Holders
of the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware Trustee
shall be effective until a Successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the resigning Delaware Trustee.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section
5.02 within 60 days after delivery of a notice of removal or a
Resignation Request, the Property Trustee or Delaware Trustee being
removed or resigning as the case may be may petition, at the expense of
the Sponsor, any court of competent jurisdiction for appointment of a
Successor Property Trustee or Successor Delaware Trustee, as the case may
be. Such court may thereupon after prescribing such notice, if any, as it
may deem proper and prescribe, appoint a Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
Section 5.03. Vacancies among the Trustees.
If a Trustee ceases to hold office for any reason and the number of Trustees is
not reduced pursuant to Section 5.01 or if the number of Trustees is increased
pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the
existence of such vacancy by a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with the requirements of this
Article 5.
Section 5.04. Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee, or
any one of them, shall not operate to dissolve, terminate or annul the Trust.
Whenever a vacancy in the number of Regular Trustees shall occur until such
vacancy is filled as provided in this Article 5, the Regular Trustees in office,
regardless
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of their number, shall have all the powers granted to the Regular Trustees and
shall discharge all the duties imposed upon the Regular Trustees by this
Declaration.
Section 5.05. Meetings.
Meetings of the Regular Trustees shall be held from time to time upon the call
of any Regular Trustee. Regular meetings of the Regular Trustees may be held at
a time and place fixed by resolution of the Regular Trustees. Notice of any in-
person meeting of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meeting of the Regular Trustees or any committee thereof shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before such meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless otherwise provided in this Declaration, any action of
the Regular Trustees may be taken at a meeting by vote of a majority of the
Regular Trustees present (whether in person or by telephone) and eligible to
vote with respect to such matter, provided that a Quorum is present, or without
a meeting by the unanimous written consent of the Regular Trustees.
Section 5.06. Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purpose of executing any registration statement or amendment thereto
or other document or schedule filed with the Commission or making any other
governmental filing (including, without limitation, the filings referred to
in Section 3.13).
(b) The Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the
names of the
Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary to the
provisions of the Trust, as set forth herein.
Section 5.07. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee or any
Regular Trustee that is not a natural person, as the case may be, may be merged
or converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the
34
Property Trustee or the Delaware Trustee or the Regular Trustees, as the case
may be, shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Property Trustee or the Delaware Trustee
or the Regular Trustee, as the case may be, shall be the successor of the
Property Trustee or the Delaware Trustee or the Regular Trustees, as the case
may be, hereunder, provided that such Person shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
ARTICLE 6
Distributions
Section 6.01. Distributions.
Holders shall receive periodic distributions, redemption payments and
liquidation distributions in accordance with the applicable terms of the
relevant Holder's Securities as set forth in Exhibits B and C hereto
("Distributions"). If and to the extent that Litchfield Financial makes a
payment of interest (including Additional Interest (as defined in the
Indenture)), premium and/or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to promptly make a Distribution of the Payment Amount to
Holders in accordance with the terms of the Securities as set forth in
Exhibits B and C hereto.
ARTICLE 7
Issuance of the Securities
Section 7.01. General Provisions Regarding the Securities.
(a) The Regular Trustees shall issue on behalf of the Trust Securities in
fully registered form representing undivided beneficial interests in the
assets of the Trust in accordance with Section 7.01(b) and for the
consideration specified in Section 3.03.
(b) The Regular Trustees shall issue on behalf of the Trust one class of
preferred securities representing preferred undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Exhibit B (the
"Preferred Securities") hereto, which terms are incorporated by reference in,
and made a part of, this Declaration as if specifically set forth herein, and
one class of common securities representing common undivided beneficial
interests in the assets of the Trust having such terms as are set forth in
Exhibit C (the "Common Securities") hereto, which terms are incorporated by
reference in, and made a part of, this Declaration as if specifically set
forth herein. The Trust shall have no securities or other interests in the
assets of the Trust other than the Preferred Securities and the Common
Securities.
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<PAGE>
(c) The Certificates shall be signed on behalf of the Trust by the Regular
Trustees (or if there are more than two Regular Trustees by any two of the
Regular Trustees). Such signatures may be the manual or facsimile signatures
of the present or any future Regular Trustee. Typographical and other minor
errors or defects in any such reproduction of any such signature shall not
affect the validity of any Certificate. In case any Regular Trustee who shall
have signed any of the Certificates shall cease to be such Regular Trustee
before the Certificate so signed shall be delivered by the Trust, such
Certificate nevertheless may be delivered as though the person who signed
such Certificate had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Certificate, shall be the Regular
Trustees, although at the date of the execution and delivery of this
Declaration any such person was not a Regular Trustee. Certificates shall be
typewritten, printed, lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements
as the Regular Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or automated quotation system on
which Securities may be listed or traded, or with any rule or regulation of
the Clearing Agency, or to conform to usage. Pending the preparation of
definitive Certificates, the Regular Trustees on behalf of the Trust may
execute temporary Certificates (printed, lithographed or typewritten), in
substantially the form of the definitive Certificates in lieu of which they
are issued, but with such omissions, insertions and variations as may be
appropriate for temporary Certificates, all as may be determined by the
Regular Trustees. Each temporary Certificate shall be executed by the Regular
Trustees (or, if there are more than two Regular Trustees, by any two of the
Regular Trustees) on behalf of the Trust upon the same conditions and in
substantially the same manner, and with like effect, as definitive
Certificates. Without unnecessary delay, the Regular Trustees on behalf of
the Trust will execute and furnish definitive Certificates and thereupon any
or all temporary Certificates may be surrendered to the transfer agent and
registrar in exchange therefor (without charge to the Holders). Each
Preferred Security Certificate whether in temporary or definitive form shall
be countersigned, upon receipt of a written order of the Trust signed by one
Regular Trustee, by the manual signature of an authorized signatory of the
Person acting as registrar and transfer agent for the Preferred Securities,
which shall initially be the Property Trustee.
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non- assessable.
(f) Every Person, by virtue of having become a Holder or a Preferred Security
Beneficial Owner in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be
bound by this Declaration.
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(g) Upon issuance of the Securities as provided in this Declaration, the
Regular Trustees on behalf of the Trust shall return to Litchfield Financial
the $10 constituting initial trust assets as set forth in the Original
Declaration.
ARTICLE 8
Dissolution of the Trust
Section 8.01. Dissolution of the Trust.
The Trust shall dissolve:
(i) when all of the Securities shall have been called for redemption and the
amounts necessary for redemption thereof shall have been paid to the Holders
of the Securities in accordance with the terms of the Securities; or
(ii) when all of the Debentures shall have been distributed to the Holders of
the Securities in exchange for all of the Securities in accordance with the
terms of the Securities;
(iii) upon the expiration of the term of the Trust as set forth in Section 3.17;
or
(iv) upon a decree of judicial dissolution.
Upon dissolution and the completion of the winding up of the affairs of the
Trust, the Trust and this Declaration shall terminate when a certificate of
cancellation is filed by the Trustees with the Secretary of State of the State
of Delaware. The Trustees shall so file such a certificate as soon as
practicable after the occurrence of an event referred to in this Section 8.01.
The provisions of Sections 3.12 and 4.02 and Article 10 shall survive the
termination of the Trust and this Declaration.
ARTICLE 9
Transfer of Interests
Section 9.01. Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms
of the Securities. To the fullest extent permitted by law, any transfer or
purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Subject to this Article 9, Preferred Securities shall be freely
transferable.
37
(c) The Holder of the Common Securities may not transfer the Common
Securities except (a) in connection with transactions permitted under Section
10.01 of the Indenture, or (b) to the Sponsor or an Affiliate thereof in
compliance with applicable law (including the Securities Act and applicable
state securities and blue sky laws). To the fullest extent permitted by law,
any attempted transfer of the Common Securities other than as set forth in
the immediately preceding sentence shall be void.
Section 9.02. Transfer of Certificates.
The Regular Trustees shall provide for the registration of Certificates and
of transfers of Certificates, which will be effected without charge but only
upon payment (with such indemnity as the Regular Trustees may require) in
respect of any tax or other government charges which may be imposed in
relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by
a written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by
this Declaration.
Section 9.03. Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for
purposes of receiving Distributions and for all other purposes whatsoever
and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such Certificate or in the Securities represented by
such Certificate on the part of any Person, whether or not the Trustees shall
have actual or other notice thereof.
Section 9.04. Book Entry Interests.
Unless otherwise specified in the terms of the Preferred Securities, the
Preferred Security Certificates, on original issuance, will be issued in the
form of one or more, fully registered, global Preferred Security Certificates
(each a "Global Certificate"), to be delivered to DTC, the initial Clearing
Agency, by, or on behalf of, the Trust. Such Global Certificates shall
initially be registered on the books and records of the Trust in the name of
Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner
will receive a definitive Preferred Security Certificate representing such
Preferred Security Beneficial Owner's interests in such Global Certificates,
except as provided in Section 9.07. Unless and until definitive, fully
registered Preferred Security
38
Certificates (the "Definitive Preferred Security Certificates") have been
issued to the Preferred Security Beneficial Owners pursuant to Section 9.07:
(i) the provisions of this Section 9.04 shall be in full force and effect;
(ii) the Trust and the Trustees shall be entitled to deal with the Clearing
Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificates and, except as set forth herein in Section
9.07 or in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) with respect to the
Property Trustee, shall have no obligation to the Preferred Security
Beneficial Owners;
(iii) to the extent that the provisions of this Section 9.04 conflict with any
other provisions of this Declaration, the provisions of this Section 9.04 shall
control; and
(iv) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC
will make book entry transfers among the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants, provided, that solely for the purposes of
determining whether the Holders of the requisite amount of Preferred
Securities have voted on any matter provided for in this Declaration, so long
as definitive Preferred Security Certificates have not been issued (pursuant
to Section 9.07 hereof), the Trustees may conclusively rely on, and shall be
protected in relying on,
any written instrument (including a proxy) delivered to the Trustees by the
Clearing Agency setting forth the Preferred Security Beneficial Owners' votes or
assigning the right to vote on any matter to any other Persons either in whole
or in part.
Section 9.05. Notices to Holders of Certificates.
Whenever a notice or other communication to the Holders is required to be
given under this Declaration, unless and until Definitive Preferred Security
Certificates shall have been issued pursuant to Section 9.07, the relevant
Trustees shall give all such notices and communications, specified herein to
be given to Holders of Preferred Securities, to the Clearing Agency and, with
respect to any Preferred Security Certificate registered in the name of a
Clearing Agency or the nominee of a Clearing Agency, the Trustees shall,
except in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) with respect to the
Property Trustee, have no notice obligations to the Preferred Security
Beneficial Owners.
Section 9.06. Appointment of Successor Clearing Agency.
39
If any Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities, the Regular Trustees
may, in their sole discretion, appoint a successor Clearing Agency with
respect to the Preferred Securities.
Section 9.07. Definitive Preferred Securities Certificates.
If (i) a Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.06 or (ii) the Regular Trustees elect after consultation with the
Sponsor to terminate the book entry system through the Clearing Agency with
respect to the Preferred Securities, then (x) Definitive Preferred Security
Certificates shall be prepared by the Regular Trustees on behalf of the Trust
with respect to such Preferred Securities and (y) upon surrender of the
Global Certificates by the Clearing Agency, accompanied by registration
instructions, the Regular Trustees shall cause Definitive Preferred Security
Certificates to be delivered to Preferred Security Beneficial Owners in
accordance with the instructions of the Clearing Agency. Neither the Trustees
nor the Trust shall be liable for any delay in delivery of such instructions
and each of them may conclusively rely on, and shall be protected in relying
on, such instructions.
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and (b)
there shall be delivered to the Regular Trustees such security or indemnity
as may be required by them to keep each of them harmless, then in the absence
of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Regular Trustees (or if there are more than two Regular
Trustees by any two of the Regular Trustees) on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under
this Section 9.08, the Regular Trustees may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
ARTICLE 10
Limitation of Liability; Indemnification
Section 10.01. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or
40
omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such
Indemnified Person by this Declaration or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason
of such Indemnified Person's gross negligence (or, in the case of the
Property Trustee, negligence) or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Trust, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders of Securities might properly be paid.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of
Securities, in their capacities as Holders, shall be entitled to the same
limitation of liability that is extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
Section 10.02. Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor shall
indemnify and hold harmless each Indemnified Person from and against any
loss, liability, expense, damage or claim incurred by such Indemnified Person
by reason of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Declaration, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, liability,
expense, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions.
(b) The provisions of this Section 10.02 shall survive the termination of
this Declaration or the resignation or removal of any Trustee.
Section 10.03. Outside Business.
The Sponsor and any Trustee (in the case of the Property Trustee, subject to
Section 5.01(c)) may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar
or dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or
41
improper. Neither the Sponsor nor any Trustee shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken
by the Trust, and the Sponsor or any Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment or other opportunity. Any Trustee
may engage or be interested in any financial or other transaction with the
Sponsor or any Affiliate of the Sponsor or may act as depository for, trustee
or agent for, or act on any committee or body of holders of, securities or
other obligations of the Sponsor or any of its Affiliates.
ARTICLE 11
Accounting
Section 11.01. Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or
such other year as is required by the Code.
Section 11.02. Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted
accounting principles, consistently applied. The Trust shall use the accrual
method of accounting for United States Federal income tax purposes.
(b) If required by applicable law, the Regular Trustees shall, as soon as
available after the end of each Fiscal Year of the Trust, cause to be
prepared and mailed to each Holder of Securities unaudited financial
statements of the Trust for such Fiscal Year, prepared in accordance with
generally accepted accounting principles; provided that if the Trust is
required to comply with the periodic reporting requirements of Section 13(a)
or 15(d) of the Exchange Act, such financial statements for such Fiscal Year
shall be examined and reported on by a firm of independent certified public
accountants selected by the Regular Trustees (which firm may be the firm used
by the Sponsor).
(c) The Regular Trustees shall cause to be duly prepared and mailed to each
Holder of Securities any annual United States Federal income tax information
statement required by the Code, containing such information with regard to
the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to
deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.
42
(d) The Regular Trustees shall cause to be duly prepared and filed with the
appropriate taxing authority an annual United States Federal income tax
return, on such form as is required by the Code, and any other annual income
tax returns required to be filed by the Regular Trustees on behalf of the
Trust with any state or local taxing authority.
Section 11.03. Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly
to the Property Account and no other funds from the Trust shall be deposited
in the Property Account. The sole signatories for such accounts shall be
designated by the Regular Trustees; provided, however, that the Property
Trustee shall designate the sole signatories for the Property Account.
Section 11.04. Withholding.
The Trust and the Trustees shall comply with all withholding requirements
under United States Federal, State and local law. The Regular Trustees shall
request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Regular Trustees to assist them in determining the extent
of, and in fulfilling, the Trust's withholding obligations. The Trust shall
file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the
extent that the Trust is required to withhold and pay over any amounts to any
authority with respect to Distributions or allocations to any Holder, the
amount withheld shall be deemed to be a Distribution in the amount of the
withholding to the Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount to be withheld was not withheld from a Distribution, the Trust may
reduce subsequent Distributions by the amount of such withholding.
ARTICLE 12
Amendments and Meetings
Section 12.01. Amendments.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may be amended by, and only by, a
written instrument executed by a majority of the Regular Trustees; provided,
however, that (i) no amendment or modification to this Declaration shall be
made, and any such purported amendment shall be void and ineffective: (A)
unless the Regular Trustees shall have first received: (x) an Officers'
Certificate that such amendment is permitted by, and conforms to, the terms
of this Declaration; and
43
(y) an Opinion of Counsel that such amendment is permitted by, and conforms to,
the terms of this Declaration and that all conditions precedent, if any, in this
Declaration to the execution and delivery of such amendment have been satisfied;
and (B) to the extent the result of such amendment would be to: (x) cause the
Trust to fail to continue to be classified for purposes of United States Federal
income taxation as a grantor trust; (y) reduce or otherwise adversely affect the
rights or powers of the Property Trustee in contravention of the Trust Indenture
Act; or (z) cause the Trust to be deemed to be an Investment Company required to
be registered under the Investment Company Act; (ii) at such time after the
Trust has issued any Securities which remain outstanding, any amendment which
would adversely affect the rights, privileges or preferences of any Holder of
Securities may be effected only with such additional requirements as may be set
forth in the terms of such Securities; (iii) Section 4.02, Section 9.01(c) and
this Section 12.01 shall not be amended without the consent of all of the
Holders of the Securities; (iv) no amendment which adversely affects the rights,
powers and privileges of the Property Trustee or the Delaware Trustee shall be
made without the consent of the Property Trustee or the Delaware Trustee,
respectively; (v) Article 4 shall not be amended without the consent of the
Sponsor; and (vi) the rights of the Holders of Common Securities under Article 5
to increase or decrease the number of, and to appoint, replace or remove,
Trustees shall not be amended without the consent of each Holder of Common
Securities.
(b) Notwithstanding Section 12.02(a), this Declaration may be amended without
the consent of the Holders of the Securities to (i) cure any ambiguity, (ii)
correct or supplement any provision in this Declaration that may be defective
or inconsistent with any other provision of this Declaration, (iii) add to
the covenants, restrictions or obligations of the Sponsor, (iv) conform to
any changes in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) or any change in
interpretation or application of Rule 3a-7 (if the Trust is excluded from the
definition of an Investment Company solely by reason of Rule 3a-7) by the
Commission, (v) make any other provisions with respect to matters or
questions arising under this Declaration which shall not be inconsistent with
the other provisions of this Declaration, (vi) modify, eliminate or add to
any provisions of this Declaration to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Securities are outstanding
or to ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act, and (vii) pursuant to Section 5.02,
evidence the acceptance of the appointment of a successor Trustee or fill a
vacancy created by an increase in the number of Regular Trustees, which
amendment does not adversely affect in any material respect the rights,
preferences or privileges of the Holders.
Section 12.02. Meetings of the Holders of Securities; Action by Written Consent.
(a) Meetings of the Holders of Preferred Securities and/or Common Securities
may be called at any time by the Regular Trustees (or as provided in the
terms of the Securities) to consider and act on any matter on which the
Holders of such class of Securities are entitled to act under the terms of
this Declaration, the terms of the Securities or the rules of any stock
exchange or automated quotation system on which the Preferred Securities are
then listed, traded or quoted. The Regular Trustees shall call a meeting of
the Holders of Preferred Securities or Common Securities, if
44
directed to do so by Holders of at least 10% in liquidation amount of such
class of Securities. Such direction shall be given by delivering to the
Regular Trustees one or more notices in writing stating that the signing
Holders of Securities wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders of
Securities calling a meeting shall specify in writing the Certificates held
by the Holders of Securities exercising the right to call a meeting and only
those specified Certificates shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of this
paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities,
the following provision shall apply to meetings of the Holders of Securities:
(i) Notice of any such meeting shall be given by mail to all the Holders of
Securities having a right to vote thereat not less than seven (7) days nor
more than sixty (60) days prior to the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or required
under this Declaration or the rules of any stock exchange or automated
quotation system on which the Preferred Securities are then listed, traded or
quoted, such vote, consent or approval may be given at a meeting of the
Holders of Securities. Any action that may be taken at a meeting of the
Holders of Securities may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is signed by
Holders of Securities owning not less than the minimum aggregate liquidation
amount of Securities that would be necessary to authorize or take such action
at a meeting at which all Holders of Securities having a right to vote
thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders of Securities entitled to
vote who have not consented in writing. The Regular Trustees may specify that
any written ballot submitted to the Holders of Securities for the purpose of
taking any action without a meeting shall be returned to the Trust within the
time specified by the Regular Trustees.
(ii) Each Holder of a Security may authorize any Person to act for it by
proxy on all matters in which a Holder of a Security is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of the Security
executing it. Except as otherwise provided herein or in the terms of the
Securities, all matters relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the Trust
were a Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation.
(iii) Each meeting of the Holders of the Securities shall be conducted by the
Regular Trustees or by such other Person that the Regular Trustees may
designate.
(iv) Unless otherwise provided in the Business Trust Act, this Declaration or
the rules of any stock exchange or automated quotation system on which the
Preferred Securities are then listed, traded or quoted, the Regular Trustees,
in their sole discretion, shall establish all other provisions
45
relating to meetings of Holders of Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any
such right to vote.
ARTICLE 13
Representations of the Property Trustee and the Delaware Trustee
Section 13.01. Representations and Warranties of the Property Trustee.
The Trustee which acts as the initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as the Property Trustee that:
(i) The Property Trustee is a national banking association or a banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the United States or the laws of the state of its
incorporation, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee of this
Declaration have been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and
to general principles of equity and the discretion of the court (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(iii) The execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee.
(iv) No consent, approval or authorization of, or registration with or notice
to, any banking authority which supervises or regulates the Property Trustee
is required for the execution, delivery or performance by the Property
Trustee of this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in Section
5.01(c).
Section 13.02. Representations and Warranties of the Delaware Trustee.
46
The Trustee which acts as the initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as the Delaware Trustee, that:
(i) The Delaware Trustee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with corporate
power and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Delaware Trustee of this
Declaration have been duly authorized by all necessary corporate action on
the part of the Delaware Trustee. This Declaration has been duly executed and
delivered by the Delaware Trustee and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and
to general principles of equity and the discretion of the court (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(iii) No consent, approval or authorization of, or registration with or
notice to, any banking authority which supervises or regulates the Delaware
Trustee, if any, is required for the execution, delivery or performance by
the Delaware Trustee of this Declaration.
(iv) The Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and is a Person that satisfies for
the Trust (S) 3807(a) of the Business Trust Act.
ARTICLE 14
Miscellaneous
Section 14.01. Notices.
All notices provided for in this Declaration shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed
by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Regular
Trustees on behalf of the Trust may give notice of to the Holders of the
Securities):
Litchfield Capital Trust I c/o Litchfield Financial Corporation, 430 Main
Street, Williamstown, MA 01267 Attention: Treasurer, Telecopy: (413) 458-1020
47
(b) if given to the Property Trustee, at the mailing address of the Property
Trustee set forth below (or such other address as the Property Trustee may
give notice of to the Holders of the Securities):
101 Barclay Street Floor 21 West New York, New York 10286 Attention:
Corporate Trust Trustee Administration Telecopy: (212) 815-5915
(c) if given to the Delaware Trustee, at the mailing address of the Delaware
Trustee set forth below (or such other address as the Delaware Trustee may
give notice of to the Holders of the Securities):
White Clay Center Route 273 Newark, Delaware 19711 Attention: Corporate
Trust Department
(d) if given to the Holder of the Common Securities, at the mailing address
of the Sponsor set forth below (or such other address as the Holder of the
Common Securities may give notice of to the Trust):
Litchfield Financial Corporation, 430 Main Street, Williamstown,
Massachusetts 01267, Attention: Treasurer, Telecopy: (413) 458-1020
(e) if given to any other Holder, at the address set forth on the books and
records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee shall also
be sent to the Trust. All notices shall be deemed to have been given, when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
Section 14.02. Undertaking for Costs.
All parties to this Declaration agree, and each Holder of any Securities by
his or her 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 Declaration, or in any suit against the Property Trustee
for any action taken or omitted by it as Property Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 1402
shall not apply to any suit instituted by the Property Trustee, to any suit
instituted by any Holder of Preferred Securities, or group of Holders of
Preferred Securities, holding more than 10% in aggregate liquidation amount
of the outstanding Preferred Securities, or to any suit instituted by any
Holder of Preferred Securities for the enforcement of the payment of the
principal of (or premium, if any) or interest on the Debentures, on or after
the respective due dates expressed in such Debentures.
48
Section 14.03. Governing Law.
This Declaration, the Securities and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State
of Delaware and all rights and remedies shall be governed by such laws
without regard to principles of conflict of laws.
Section 14.04. Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or
any provision hereof.
Section 14.05. Partial Enforceability.
If any provision of this Declaration, or the application of such provision to
any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to Persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
Section 14.06. Counterparts.
This Declaration may contain more than one counterpart of the signature pages
and this Declaration may be executed by the affixing of the signature of the
Sponsor and each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed
a single signature page.
Section 14.07. Intention of the Parties.
It is the intention of the parties hereto that the Trust not be classified
for United States Federal income tax purposes as an association taxable as a
corporation or partnership but that the Trust be treated as a grantor trust
for United States federal income tax purposes. The provisions of this
Declaration shall be interpreted to further this intention of the parties.
Section 14.08. Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included,
and all covenants and agreements in this Declaration by the Sponsor and the
Trustees shall bind and inure to the benefit of their respective successors
and assigns, whether so expressed.
Section 14.09. No Recourse.
49
The Trust's obligations hereunder are intended to be the obligations of the
Trust and no recourse for the payment of Distributions, or for any claim upon
the Securities or otherwise in respect thereof, shall be had against any Holder
of Securities or any Affiliate of a Holder of Securities, solely by reason of
such Person's being a Holder of Securities or an Affiliate of a Holder of
Securities, it being understood that the Holder of Securities, solely by reason
of being a Holder of Securities, has limited liability (in accordance with the
provisions of the Business Trust Act) for the liabilities and obligations of the
Trust. Nothing contained in this Section 14.09 shall be construed to limit the
exercise or enforcement, in accordance with the terms of this Declaration, the
Preferred Guarantee and the Indenture, of the rights and remedies against the
Trust or the Sponsor.
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as
of the day and year first above written.
LITCHFIELD FINANCIAL CORPORATION,
as Sponsor
By: /s/ R.A. Stratton
Name: Richard A. Stratton
Title: President and Chief Executive Officer
/s/ Ronald E. Rabidou
Ronald E. Rabidou, as Regular Trustee
/s/ Heather A. Sica
Heather A. Sica, as Regular Trustee
/s/ John J. Malloy
John J. Malloy, as Regular Trustee
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Michael Culhane
Name: Michael Culhane
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
Name: Walter N. Gitlin
Title: Authorized Signatory
50
EXHIBIT A
CERTIFICATE OF TRUST
OF
LITCHFIELD CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Litchfield Capital Trust I (the "Trust"), dated as
of April ___, 1999, is being duly executed and filed by the undersigned, as
trustees, with the Secretary of State of the State of Delaware to form a
business trust under the Delaware Business Trust Act (12 Del.
Code (S) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is Litchfield
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are The
Bank of New York (Delaware), a Delaware banking corporation, White Clay
Center, Route 273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective at the time of
its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust at
the time of filing this Certificate of Trust, have executed this Certificate of
Trust as of the date first above written.
LITCHFIELD FINANCIAL
CORPORATION,
as Sponsor
By:______________________________
Name:
Title:
- --------------------------------
John J. Malloy, not in his individual
capacity, but solely as Regular Trustee
- --------------------------------
Heather A. Sica, not in her individual
capacity, but solely as Regular Trustee
- --------------------------------
Ronald E. Rabidou, not in his individual capacity, but solely as Regular Trustee
THE BANK OF NEW YORK, not in its individual capacity, but solely as Property
Trustee
By:______________________________
Name:
Title:
THE BANK OF NEW YORK
(DELAWARE),
not in its individual capacity, but solely
as Delaware Trustee
By:______________________________
Name:
Title:
51
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust of
Litchfield Capital Trust I dated as of May 19, 1999 (as amended from time to
time, the "Declaration"), the designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth below (each capitalized term used but not defined herein having the
meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER. 10% Series A Preferred Securities of the Trust with
an aggregate liquidation amount at any time outstanding with respect to the
assets of the Trust of Twenty-Five Million Dollars ($25,000,000) and 375,000
Preferred Securities of the Trust with an aggregate liquidation amount at any
time outstanding with respect to the assets of the Trust of Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000), each with a liquidation amount with
respect to the assets of the Trust of $10 per Preferred Security, are hereby
designated as "10% Series A Trust Preferred Securities,." The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in the
form attached hereto as Annex I, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice or
to conform to the rules of any stock exchange or automated quotation system on
which the Preferred Securities are then listed, traded or quoted. In connection
with the issuance and sale of the Preferred Securities and the Common
Securities, the Trust will purchase as trust assets Debentures of Litchfield
Financial having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities so
issued and bearing interest at an annual rate equal to the annual Distribution
rate on the Preferred Securities and the Common Securities and having payment
and redemption provisions which correspond to the payment and redemption
provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Preferred Security will be
fixed at a rate per annum of ____% (the "Coupon Rate") of the stated liquidation
amount of $10 per Preferred Security, such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
arrears for more than one calendar quarter will accumulate additional
distributions thereon at the Coupon Rate per annum (to the extent permitted by
applicable law), compounded quarterly. The term "Distributions" as used herein
means such periodic cash distributions and any such additional distributions
payable unless otherwise stated. A Distribution will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Debentures held by the Property Trustee and to the extent the Trust has funds on
hand legally available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
(b) Distributions on the Preferred Securities will accumulate from May 19,
1999, and will be payable quarterly in arrears, on June 30, September 30,
December 31, and March 31 of each year, commencing
52
on June 30, 1999, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Debentures held by
the Property Trustee. So long as Litchfield Financial shall not be in default
in the payment of interest on the Debentures, Litchfield Financial has the
right under the Indenture for the Debentures to defer payments of interest on
the Debentures by extending the interest payment period at any time and from
time to time on the Debentures for a period not exceeding 20 consecutive
quarterly interest periods (each, an "Extension Period"), during which
Extension Period no interest shall be due and payable on the Debentures. As a
consequence of such deferral, Distributions shall also be deferred. Despite
such deferral, Distributions will continue to accumulate with additional
distributions thereon (to the extent permitted by applicable law but not at a
rate greater than the rate at which interest is then accruing on the
Debentures) at the Coupon Rate compounded quarterly during any such Extension
Period; provided that no Extension Period shall extend beyond the stated
maturity of the Debentures. Prior to the termination of any such Extension
Period, Litchfield Financial may further extend such Extension Period;
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarterly interest
periods. Upon the termination of any Extension Period and the payment of all
amounts then due, Litchfield Financial may commence a new Extension Period,
subject to the above requirements. Payments of accumulated Distributions will
be payable to Holders of Preferred Securities as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period.
(c) Distributions on the Preferred Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and
records of the Trust on the relevant record dates. While the Preferred
Securities remain in book-entry only form, the relevant record dates shall be
one business day prior to the relevant Distribution date, and if the
Preferred Securities are no longer in book-entry only form, the relevant
record dates will be the fifteenth (15th) day of the month prior to the
relevant Distribution date, which record and payment dates correspond to the
record and interest payment dates on the Debentures. Distributions payable on
any Preferred Securities that are not punctually paid on any Distribution
payment date as a result of Litchfield Financial' having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the person in whose name such Preferred Security is registered on
the relevant record date, and such defaulted Distribution will instead be
payable to the person in whose name such Preferred Security is registered on
the special record date established by the Regular Trustees, which record
date shall correspond to the special record date or other specified date
determined in accordance with the Indenture; provided, however, that
Distributions shall not be considered payable on any Distribution payment
date falling within an Extension Period unless Litchfield Financial has
elected to make a full or partial payment of interest accrued on the
Debentures on such Distribution payment date. Subject to any applicable laws
and regulations and the provisions of the Declaration, each payment in
respect of the Preferred Securities will be made as described in paragraph 8
hereof. If any date on which Distributions are payable on the Preferred
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
53
>
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such payment was
originally payable.
(d) All Distributions paid with respect to the Preferred Securities and the
Common Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for the
Trust that is not accounted for under the Declaration, such money or property
shall be distributed Pro Rata among the Holders of the Preferred Securities
and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any voluntary
or involuntary dissolution of the Trust, the Holders of the Preferred Securities
and the Common Securities will be entitled to receive Pro Rata solely out of the
assets of the Trust legally available for distribution to Holders of Preferred
Securities and Common Securities after satisfaction of liabilities to the
creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $10 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets on hand legally available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct the
Property Trustee in writing at any time to dissolve the Trust and to
distribute Debentures to Holders in exchange for Securities (which direction
is optional and wholly within the discretion of the Holder of the Common
Securities). Upon the receipt of any such written direction, the Property
Trustee shall promptly (i) distribute Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of the Preferred
Securities and the Common Securities held by each Holder, which Debentures
bear accrued and unpaid interest in an amount equal to the accumulated and
54
unpaid Distributions on the Preferred Securities and the Common Securities of
such Holder, in exchange for the Preferred Securities and Common Securities
of such Holder and (ii) dissolve the Trust.
(c) On the date fixed for any distribution of Debentures, upon dissolution of
the Trust, (i) the Preferred Securities will no longer be deemed to be
outstanding and may be canceled by the Regular Trustees, and (ii)
Certificates representing Preferred Securities will be deemed to represent
beneficial interests in the Debentures having an aggregate principal amount
equal to the stated liquidation amount of, and bearing accrued and unpaid
interest equal to accumulated and unpaid Distributions on, such Preferred
Securities until such Certificates are presented to Litchfield Financial or
its agent for transfer or reissuance.
(d) If Debentures are distributed to Holders of the Preferred Securities,
Litchfield Financial, pursuant to the terms of the Indenture, will use its
best efforts to have the Debentures listed on the New York Stock Exchange or
on such other exchange as the Preferred Securities were listed immediately
prior to the distribution of the Debentures.
4. REDEMPTION OF DEBENTURES. The Preferred Securities may be redeemed only if
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities are
repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after June
30, 2004, the proceeds of such repayment will be promptly applied to redeem
Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice,
at a redemption price of $10 per Preferred Security and Common Security plus
an amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Preferred Securities will be
redeemed as described in paragraph 4(f)(ii) below. If a partial redemption
would result in the delisting of the Preferred Securities by any national
securities exchange or other organization on which the Preferred Securities
are then listed or traded, Litchfield Financial pursuant to the Indenture
will redeem Debentures only in whole and, as a result, the Trust may redeem
the Preferred Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be
continuing, Litchfield Financial shall have the right at any time, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures in whole
55
or in part for cash at the Redemption Price within 90 days following the
occurrence of such Special Event, and promptly following such redemption,
Preferred Securities and Common Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Debentures so redeemed
will be redeemed by the Trust at the Redemption Price on a Pro Rata basis.
The Common Securities will be redeemed Pro Rata with the Preferred
Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities will have a priority over the Common
Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
obtained an Opinion of Counsel experienced in such matters (a "Dissolution
Tax Opinion") to the effect that on or after May 19, 1999, as a result of (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after May 19, 1999, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States Federal income tax with respect
to income accrued or received on the Debentures, (ii) the Trust is, or will
be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest
payable by Litchfield Financial to the Trust on the Debentures is not, or
within 90 days of the date thereof will not be, deductible by Litchfield
Financial for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after May 19, 1999.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accumulated and unpaid Distributions have been paid on
all Preferred Securities for all quarterly Distribution periods terminating
on or prior to the date of redemption.
(e) [Intentionally omitted.]
56
(f) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 30 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this paragraph 4(f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first- class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding Preferred Securities
are to be redeemed, the Preferred Securities to be redeemed will be redeemed
Pro Rata from each Holder of Preferred Securities, it being understood that,
in respect of Preferred Securities registered in the name of and held of
record by DTC (or successor Clearing Agency) or any other nominee, the
Preferred Securities will be redeemed from, and the distribution of the
proceeds of such redemption will be made to, DTC (or successor Clearing
Agency).
(iii) Subject to paragraph 8 hereof, if the Trust gives a
Redemption/Distribution Notice in respect of a redemption of Preferred
Securities as provided in this paragraph 4 then (A) while the Preferred
Securities are in book-entry only form, with respect to the Preferred
Securities, by 10:00 a.m., New York City time, on the redemption date, provided
that Litchfield Financial has paid the Property Trustee, in immediately
available funds, a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will deposit
irrevocably with DTC (or successor Clearing Agency) funds sufficient to pay the
applicable Redemption Price with respect to the Preferred Securities and will
give DTC (or successor Clearing Agency) irrevocable instructions and authority
to pay the Redemption Price to the Holders of the Preferred Securities and (B)
if the Preferred Securities are issued in definitive form, with respect to the
Preferred Securities and provided that Litchfield Financial has paid the
Property Trustee, in immediately available funds, a sufficient amount of cash in
connection with the related redemption or maturity of the Debentures, the
Property Trustee will pay the relevant Redemption Price to the Holders of such
Preferred Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
redemption date, Distributions will cease to accumulate on the Preferred
Securities called for redemption, such Preferred Securities will no longer be
deemed to be outstanding and all rights of Holders of such Preferred Securities
so called for redemption will cease, except the right of the Holders of such
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Securities
which have been so called for redemption. If any
57
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid either by
the Property Trustee or by Litchfield Financial pursuant to the Preferred
Guarantee, Distributions on such Preferred Securities will continue to
accumulate, from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on
behalf of the Trust to DTC or its nominee (or any successor Clearing Agency
or its nominee) if the Global Certificates have been issued or, if Definitive
Preferred Security Certificates have been issued, to the Holders of the
Preferred Securities.
(v) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Litchfield Financial or
any of its Affiliates may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.
5. VOTING RIGHTS. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Securities, whether
by way of amendment to the Declaration, other than as described in Section
12.01(b) of the Declaration, or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section
8.01 of the Declaration, then the Holders of outstanding Securities will be
entitled to vote on such amendment or proposal as a single class and such
amendment or proposal shall not be effective except with the approval of the
Holders of Securities of at least a Majority in liquidation amount of the
Securities, voting together as a single class; provided, however, that (A) if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Preferred Securities or the Common Securities, then only the
affected class of Securities will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with
the approval of at least a Majority in liquidation amount of such class of
Securities and (B) amendments to the Declaration shall be subject to such
further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
58
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the Securities, or, in the case of clause (2) above, each
Holder of Securities; and provided, further, that the Property Trustee shall be
under no obligation to take any action in accordance with the directions of the
Holders of Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an Opinion of Counsel experienced in such matters to the
effect that the Trust will not be classified for United States Federal income
tax purposes as other than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the Indenture (the "Debenture Trustee"), or
exercising any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
6.06 of the Indenture or (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures,
without, in each case, obtaining the prior approval of the Holders of a Majority
in liquidation amount of all outstanding Preferred Securities and Common
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities except by
subsequent vote of such Holders. The Property Trustee shall notify each Holder
of Preferred Securities of any notice of default with respect to the Debentures.
In addition to obtaining the foregoing approvals of such Holders of the
Preferred Securities and Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an Opinion of Counsel experienced in such
matters to the effect that for United States Federal income tax purposes the
Trust will not be classified as other than a grantor trust on account of such
action.
If an Event of Default has occurred and is continuing, then the Holders of a
Majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it as
a holder of the Debentures. If the Property Trustee fails to enforce its rights
under the Debentures, a Holder of Preferred Securities, to the extent permitted
by applicable law, may, after a period of 30 days has elapsed since such
Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Sponsor to enforce the
Property Trustee's rights under the Debentures without first instituting any
legal proceeding against the Property Trustee or any other Person; provided
further, that, if an Event of Default has occurred and is continuing and such
event is attributed to the failure of the Sponsor to pay interest or principal
on the Debentures on the date such
59
interest or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a Holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder (a "Holder Direct
Action") on or after the respective due date specified in the Debentures. In
connection with such Holder Direct Action, the Sponsor will be subrogated to the
rights of such Holder of Preferred Securities to the extent of any payment made
by the Sponsor to such Holders of Preferred Securities in such Holder Direct
Action. Except as provided in the preceding sentences, the Holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the Holders of the Debentures.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Preferred Securities are entitled to vote to be mailed to each Holder
of record of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.
No vote or consent of the Holders of Preferred Securities will be required for
the Trust to redeem and cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration.
Notwithstanding that Holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by Litchfield Financial or by any
Affiliate of Litchfield Financial shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
Except as provided in this paragraph 5, Holders of the Preferred Securities will
have no rights to increase or decrease the number of Trustees or to appoint,
remove or replace a Trustee, which voting rights are vested exclusively in the
Holders of the Common Securities.
6. PRO RATA TREATMENT. A reference in these terms of the Preferred Securities to
any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities
60
pro rata according to the aggregate liquidation amount of Common Securities held
by the relevant Holder relative to the aggregate liquidation amount of all
Common Securities outstanding.
7. RANKING. The Preferred Securities rank pari passu and payment thereon will be
made Pro Rata with the Common Securities, except that when an Event of Default
occurs and is continuing, the rights of Holders of Preferred Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise rank in priority to the rights of Holders of the Common Securities.
8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and
payments on redemption of the Preferred Securities will be payable, the transfer
of the Preferred Securities will be registrable, and Preferred Securities will
be exchangeable for Preferred Securities of other denominations of a like
aggregate liquidation amount, at the corporate trust office of the Property
Trustee in The City of New York; provided that payment of Distributions may be
made at the option of the Regular Trustees on behalf of the Trust by check
mailed to the address of the persons entitled thereto and that the payment on
redemption of any Preferred Security will be made only upon surrender of such
Preferred Security to the Property Trustee.
9. ACCEPTANCE OF INDENTURE AND PREFERRED GUARANTEE. Each Holder of
Preferred Securities, by the acceptance thereof, agrees to the provisions of (i)
the Preferred Guarantee, including the subordination provisions therein, and
(ii) the Indenture and the Debentures, including the subordination provisions of
the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Preferred Securities shall have no
preemptive or similar rights to subscribe to any additional Preferred Securities
or Common Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration. The
Trust will provide a copy of the Declaration and the Indenture to a Holder of
Preferred Securities without charge on written request to the Trust at its
principal place of business.
61
Annex I
FORM OF PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - THIS PREFERRED
SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR
PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO
TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO LITCHFIELD
CAPITAL TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Certificate Number Number of Preferred Securities: ____________
__________________
Aggregate Liquidation Amount: $____________
CUSIP NO. ____________
Certificate Evidencing Preferred Securities
of
Litchfield Capital Trust I
____% Series A Trust Preferred Securities
(liquidation amount $10 per Preferred Security)
Litchfield Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that _________ (the
"Holder") is the registered owner of _____
62
(______) preferred securities of the Trust representing preferred undivided
beneficial interests in the assets of the Trust and designated the ____% Series
A Trust Preferred Securities (liquidation amount $10 per Preferred Security)
(the "Preferred Securities"). The Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this Certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this Certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of ___________, ____, as the same may
be amended from time to time (the "Declaration") including the designation of
the terms of Preferred Securities as set forth in Exhibit B thereto. The
Preferred Securities and the Common Securities issued by the Trust pursuant to
the Declaration represent undivided beneficial interests in the assets of the
Trust, including the Debentures (as defined in the Declaration) issued by
Litchfield Financial Corporation, a Massachusetts corporation ("Litchfield
Financial"), to the Trust pursuant to the Indenture referred to in the
Declaration. The Holder is entitled to the benefits of the Guarantee Agreement
of Litchfield Financial dated as of __________, ____, as the same may be amended
from time to time (the "Guarantee") to the extent provided therein. The Trust
will furnish a copy of the Declaration, the Guarantee and the Indenture to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is deemed to have
(i) agreed to the terms of the Indenture and the Debentures, including that the
Debentures are subordinate and junior in right of payment to all Senior Debt (as
defined in the Indenture) as and to the extent provided in the Indenture, and
(ii) agreed to the terms of the Guarantee, including that the Guarantee is
subordinate and junior in right of payment to all other liabilities of
Litchfield Financial, including the Debentures, except those made pari passu or
subordinate by their terms, and senior to all capital stock (other than the most
senior preferred stock issued, from time to time, if any, by Litchfield
Financial, which preferred stock will rank pari passu with the Guarantee) now or
hereafter issued by Litchfield Financial and to any guarantee now or hereafter
entered into by Litchfield Financial in respect of any of its capital stock
(other than the most senior preferred stock issued, from time to time, if any,
by Litchfield Financial).
Upon receipt of this Certificate, the Holder is bound by the Declaration and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this Certificate.
LITCHFIELD CAPITAL TRUST I
--------------------------------
Ronald E. Rabidou, as Regular Trustee
63
--------------------------------
Heather A. Sica, as Regular Trustee
--------------------------------
John J. Malloy, as Regular Trustee
Dated:
Countersigned and Registered:
Transfer Agent and Registrar
By:___________________________
Authorized Signatory
64
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a rate per
annum of ___ % (the "Coupon Rate") of the stated liquidation amount of $10 per
Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will accumulate additional distributions thereon at the Coupon
Rate per annum (to the extent permitted by applicable law), compounded
quarterly. The term "Distributions" as used herein means such periodic cash
distributions and any such additional distributions payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Property Trustee and to the extent the
Trust has funds on hand legally available therefor. The amount of Distributions
payable for any period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution period for which Distributions
are computed, Distributions will be computed on the basis of the actual number
of days elapsed per 90-day quarter.
Distributions on the Preferred Securities will accumulate from _________, ____,
and will be payable quarterly in arrears, on ______, ______, ______ and ______
of each year, commencing on ________, ____, but only if and to the extent that
interest payments are made in respect of the Debentures held by the Property
Trustee. So long as Litchfield Financial shall not be in default in the payment
of interest on the Debentures, Litchfield Financial has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 20 consecutive quarterly interest periods
(each an "Extension Period"), during which Extension Period no interest shall be
due and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions will
continue to accumulate with additional distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
quarterly during any such Extension Period; provided that no Extension Period
shall extend beyond the stated maturity of the Debentures. Prior to the
termination of any such Extension Period, Litchfield Financial may further
extend such Extension Period; provided that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods. Upon the termination of any Extension Period and the
payment of all amounts then due, Litchfield Financial may commence a new
Extension Period, subject to the above requirements. Payments of accumulated
Distributions will be payable to Holders of Preferred Securities as they appear
on the books and records of the Trust on the first record date after the end of
the Extension Period.
The Preferred Securities shall be redeemable as provided in the Declaration.
65
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: ______________________________________
Signature: _________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THIS PREFERRED SECURITY
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
66
TERMS OF
COMMON SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust of
Litchfield Capital Trust I dated as of May 19, 1999 (as amended from time to
time, the "Declaration"), the designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth below (each capitalized term used but not defined herein having the
meaning set forth in the Declaration):
1. DESIGNATION AND NUMBER. 10% Series A Common Securities of the Trust with an
aggregate liquidation amount at any time outstanding with respect to the assets
of the Trust of Seven Hundred Seventy-Three Thousand Two Hundred Dollars
($773,200), and each with a liquidation amount with respect to the assets of the
Trust of $10 per Common Security, and 77,320 Common Securities of the Trust with
an aggregate liquidation amount at any time outstanding with respect to the
assets of the Trust of Seven Hundred Seventy-Three Thousand Two Hundred Dollars
($773,200), and each with a liquidation amount with respect to the assets of the
Trust of $10 per Common Security for issuance upon the exercise of the option
granted to the Underwriters, solely to cover over-allotments, if any, are hereby
designated as "10% Series A Trust Common Securities." The Common Security
Certificates evidencing the Common Securities shall be substantially in the form
attached hereto as Annex I, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice. The Common
Securities are to be issued and sold to Litchfield Financial in consideration of
$773,200 in cash. In connection with the issuance and sale of the Preferred
Securities and the Common Securities, the Trust will purchase as trust assets
Debentures of Litchfield Financial having an aggregate principal amount equal to
the aggregate liquidation amount of the Preferred Securities and the Common
Securities so issued, and bearing interest at an annual rate equal to the annual
Distribution rate on the Preferred Securities and the Common Securities and
having payment and redemption provisions which correspond to the payment and
redemption provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Common Security will be
fixed at a rate per annum of 10% (the "Coupon Rate") of the stated liquidation
amount of $10 per Common Security, such rate being the rate of interest payable
on the Debentures to be held by the Property Trustee. Distributions in arrears
for more than one calendar quarter will accumulate additional distributions
thereon at the Coupon Rate per annum (to the extent permitted by applicable
law), compounded quarterly. The term "Distributions" as used herein means such
periodic cash distributions and any such additional distributions payable unless
otherwise stated. A Distribution will be made by the Property Trustee only to
the extent that interest payments are made in respect of the Debentures held by
the Property Trustee and to the extent the Trust has funds on hand legally
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
67
(b) Distributions on the Common Securities will accumulate from May 19, 1999,
and will be payable quarterly in arrears, on June 30, September 30, December
31, and March 31 of each year commencing on June 30, 1999, except as
otherwise described below, but only if and to the extent that interest
payments are made in respect of the Debentures held by the Property Trustee.
So long as Litchfield Financial shall not be in default in the payment of
interest on the Debentures, Litchfield Financial has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures
by extending the interest payment period at any time and from time to time on
the Debentures for a period not exceeding 20 consecutive quarterly interest
periods (each, an "Extension Period"), during which Extension Period no
interest shall be due and payable on the Debentures. As a consequence of such
deferral, Distributions shall also be deferred. Despite such deferral,
Distributions will continue to accumulate with additional distributions
thereon (to the extent permitted by applicable law but not at a rate greater
than the rate at which interest is then accruing on the Debentures) at the
Coupon Rate compounded quarterly during any such Extension Period; provided
that no Extension Period shall extend beyond the stated maturity of the
Debentures. Prior to the termination of any such Extension Period, Litchfield
Financial may further extend such Extension Period; provided that such
Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarterly interest periods. Upon the
termination of any Extension Period and the payment of all amounts then due,
Litchfield Financial may commence a new Extension Period, subject to the
above requirements. Payments of accumulated Distributions will be payable to
Holders of Common Securities as they appear on the books and records of the
Trust on the first record date after the end of the Extension Period.
(c) Distributions on the Common Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and
records of the Trust on the relevant record dates. While the Preferred
Securities remain in book-entry only form, the relevant record dates for the
Common Securities shall be one business day prior to the relevant
Distribution date, and if the Preferred Securities are no longer in
book-entry only form, the relevant record dates for the Common Securities
will be the fifteenth (15th) day of the month prior to the relevant
Distribution date, which record and payment dates correspond to the record
and interest payment dates on the Debentures. Distributions payable on any
Common Securities that are not punctually paid on any Distribution payment
date as a result of Litchfield Financial' having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the person in whose name such Common Security is registered on the
relevant record date, and such defaulted Distribution will instead be payable
to the person in whose name such Common Security is registered on the special
record date established by the Regular Trustees, which record date shall
correspond to the special record date or other specified date determined in
accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless Litchfield Financial has elected to make a full or
partial payment of interest accrued on the Debentures on such Distribution
payment date. Subject to any applicable laws and regulations and the
provisions of the Declaration, each payment in respect of the Common
Securities will be made as described in paragraph 8 hereof. If any date on
which Distributions are payable on the Common Securities is not a Business
Day, then payment of the
68
Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on the date such payment was originally payable.
(d) All Distributions paid with respect to the Common Securities and the
Preferred Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for the
Trust that is not accounted for under the Declaration, such money or property
shall be distributed Pro Rata among the Holders of the Preferred Securities
and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any voluntary
or involuntary dissolution of the Trust, the Holders of the Preferred Securities
and the Common Securities will be entitled to receive Pro Rata solely out of the
assets of the Trust legally available for distribution to Holders of Preferred
Securities and Common Securities after satisfaction of liabilities to the
creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $10 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets on hand legally available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct
the Property Trustee in writing at any time to dissolve the Trust and
to distribute Debentures to Holders in exchange for Securities (which
direction is optional and wholly within the discretion of the Holder of
the Common Securities). Upon the receipt of any such written direction,
the Property Trustee shall promptly (i) distribute Debentures in an
aggregate principal amount
69
equal to the aggregate stated liquidation amount of the Preferred
Securities and the Common Securities held by each Holder, which
Debentures bear accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on the Preferred Securities and
the Common Securities of such Holder, in exchange for the Preferred
Securities and Common Securities of such Holder and (ii) dissolve the
Trust.
(c) On the date fixed for any distribution of Debentures, upon
dissolution of the Trust, (i) the Common Securities will no longer be
deemed to be outstanding and may be canceled by the Regular Trustees,
and (ii) Certificates representing Common Securities will be deemed to
represent beneficial interests in the Debentures having an aggregate
principal amount equal to the stated liquidation amount of, and bearing
accrued and unpaid interest equal to accumulated and unpaid
Distributions on, such Common Securities until such Certificates are
presented to Litchfield Financial or its agent for transfer or
reissuance.
4. REDEMPTION OF DEBENTURES. The Common Securities may be redeemed only
if Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Preferred Securities and the Common
Securities are repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after June
30, 2004, the proceeds of such repayment will be promptly applied to redeem
Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice,
at a redemption price of $10 per Preferred Security and Common Security plus
an amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Common Securities will be
redeemed as described in paragraph 4(e)(ii) below. If a partial redemption
would result in the delisting of the Preferred Securities by any national
securities exchange or other organization on which the Preferred Securities
are then listed or traded, Litchfield Financial pursuant to the Indenture
will redeem Debentures only in whole and, as a result, the Trust may redeem
the Common Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each, a "Special Event") shall occur and be
continuing, Litchfield Financial shall have the right at any time, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures in whole
or in part for cash at the Redemption Price within 90 days following the
occurrence of such Special Event, and promptly following such redemption,
Preferred Securities and Common
70
Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so redeemed will be redeemed by the Trust
at the Redemption Price on a Pro Rata basis. The Common Securities will be
redeemed Pro Rata with the Preferred Securities, except that if an Event of
Default has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to payment of the Redemption
Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
obtained an Opinion of Counsel experienced in such matters (a "Dissolution
Tax Opinion") to the effect that on or after May 19, 1999, as a result of (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after May 19, 1999, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States Federal income tax with respect
to income accrued or received on the Debentures, (ii) the Trust is, or will
be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest
payable by Litchfield Financial to the Trust on the Debentures is not, or
within 90 days of the date thereof will not be, deductible by Litchfield
Financial for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after May 19, 1999.
(d) The Trust may not redeem fewer than all the outstanding Common Securities
unless all accumulated and unpaid Distributions have been paid on all Common
Securities for all quarterly Distribution periods terminating on or prior to
the date of redemption.
(e) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 30 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date
71
of redemption or exchange and the dates on which notices are given pursuant
to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed
to be given on the day such notice is first mailed by first- class mail,
postage prepaid, to Holders of Preferred Securities and Common Securities.
Each Redemption/Distribution Notice shall be addressed to the Holders of
Preferred Securities and Common Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common Securities are
to be redeemed, the Common Securities to be redeemed will be redeemed Pro
Rata from each Holder of Common Securities (subject to adjustment to
eliminate fractional Common Securities).
(iii) If the Trust gives a Redemption/Distribution Notice in respect of a
redemption of Common Securities as provided in this paragraph 4 (which notice
will be irrevocable), then immediately prior to the close of business on the
redemption date, provided that Litchfield Financial has paid to the Property
Trustee in immediately available funds a sufficient amount of cash in connection
with the related redemption or maturity of the Debentures, Distributions will
cease to accumulate on the Common Securities called for redemption, such Common
Securities will no longer be deemed to be outstanding and all rights of Holders
of such Common Securities so called for redemption will cease, except the right
of the Holders of such Common Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Common Securities which have been so called for redemption. If any date fixed
for redemption of Common Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of Common Securities
is improperly withheld or refused and not paid by the Property Trustee,
Distributions on such Common Securities will continue to accumulate, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on
behalf of the Trust to Holders of the Common Securities.
5. VOTING RIGHTS. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the
Common Securities will have no voting rights.
72
(b) Holders of Common Securities have the sole right under the Declaration to
increase or decrease the number of Trustees, and to appoint, remove or
replace a Trustee, any such increase, decrease, appointment, removal or
replacement to be approved by Holders of Common Securities representing a
Majority in liquidation amount of the Common Securities.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration, other than as described in Section 12.01(b) of the
Declaration, or otherwise, or (ii) the dissolution, winding-up or termination of
the Trust, other than as described in Section 8.01 of the Declaration or Section
3 of this Exhibit C or Section 3 of Exhibit B, then the Holders of outstanding
Securities will be entitled to vote on such amendment or proposal as a single
class and such amendment or proposal shall not be effective except with the
approval of the Holders of Securities of at least a Majority in liquidation
amount of the Securities, voting together as a single class; provided, however,
that (A) if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class of Securities will be entitled to vote on such amendment
or proposal and such amendment or proposal shall not be effective except with
the approval of at least a Majority in liquidation amount of such class of
Securities, (B) the rights of Holders of Common Securities under Section 5.02 of
the Declaration to increase or decrease the number of, and to appoint, replace
or remove, Trustees shall not be amended without the consent of each Holder of
Common Securities, and (C) amendments to the Declaration shall be subject to
such further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the Securities, or, in the case of clause (2) above, each
Holder of Securities; and provided, further, that the Property Trustee shall be
under no obligation to take any action in accordance with the directions of the
Holders of Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an Opinion of Counsel experienced in such matters to the
effect that the Trust will not be classified for United States Federal income
tax purposes as other than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the
73
Indenture (the "Debenture Trustee"), or exercising any trust or power conferred
on such Debenture Trustee with respect to the Debentures, (ii) waive any past
default that is waivable under Section 6.06 of the Indenture or (iii) exercise
any right to rescind or annul a declaration of acceleration of the maturity of
the principal of the Debentures, without, in each case, obtaining the prior
approval of the Holders of a Majority in liquidation amount of all outstanding
Common Securities and Preferred Securities. The Trustees shall not revoke any
action previously authorized or approved by a vote of the Holders of the Common
Securities except by subsequent vote of such Holders. The Property Trustee shall
notify each Holder of Common Securities of any notice of default with respect to
the Debentures. In addition to obtaining the foregoing approvals of such Holders
of the Common Securities and Preferred Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an Opinion of Counsel experienced
in such matters to the effect that for United States Federal income tax purposes
the Trust will not be classified as other than a grantor trust on account of
such action.
Notwithstanding any other provision of these terms, each Holder of Common
Securities will be deemed to have waived any Event of Default with respect to
the Common Securities and its consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived by the Holders of
Preferred Securities as provided in the Declaration or otherwise eliminated, and
until all Events of Default with respect to the Preferred Securities have been
so cured, waived by the Holders of Preferred Securities or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the Holders
of Preferred Securities and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee in accordance with the terms of
the Declaration or of the Securities. In the event that any Event of Default
with respect to the Preferred Securities is waived by the Holders of Preferred
Securities as provided in the Declaration, the Holders of Common Securities
agree that such waiver shall also constitute the waiver of such Event of Default
with respect to the Common Securities for all purposes under the Declaration
without any further act, vote or consent of the Holders of the Common
Securities.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities or pursuant to written consent.
The Regular Trustees will cause a notice of any meeting at which Holders of
Common Securities are entitled to vote to be mailed to each Holder of record of
Common Securities. Each such notice will include a statement setting forth (i)
the date of such meeting, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote and (iii)
instructions for the delivery of proxies.
No vote or consent of the Holders of Common Securities will be required for the
Trust to redeem and cancel Common Securities or to distribute the Debentures in
accordance with the Declaration.
74
6. PRO RATA TREATMENT. A reference in these terms of the Common Securities to
any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
7. RANKING. The Common Securities rank pari passu and payment thereon will be
made Pro Rata with the Preferred Securities, except that when an Event of
Default occurs and is continuing, the rights of Holders of Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise are subordinate to the rights of Holders of the Preferred Securities.
8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and payments
on redemption of the Common Securities will be payable, the transfer of the
Common Securities will be registrable, and Common Securities will be
exchangeable for Common Securities of other denominations of a like aggregate
liquidation amount, at the principal corporate trust office of the Property
Trustee in The City of New York; provided that payment of Distributions may be
made at the option of the Regular Trustees on behalf of the Trust by check
mailed to the address of the persons entitled thereto and that the payment on
redemption of any Common Security will be made only upon surrender of such
Common Security to the Property Trustee. Notwithstanding the foregoing,
transfers of Common Securities are subject to conditions set forth in Section
9.01(c) of the Declaration.
9. ACCEPTANCE OF INDENTURE. Each Holder of Common Securities, by the acceptance
thereof, agrees to the provisions of Indenture and the Debentures, including the
subordination provisions of the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Common Securities shall have no
preemptive or similar rights to subscribe to any additional Common Securities or
Preferred Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration. The
Trust will provide a copy of the Declaration and the Indenture to a Holder of
Common Securities without charge on written request to the Trust at its
principal place of business.
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Annex I
FORM OF COMMON SECURITY CERTIFICATE
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
Litchfield Capital Trust I
____% Series A Trust Common Securities
(liquidation amount $10 per Common Security)
Litchfield Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of ____________________________ (_________)
common securities of the Trust representing common undivided beneficial
interests in the assets of the Trust and designated the "____% Series A Trust
Common Securities" (liquidation amount $10 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer and satisfaction of
the other conditions set forth in the Declaration (as defined below) including,
without limitation, Section 9.01(c) thereof. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this Certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Declaration of Trust of
the Trust dated as of __________, ____, as the same may be amended from time to
time (the "Declaration") including the designation of the terms of Common
Securities as set forth in Exhibit C thereto. The Common Securities and the
Preferred Securities issued by the Trust pursuant to the Declaration represent
undivided beneficial interests in the assets of the Trust, including the
Debentures (as defined in the Declaration) issued by Litchfield Financial
Corporation, a Massachusetts corporation ("Litchfield Financial"), to the Trust
pursuant to the Indenture referred to in the Declaration. The Trust will furnish
a copy of the Declaration and the Indenture to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
The Holder of this Certificate, by accepting this Certificate, is deemed to have
agreed to the terms of the Indenture and the Debentures, including that the
Debentures are subordinate and junior in right
76
of payment to all Senior Debt (as defined in the Supplemental Indenture) as and
to the extent provided in the Indenture.
Upon receipt of this Certificate, the Holder is bound by the Declaration and is
entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this Certificate
this ___ day of -------------, ----.
LITCHFIELD CAPITAL TRUST I
--------------------------------
John J. Malloy, as Regular Trustee
--------------------------------
Heather A. Sica, as Regular Trustee
--------------------------------
Ronald E. Rabidou, as Regular Trustee
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per annum
of ___ % (the "Coupon Rate") of the stated liquidation amount of $10 per Common
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more than one quarter
will accumulate additional distributions thereon at the Coupon Rate per annum
(to the extent permitted by applicable law) compounded quarterly. The term
"Distributions" as used herein means such periodic cash distributions and any
such additional distributions payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Trust has funds on hand
legally available therefor. The amount of Distributions payable for any period
will be computed for any full quarterly Distribution period on the basis of a
360-day year of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
Distributions on the Common Securities will accumulate from _________, ____ and
will be payable quarterly in arrears, on _____________, ____________,
_____________ and _____________ of each year, commencing on ________, ____, but
only if and to the extent that interest payments are made in respect of the
Debentures held by the Property Trustee. So long as Litchfield Financial shall
not be in default in the payment of interest on the Debentures, Litchfield
Financial has the right under the Indenture for the Debentures to defer payments
of interest on the Debentures by extending the interest payment period at any
time and from time to time on the Debentures for a period not
77
exceeding 20 consecutive quarterly interest periods (each an "Extension
Period"), during which Extension Period no interest shall be due and payable on
the Debentures. As a consequence of such deferral, Distributions shall also be
deferred. Despite such deferral, Distributions will continue to accumulate with
additional distributions thereon (to the extent permitted by applicable law but
not at a rate greater than the rate at which interest is then accruing on the
Debentures) at the Coupon Rate compounded quarterly during any such Extension
Period; provided that no Extension Period shall extend beyond the stated
maturity of the Debentures. Prior to the termination of any such Extension
Period, Litchfield Financial may further extend such Extension Period; provided
that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarterly interest periods.
Upon the termination of any Extension Period and the payment of all amounts then
due, Litchfield Financial may commence a new Extension Period, subject to the
above requirements. Payments of accumulated Distributions will be payable to
Holders of Common Securities as they appear on the books and records of the
Trust on the first record date after the end of the Extension Period.
The Common Securities shall be redeemable as provided in the Declaration.
78
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
_____________________________________________________ agent to transfer this
Common Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date: ________________________
Signature: _________________________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
HWD2: 517541-1
79
Exhibit 4.16
LITCHFIELD FINANCIAL CORPORATION
GUARANTEE AGREEMENT
LITCHFIELD CAPITAL TRUST I
DATED AS OF MAY 19, 1999
TABLE OF CONTENTS
<TABLE>
Page
ARTICLE 1
DEFINITIONS
<S> <C>
SECTION 1.01 DEFINITIONS................................................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION..........................................................6
SECTION 2.02. LISTS OF HOLDERS OF PREFERRED SECURITIES..................................................6
SECTION 2.03. REPORTS BY THE GUARANTEE TRUSTEE..........................................................6
SECTION 2.04. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.................................................7
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
...............................................................................................7
SECTION 2.06. EVENTS OF DEFAULT; WAIVER.................................................................7
SECTION 2.07. DISCLOSURE OF INFORMATION..................................................................7
SECTION 2.08. CONFLICTING INTEREST......................................................................8
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE................................................9
SECTION 3.02. CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE
TRUSTEE............................................................................9
SECTION 3.03 .NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE.........................................................................11
SECTION 3.04. GUARANTEE TRUSTEE MAY OWN PREFERRED
SECURITIES .......................................................................11
SECTION 3.05. MONEYS RECEIVED BY GUARANTEE TRUSTEE TO
BE HELD IN TRUST WITHOUT INTEREST.................................................11
SECTION 3.06. GUARANTEE TRUSTEE ENTITLED TO
COMPENSATION, REIMBURSEMENT AND INDEMNITY.........................................12
SECTION 3.07. RIGHT OF GUARANTEE TRUSTEE TO RELY ON
CERTIFICATE OF OFFICERS OF GUARANTOR WHERE
NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED........................................12
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. QUALIFICATIONS...........................................................................12
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION
OF THE GUARANTEE TRUSTEE...........................................................13
-i-
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE................................................................................13
SECTION 5.02. WAIVER OF NOTICE.........................................................................14
SECTION 5.03. OBLIGATIONS NOT AFFECTED.................................................................14
SECTION 5.04. ENFORCEMENT OF GUARANTEE.................................................................15
SECTION 5.05. GUARANTEE OF PAYMENT.....................................................................15
SECTION 5.06. SUBROGATION..............................................................................15
SECTION 5.07. INDEPENDENT OBLIGATIONS..................................................................16
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. LIMITATION OF TRANSACTIONS...............................................................16
SECTION 6.02. SUBORDINATION............................................................................16
ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION..............................................................................17
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.01. EXCULPATION..............................................................................17
SECTION 8.02. INDEMNIFICATION..........................................................................18
SECTION 8.03. SURVIVE TERMINATION......................................................................18
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS...................................................................18
SECTION 9.02. AMENDMENTS...............................................................................18
SECTION 9.03. NOTICES..................................................................................18
SECTION 9.04. GENDERS..................................................................................19
SECTION 9.05. BENEFIT..................................................................................19
SECTION 9.06. GOVERNING LAW............................................................................19
SECTION 9.07. COUNTERPARTS.............................................................................19
SECTION 9.08. LIMITED LIABILITY........................................................................19
</TABLE>
-ii-
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of May 19, 1999, is executed and
delivered by Litchfield Financial Corporation, a Massachusetts corporation (the
"Guarantor"), and The Bank of New York, a New York banking corporation, as the
initial Guarantee Trustee (as defined herein) for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Litchfield Capital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of May 19, 1999 among the trustees of the Issuer named
therein, Litchfield Financial Corporation, as Sponsor, and the Holders from time
to time of preferred undivided beneficial interests in the assets of the Issuer,
the Issuer may issue up to $25,000,000 aggregate liquidation amount of its 10%
Series A Trust Preferred Securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Issuer and having
the terms set forth in Exhibit B to the Declaration, of which $25,000,000
aggregate liquidation amount of Preferred Securities is being issued as of the
date hereof; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities,
the Guarantor desires to irrevocably and unconditionally agree, to the extent
set forth herein, to pay to the Holders the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth
herein; and
NOW, THEREFORE, in consideration of the purchase by the initial
purchasers thereof of Preferred Securities, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time.
ARTICLE 1
DEFINITIONS
SECTION 1.0. DEFINITIONS.
(a) Capitalized terms used in this Guarantee Agreement but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
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(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer, having the terms set forth in
Exhibit C to the Declaration.
"Debentures" means the series of unsecured junior subordinated
debentures issued by the Guarantor under the Indenture to the Property Trustee
and entitled the "10% Series A Junior Subordinated Debentures due 2029."
"Declaration" has the meaning set forth in the first WHEREAS clause
above.
"Distributions" means the periodic distributions and other payments
payable to Holders in accordance with the terms of the Preferred Securities set
forth in Exhibit B to the Declaration.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payment, any
such default shall constitute an Event of Default only if the Guarantor shall
have received notice of such default and shall not have cured such default
within 60 days after receipt of such notice.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions and the Redemption Price, including all accumulated and
unpaid Distributions to, but excluding, the date of redemption, with respect to
the Preferred Securities called for redemption by the Issuer but only if and to
the extent that in each case the Guarantor has made a payment to the Property
Trustee of interest or principal or premium, if any, on the Debentures and (ii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Issuer (other than in connection with the distribution of Debentures to Holders
in exchange for Preferred Securities or the redemption of all the Preferred
Securities upon the maturity or redemption of the Debentures as provided in the
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Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer has funds on hand legally available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer as required by applicable law (in either
case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, a New York banking
corporation, until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Guarantee Agreement, and
thereafter means each such Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of May 19,
1999 between the Guarantor and The Bank of New York, as trustee, as supplemented
by the Supplemental Indenture No. 1 thereto dated as of May 19, 1999 (the
"Supplemental Indenture"), pursuant to which the Debentures are to be issued to
the Property Trustee.
"Liquidation Distribution" has the meaning specified in the definition
of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities" means,
except as otherwise required by the Trust Indenture Act, Holder(s) of
outstanding Preferred Securities voting together as a single class, who are the
record owners of Preferred Securities whose liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accumulated and unpaid Distributions to the date upon which the voting
percentages are determined) represents more than 50% of the liquidation amount
of all outstanding Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or a Vice President, and by the Treasurer, an Associate Treasurer,
an Assistant Treasurer, the Comptroller, the Secretary or an Assistant
Secretary, of such Person, and delivered to the Guarantee Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 2.04 shall
be the principal executive, financial or accounting officer of the Guarantor.
Any Officers' Certificate delivered with respect
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to compliance with a condition or covenant provided for in this Guarantee
Agreement shall include:
(i) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(ii) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(iii) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" has the meaning set forth in the first WHEREAS
clause above.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Redemption Price" means the amount payable on redemption of the
Preferred Securities in accordance with the terms of the Preferred Securities.
"Responsible Officer" means, when used with respect to the Guarantee
Trustee, any officer within the corporate trust department of the Guarantee
Trustee, including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Guarantee Trustee who customarily performs functions similar to those performed
by the Persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of such Person's knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Guarantee Agreement.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
-5-
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by ss.ss.310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control; and
(c) the application of the Trust Indenture Act to this Guarantee
Agreement shall not affect the nature of the Preferred Securities as equity
securities representing preferred undivided beneficial interests in the assets
of the Issuer.
SECTION 2.02. LISTS OF HOLDERS OF PREFERRED SECURITIES.
(a) The Guarantor shall provide the Guarantee Trustee (unless the
Guarantee Trustee is otherwise the registrar of the Preferred Securities) (i)
within 14 days after each record date for payment of Distributions, a list, in
such form as the Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, and (ii) at any
other time within 30 days of receipt by the Guarantor of a written request for a
List of Holders as of a date no more than 14 days before such List of Holders is
given to the Guarantee Trustee; provided that the Guarantor shall not be
obligated to provide such List of Holders at any time that the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor. The Guarantee Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in the List of
Holders given to it; provided, that the Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) the Guarantee Trustee shall comply with its obligations under
ss.ss.310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. REPORTS BY THE GUARANTEE TRUSTEE. Within 60 days after
January 15 of each year, commencing January 15, 2000, the Guarantee Trustee
shall provide to the Holders such reports as are required by ss.313 of the Trust
Indenture Act, if any, in the form, in the manner and at the times provided by
ss.313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with
the other requirements of ss.313 of the Trust Indenture Act. A copy of each such
report shall, at the time of such transmission to the Holders, be filed by the
Guarantee Trustee with the Company, with each stock exchange upon which any
Preferred Securities are listed (if
-6-
so listed) and also with the Commission. The Company agrees to notify the
Guarantee Trustee when any Preferred Securities become listed on any stock
exchange and any delisting thereof.
SECTION 2.04. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee, the Commission and the Holders, as
applicable, such documents, reports and information as required by
ss.314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance
certificates required by ss.314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by ss.314(a)(4) and (c) of the Trust Indenture Act (provided that any
certificate to be provided pursuant to ss.314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each fiscal year of the Issuer).
Delivery of such reports, information and documents to the Guarantee Trustee is
for informational purposes only and the Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein,
including the Company's compliance with any of its covenants hereunder (as to
which the Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
which relate to any of the matters set forth in ss.314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
ss.314(c) may be given in the form of an Officers' Certificate.
SECTION 2.06. EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default, or
impair any right consequent thereon.
(b) The right of any Holder to receive payment of the Guarantee
Payments in accordance with this Guarantee Agreement, or to institute suit for
the enforcement of any such payment, shall not be impaired without the consent
of each such Holder.
SECTION 2.07. DISCLOSURE OF INFORMATION. The disclosure of information
as to the names and addresses of the Holders in accordance with ss.312 of the
Trust Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or any law
hereafter enacted which does not specifically refer to ss.312 of the Trust
Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of
mailing any material pursuant to a request made under ss.312(b) of the Trust
Indenture Act.
SECTION 2.08. CONFLICTING INTEREST. The Declaration shall be deemed to
be specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in ss.310(b) of the Trust Indenture Act.
-7-
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee in
trust for the benefit of the Holders. The Guarantee Trustee shall not transfer
its right, title and interest in this Guarantee Agreement to any Person except a
Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of
its appointment to act as Guarantee Trustee or to a Holder exercising his or her
rights pursuant to Section 5.04(iv). The right, title and interest of the
Guarantee Trustee to this Guarantee Agreement shall vest automatically in each
Person who may hereafter be appointed as Guarantee Trustee in accordance with
Article 4. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) This Guarantee Agreement and all moneys received by the Property
Trustee in respect of the Guarantee Payments will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of, or for the
benefit of, the Guarantee Trustee or its agents or their creditors.
(d) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default known to a Responsible Officer of the Guarantee Trustee,
transmit by mail, first class postage prepaid, to the Holders, as their names
and addresses appear upon the List of Holders, notice of all such Events of
Default, unless such defaults shall have been cured before the giving of such
notice; provided, that, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible Officers, of the Guarantee
Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders. The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Guarantee Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Guarantee Agreement shall have obtained
written notice of such Event of Default.
(e) The Guarantee Trustee shall continue to serve as a trustee until a
Successor Guarantee Trustee has been appointed and accepted that appointment in
accordance with Article 4.
-8-
SECTION 3.02. CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) The Guarantee Trustee, before the occurrence of an Event of Default
and after the curing or waiving of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Guarantee Agreement, and no implied covenants or obligations shall be
read into this Guarantee Agreement against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Guarantee Trustee and
conforming to the requirements of this Guarantee Agreement; but in the case of
any such certificates or opinions that by any provision hereof or the Trust
Indenture Act are specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Guarantee
Agreement or the Trust Indenture Act, as the case may be;
(ii) the Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
liquidation amount of Preferred Securities relating to the time, method and
place of
-9-
conducting any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
(iv) no provision of this Guarantee
Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Guarantee Agreement or adequate indemnity
against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.02(a)
and (b):
(i) whenever in the administration of
this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a
matter be proved or established prior to taking, suffering or omitting any
action hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, request
and rely upon an Officers' Certificate, which, upon receipt of such request,
shall be promptly delivered by the Guarantor;
(ii) the Guarantee Trustee (A) may consult
with counsel (which may be counsel to the Guarantor or any of its Affiliates and
may include any of its employees) selected by it in good faith and with due care
and the written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon
and in accordance with such advice and opinion and (B) shall have the right at
any time to seek instructions concerning the administration of this Guarantee
Agreement from any court of competent jurisdiction;
(iii) the Guarantee Trustee may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it in good faith and with due care;
(iv) the Guarantee Trustee shall be under no
obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holder, unless such Holder shall have offered to the
Guarantee Trustee security and indemnity satisfactory to the Guarantee Trustee
against the costs, expenses (including its attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction; provided that nothing contained in this clause (iv) shall relieve the
Guarantee Trustee of the obligation, upon the occurrence of an Event of Default
(which has not been cured or waived) to exercise such of the rights and powers
vested in it by this Guarantee Agreement, and to use the same degree of care and
skill in this exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; and
-10-
(v) any action taken by the Guarantee
Trustee or its agents hereunder shall bind the Holders and the signature of the
Guarantee Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire as to
the authority of the Guarantee Trustee to so act, or as to its compliance with
any of the terms and provisions of this Guarantee Agreement, both of which shall
be conclusively evidenced by the Guarantee Trustee's or its agent's taking such
action.
SECTION 3.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE. The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee Agreement.
SECTION 3.04. GUARANTEE TRUSTEE MAY OWN PREFERRED SECURITIES. The
Guarantee Trustee, in its individual or any other capacity, may become the owner
or pledgee of Preferred Securities and may otherwise deal with the Guarantor
with the same rights it would have if it were not Guarantee Trustee.
SECTION 3.05. MONEYS RECEIVED BY GUARANTEE TRUSTEE TO BE HELD IN TRUST
WITHOUT INTEREST. All moneys received by the Guarantee Trustee shall, until used
or applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by law. The Guarantee Trustee shall be under no liability for interest
on any moneys received by it hereunder except such as it may agree in writing to
pay thereon.
SECTION 3.06. GUARANTEE TRUSTEE ENTITLED TO COMPENSATION,
REIMBURSEMENT AND INDEMNITY.
(a) The Guarantor covenants and agrees to pay to the Guarantee Trustee
from time to time, and the Guarantee Trustee shall be entitled to, such
compensation as the Guarantor and the Guarantee Trustee shall from time to time
agree in writing (which shall not be limited by any provision of law in regard
to the compensation of a Guarantee Trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Guarantee
Trustee, and the Guarantor will pay or reimburse the Guarantee Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Guarantee Trustee in accordance with any of the provisions of this
Guarantee Agreement (including the reasonable compensation and the reasonable
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Guarantor also covenants to indemnify each of
the Guarantee Trustee or any predecessor Guarantee Trustee and their officers,
agents, directors and employees for, and to hold them harmless against, any and
all loss, liability, damage, claim or expense including taxes (other than taxes
based upon, measured by or determined by the income of the Guarantee
-11-
Trustee) incurred without negligence or bad faith on the part of the Guarantee
Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs and expenses of
defending itself against any claim (whether asserted by the Guarantor, any
Holder or any other Person) of liability in the premises. The provisions of this
Section 3.06 shall survive the termination of this Guarantee Agreement and
resignation or removal of the Guarantee Trustee.
(b) The obligations of the Guarantor under this Section 3.06 to
compensate and indemnify the Guarantee Trustee and to pay or reimburse the
Guarantee Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder. Such additional indebtedness shall be secured
by a lien prior to that of the Preferred Securities upon all property and funds
held or collected by the Guarantee Trustee as such, except funds held in trust
for the benefit of the holders of particular Preferred Securities.
SECTION 3.07. RIGHT OF GUARANTEE TRUSTEE TO RELY ON CERTIFICATE OF
OFFICERS OF GUARANTOR WHERE NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED. Except as
otherwise provided in Section 3.02, whenever in the administration of the
provisions of this Guarantee Agreement the Guarantee Trustee shall deem it
necessary or
desirable that a matter be proved or established prior to taking or suffering or
omitting to take any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Guarantee Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Guarantee Trustee and such certificate, in the absence of negligence or bad
faith on the part of the Guarantee Trustee, shall be full warrant to the
Guarantee Trustee for any action taken, suffered or omitted to be taken by it
under the provisions of this Guarantee Agreement upon the faith thereof.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. QUALIFICATIONS. There shall at all times be a Guarantee
Trustee that shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a national banking association or corporation organized and
doing business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this clause (ii), the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
-12-
If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i) and (ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02. If
the Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of ss.310(b) of the Trust Indenture Act, the Guarantee Trustee and the
Guarantor shall in all respects comply with the provisions of ss.310(b) of the
Trust Indenture Act.
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF THE
GUARANTEE TRUSTEE.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed
or removed without cause by the Guarantor upon 60 days' prior written notice.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by written instrument executed by such
Successor Guarantee Trustee and delivered to the Guarantor and the Guarantee
Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold office until
its successor shall have been appointed or until its removal or resignation.
(d) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of a notice of removal or a Resignation Request, the
Guarantee Trustee being removed or resigning as the case may be may petition any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, appoint a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01.
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid
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by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
SECTION 5.02. WAIVER OF NOTICE. The Guarantor hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands. Notwithstanding anything to the
contrary herein, the Guarantor retains all of its rights under the Indenture to
extend the interest payment period on the Debentures and the Guarantor shall not
be obligated hereunder to make any Guarantee Payment during any Extended
Interest Payment Period (as defined in the Supplemental Indenture) with respect
to the Distributions on the Preferred Securities.
SECTION 5.03. OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that result from any Extended Interest Payment Period), Redemption
Price, Liquidation Distribution (as defined in the Declaration) or any other
sums payable under the terms of the Preferred Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions that result from any Extended Interest Payment Period);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
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(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. ENFORCEMENT OF GUARANTEE. The Guarantor and the Guarantee
Trustee expressly acknowledge that (i) this Guarantee Agreement will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on
behalf of the Holders; (iii) Holders representing not less than a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or other power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement as provided in clauses (ii) and (iii) above, any Holder may institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Issuer, the Guarantee Trustee or any other Person. Notwithstanding the
foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may
directly institute a proceeding against the Guarantor for enforcement of this
Guarantee Agreement for such payment without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other Person.
SECTION 5.05. GUARANTEE OF PAYMENT. This Guarantee Agreement creates a
guarantee of payment and not merely of collection. This Guarantee Agreement will
not be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer) or upon the distribution
of the Debentures to the Holders as provided in the Declaration.
SECTION 5.06. SUBROGATION. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
-15-
SECTION 5.07. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. LIMITATION OF TRANSACTIONS. So long as any Preferred
Securities remain outstanding, the Guarantor agrees that it will not declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
(other than (a) dividends or distributions in shares of, or options, warrants,
rights to subscribe for or purchase shares of, common stock of the Guarantor,
(b) any declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
as a result of a reclassification of the Guarantor's capital stock or the
exchange or the conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (d) the
payment of accrued dividends and the purchase of fractional interests in shares
of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
or (e) purchases of the Guarantor's common stock related to the issuance of the
Guarantor's common stock or rights under any of the Guarantor's benefit plans
for its directors, officers or employees, any of the Guarantor's dividend
reinvestment plans or stock purchase plans, or any of the benefit plans of any
of the Guarantor's Affiliates, for such Affiliate's directors, officers or
employees) or make any guarantee payment with respect thereto, if at such time
(i) the Guarantor shall be in default with respect to its Guarantee Payments or
other payment obligations hereunder, (ii) there shall have occurred any event of
default under the Declaration or (iii) the Guarantor shall have given notice of
its election of an Extended Interest Payment Period and such period, or any
extension thereof, is continuing. In addition, so long as any Preferred
Securities remain outstanding, the Guarantor agrees that it (i) will remain the
sole direct or indirect owner of all of the outstanding Common Securities and
shall not cause or permit the Common Securities to be transferred except to the
extent such transfer is permitted under Section 9.01 of the Declaration;
provided that any permitted successor of the Guarantor under the Indenture may
succeed to the Guarantor's ownership of the Common Securities and (ii) will use
reasonable efforts to cause the Issuer to continue to be treated as a grantor
trust for United States federal income tax purposes except in connection with a
distribution of Debentures as provided in the Declaration.
SECTION 6.02. SUBORDINATION. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, including the
Debentures, except those made pari passu or
-16-
subordinate by their terms, and (ii) senior to all capital stock (other than
the most senior preferred stock issued, from time to time, if any, by the
Guarantor, which preferred stock will rank pari passu with this Guarantee
Agreement) now or hereafter issued by the Guarantor and to any guarantee now or
hereafter entered into by the Guarantor in respect of any of its capital stock
(other than the most senior preferred stock issued, from time to time, if any,
by the Guarantor). The Guarantor's obligations under this Guarantee Agreement
will rank pari passu with respect to obligations under other guarantee
agreements which it may enter into from time to time to the extent that (i) such
agreements shall be entered into in substantially the form hereof and provide
for comparable guarantees by the Guarantor of payment on preferred securities
issued by other trusts, partnerships or other entities affiliated with the
Guarantor that are financing vehicles of the Guarantor and (ii) the debentures
or other evidences of indebtedness of the Guarantor relating to such preferred
securities are junior subordinated, unsecured indebtedness of the Guarantor.
ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION. This Guarantee Agreement shall terminate and
be of no further force and effect (i) upon full payment of the Redemption Price
of all Preferred Securities, (ii) upon the distribution of Debentures to Holders
and holders of Common Securities in exchange for all of the Preferred Securities
and Common Securities or (iii) upon full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer. Notwithstanding
the foregoing, this Guarantee Agreement will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to the Preferred Securities or under this
Guarantee Agreement.
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.01. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Holder for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Guarantee Agreement and
in a manner such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee
Agreement or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
-17-
care by or on behalf of the Guarantor, including information, opinions, reports
or statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
SECTION 8.02. INDEMNIFICATION. To the fullest extent permitted by
applicable law, the Guarantor shall indemnify and hold harmless each Indemnified
Person from and against any loss, liability, expense, damage or claim incurred
by such Indemnified Person by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Guarantee
Agreement and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Guarantee Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, liability, expense, damage or claim incurred
by such Indemnified Person by reason of negligence or willful misconduct with
respect to such acts or omissions.
SECTION 8.03. SURVIVE TERMINATION. The provisions of Sections 8.01 and 8.02
shall survive the termination of this Guarantee Agreement or the resignation or
removal of the Guarantee Trustee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assignees,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Ten of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 9.02. AMENDMENTS. Except with respect to any changes which do
not adversely affect the rights of Holders in any material respect (in which
case no consent of Holders will be required), this Guarantee Agreement may only
be amended with the prior approval of the Guarantor and the Holders of not less
than a Majority in liquidation amount of the Preferred Securities. The
provisions of Section 12.02 of the Declaration concerning meetings of Holders
shall apply to the giving of such approval.
SECTION 9.03. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
Litchfield Financial Corporation, 430 Main Street, P.O. Box 488,
Williamstown, MA 01267,
Telecopy: (413) 458-1020
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(b) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice of to the
Holders:
The Bank of New York 101 Barclay Street Floor 21 West New York,
New York 10286
Attention: Corporate Trust Trustee Administration Telecopy:
(212) 815-5915
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.04. GENDERS. The masculine, feminine and neuter genders used
herein shall include the masculine, feminine and neuter genders.
SECTION 9.05. BENEFIT. This Guarantee Agreement is solely for the
benefit of the Holders and subject to Section 3.01(a) is not separately
transferable from the Preferred Securities.
SECTION 9.06. GOVERNING LAW.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS).
SECTION 9.07. COUNTERPARTS. This Guarantee Agreement may be executed in
counterparts, each of which shall be an original; but such counterparts shall
together constitute one and the same instrument.
SECTION 9.08. LIMITED LIABILITY. The Holders, in their capacities as
such, shall not be personally liable for any liabilities or obligations of the
Guarantor arising out of this Guarantee Agreement, and the parties hereby agree
that the Holders, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to the stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
LITCHFIELD FINANCIAL CORPORATION
By:/s/ R. A. Stratton
Richard A. Stratton
President and Chief Executive Officer
THE BANK OF NEW YORK, as Guarantee Trustee
By:/s/ Michael Culhane
Michael Culhane
Vice President
HWD2: 551489-2
-20-
Exhibit 4.17
LITCHFIELD FINANCIAL CORPORATION
GUARANTEE AGREEMENT
LITCHFIELD CAPITAL TRUST I
DATED AS OF JUNE 8, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
DEFINITIONS
<S> <C>
SECTION 1.01 DEFINITIONS................................................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION..........................................................6
SECTION 2.02. LISTS OF HOLDERS OF PREFERRED SECURITIES..................................................6
SECTION 2.03. REPORTS BY THE GUARANTEE TRUSTEE..........................................................6
SECTION 2.04. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.................................................7
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
...............................................................................................7
SECTION 2.06. EVENTS OF DEFAULT; WAIVER.................................................................7
SECTION 2.07. DISCLOSURE OF INFORMATION..................................................................7
SECTION 2.08. CONFLICTING INTEREST......................................................................8
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE................................................9
SECTION 3.02. CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE
TRUSTEE............................................................................9
SECTION 3.03 .NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE.........................................................................11
SECTION 3.04. GUARANTEE TRUSTEE MAY OWN PREFERRED
SECURITIES .......................................................................11
SECTION 3.05. MONEYS RECEIVED BY GUARANTEE TRUSTEE TO
BE HELD IN TRUST WITHOUT INTEREST.................................................11
SECTION 3.06. GUARANTEE TRUSTEE ENTITLED TO
COMPENSATION, REIMBURSEMENT AND INDEMNITY.........................................12
SECTION 3.07. RIGHT OF GUARANTEE TRUSTEE TO RELY ON
CERTIFICATE OF OFFICERS OF GUARANTOR WHERE
NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED........................................12
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. QUALIFICATIONS...........................................................................12
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION
OF THE GUARANTEE TRUSTEE...........................................................13
-i-
<PAGE>
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE................................................................................13
SECTION 5.02. WAIVER OF NOTICE.........................................................................14
SECTION 5.03. OBLIGATIONS NOT AFFECTED.................................................................14
SECTION 5.04. ENFORCEMENT OF GUARANTEE.................................................................15
SECTION 5.05. GUARANTEE OF PAYMENT.....................................................................15
SECTION 5.06. SUBROGATION..............................................................................15
SECTION 5.07. INDEPENDENT OBLIGATIONS..................................................................16
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. LIMITATION OF TRANSACTIONS...............................................................16
SECTION 6.02. SUBORDINATION............................................................................16
ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION..............................................................................17
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.01. EXCULPATION..............................................................................17
SECTION 8.02. INDEMNIFICATION..........................................................................18
SECTION 8.03. SURVIVE TERMINATION......................................................................18
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS...................................................................18
SECTION 9.02. AMENDMENTS...............................................................................18
SECTION 9.03. NOTICES..................................................................................18
SECTION 9.04. GENDERS..................................................................................19
SECTION 9.05. BENEFIT..................................................................................19
SECTION 9.06. GOVERNING LAW............................................................................19
SECTION 9.07. COUNTERPARTS.............................................................................19
SECTION 9.08. LIMITED LIABILITY........................................................................19
</TABLE>
-ii-
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of June 8, 1999, is executed and
delivered by Litchfield Financial Corporation, a Massachusetts corporation (the
"Guarantor"), and The Bank of New York, a New York banking corporation, as the
initial Guarantee Trustee (as defined herein) for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Litchfield Capital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of May 19, 1999 among the trustees of the Issuer named
therein, Litchfield Financial Corporation, as Sponsor, and the Holders from time
to time of preferred undivided beneficial interests in the assets of the Issuer,
the Issuer may issue up to $28,750,000 aggregate liquidation amount of its 10%
Series A Trust Preferred Securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Issuer and having
the terms set forth in Exhibit B to the Declaration, of which $1,200,000
aggregate liquidation amount of Preferred Securities is being issued as of the
date hereof; and
WHEREAS, as incentive for the Holders to purchase Preferred Securities,
the Guarantor desires to irrevocably and unconditionally agree, to the extent
set forth herein, to pay to the Holders the Guarantee Payments (as defined
herein) and to make certain other payments on the terms and conditions set forth
herein; and
NOW, THEREFORE, in consideration of the purchase by the initial
purchasers thereof of Preferred Securities, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time.
ARTICLE 1
DEFINITIONS
SECTION 1.0. DEFINITIONS.
(a) Capitalized terms used in this Guarantee Agreement but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
-2-
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer, having the terms set forth in
Exhibit C to the Declaration.
"Debentures" means the series of unsecured junior subordinated
debentures issued by the Guarantor under the Indenture to the Property Trustee
and entitled the "10% Series A Junior Subordinated Debentures due 2029."
"Declaration" has the meaning set forth in the first WHEREAS clause
above.
"Distributions" means the periodic distributions and other payments
payable to Holders in accordance with the terms of the Preferred Securities set
forth in Exhibit B to the Declaration.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payment, any
such default shall constitute an Event of Default only if the Guarantor shall
have received notice of such default and shall not have cured such default
within 60 days after receipt of such notice.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions and the Redemption Price, including all accumulated and
unpaid Distributions to, but excluding, the date of redemption, with respect to
the Preferred Securities called for redemption by the Issuer but only if and to
the extent that in each case the Guarantor has made a payment to the Property
Trustee of interest or principal or premium, if any, on the Debentures and (ii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Issuer (other than in connection with the distribution of Debentures to Holders
in exchange for Preferred Securities or the redemption of all the Preferred
Securities upon the maturity or redemption of the Debentures as provided in the
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Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer has funds on hand legally available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer as required by applicable law (in either
case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, a New York banking
corporation, until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Guarantee Agreement, and
thereafter means each such Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of May 19,
1999 between the Guarantor and The Bank of New York, as trustee, as supplemented
by the Supplemental Indenture No. 1 thereto dated as of May 19, 1999 (the
"Supplemental Indenture"), pursuant to which the Debentures are to be issued to
the Property Trustee.
"Liquidation Distribution" has the meaning specified in the definition
of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities" means,
except as otherwise required by the Trust Indenture Act, Holder(s) of
outstanding Preferred Securities voting together as a single class, who are the
record owners of Preferred Securities whose liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accumulated and unpaid Distributions to the date upon which the voting
percentages are determined) represents more than 50% of the liquidation amount
of all outstanding Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or a Vice President, and by the Treasurer, an Associate Treasurer,
an Assistant Treasurer, the Comptroller, the Secretary or an Assistant
Secretary, of such Person, and delivered to the Guarantee Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 2.04 shall
be the principal executive, financial or accounting officer of the Guarantor.
Any Officers' Certificate delivered with respect
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to compliance with a condition or covenant provided for in this Guarantee
Agreement shall include:
(i) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(ii) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(iii) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" has the meaning set forth in the first WHEREAS
clause above.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Redemption Price" means the amount payable on redemption of the
Preferred Securities in accordance with the terms of the Preferred Securities.
"Responsible Officer" means, when used with respect to the Guarantee
Trustee, any officer within the corporate trust department of the Guarantee
Trustee, including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Guarantee Trustee who customarily performs functions similar to those performed
by the Persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of such Person's knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Guarantee Agreement.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
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ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by ss.ss.310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control; and
(c) the application of the Trust Indenture Act to this Guarantee
Agreement shall not affect the nature of the Preferred Securities as equity
securities representing preferred undivided beneficial interests in the assets
of the Issuer.
SECTION 2.02. LISTS OF HOLDERS OF PREFERRED SECURITIES.
(a) The Guarantor shall provide the Guarantee Trustee (unless the
Guarantee Trustee is otherwise the registrar of the Preferred Securities) (i)
within 14 days after each record date for payment of Distributions, a list, in
such form as the Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, and (ii) at any
other time within 30 days of receipt by the Guarantor of a written request for a
List of Holders as of a date no more than 14 days before such List of Holders is
given to the Guarantee Trustee; provided that the Guarantor shall not be
obligated to provide such List of Holders at any time that the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor. The Guarantee Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in the List of
Holders given to it; provided, that the Guarantee Trustee may destroy any List
of Holders previously given to it on receipt of a new List of Holders.
(b) the Guarantee Trustee shall comply with its obligations under
ss.ss.310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. REPORTS BY THE GUARANTEE TRUSTEE. Within 60 days after
January 15 of each year, commencing January 15, 2000, the Guarantee Trustee
shall provide to the Holders such reports as are required by ss.313 of the Trust
Indenture Act, if any, in the form, in the manner and at the times provided by
ss.313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with
the other requirements of ss.313 of the Trust Indenture Act. A copy of each such
report shall, at the time of such transmission to the Holders, be filed by the
Guarantee Trustee with the Company, with each stock exchange upon which any
Preferred Securities are listed (if
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so listed) and also with the Commission. The Company agrees to notify the
Guarantee Trustee when any Preferred Securities become listed on any stock
exchange and any delisting thereof.
SECTION 2.04. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee, the Commission and the Holders, as
applicable, such documents, reports and information as required by
ss.314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance
certificates required by ss.314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by ss.314(a)(4) and (c) of the Trust Indenture Act (provided that any
certificate to be provided pursuant to ss.314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each fiscal year of the Issuer).
Delivery of such reports, information and documents to the Guarantee Trustee is
for informational purposes only and the Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein,
including the Company's compliance with any of its covenants hereunder (as to
which the Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
which relate to any of the matters set forth in ss.314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
ss.314(c) may be given in the form of an Officers' Certificate.
SECTION 2.06. EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default, or
impair any right consequent thereon.
(b) The right of any Holder to receive payment of the Guarantee
Payments in accordance with this Guarantee Agreement, or to institute suit for
the enforcement of any such payment, shall not be impaired without the consent
of each such Holder.
SECTION 2.07. DISCLOSURE OF INFORMATION. The disclosure of information
as to the names and addresses of the Holders in accordance with ss.312 of the
Trust Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or any law
hereafter enacted which does not specifically refer to ss.312 of the Trust
Indenture Act, nor shall the Guarantee Trustee be held accountable by reason of
mailing any material pursuant to a request made under ss.312(b) of the Trust
Indenture Act.
SECTION 2.08. CONFLICTING INTEREST. The Declaration shall be deemed to
be specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in ss.310(b) of the Trust Indenture Act.
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ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee in
trust for the benefit of the Holders. The Guarantee Trustee shall not transfer
its right, title and interest in this Guarantee Agreement to any Person except a
Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of
its appointment to act as Guarantee Trustee or to a Holder exercising his or her
rights pursuant to Section 5.04(iv). The right, title and interest of the
Guarantee Trustee to this Guarantee Agreement shall vest automatically in each
Person who may hereafter be appointed as Guarantee Trustee in accordance with
Article 4. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) This Guarantee Agreement and all moneys received by the Property
Trustee in respect of the Guarantee Payments will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of, or for the
benefit of, the Guarantee Trustee or its agents or their creditors.
(d) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default known to a Responsible Officer of the Guarantee Trustee,
transmit by mail, first class postage prepaid, to the Holders, as their names
and addresses appear upon the List of Holders, notice of all such Events of
Default, unless such defaults shall have been cured before the giving of such
notice; provided, that, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible Officers, of the Guarantee
Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders. The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Guarantee Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Guarantee Agreement shall have obtained
written notice of such Event of Default.
(e) The Guarantee Trustee shall continue to serve as a trustee until a
Successor Guarantee Trustee has been appointed and accepted that appointment in
accordance with Article 4.
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SECTION 3.02. CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) The Guarantee Trustee, before the occurrence of an Event of Default
and after the curing or waiving of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Guarantee Agreement, and no implied covenants or obligations shall be
read into this Guarantee Agreement against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Guarantee Trustee and
conforming to the requirements of this Guarantee Agreement; but in the case of
any such certificates or opinions that by any provision hereof or
the Trust Indenture Act are specifically required to be furnished to the
Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Guarantee Agreement or the Trust Indenture Act, as the case may be;
(ii) the Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
liquidation amount of Preferred Securities relating to the time, method and
place of
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conducting any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
(iv) no provision of this Guarantee
Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Guarantee Agreement or adequate indemnity
against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.02(a)
and (b):
(i) whenever in the administration of
this Guarantee Agreement, the Guarantee Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Guarantee Trustee (unless other evidence
is herein specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officers' Certificate, which, upon receipt of
such request, shall be promptly delivered by the Guarantor;
(ii) the Guarantee Trustee (A) may consult
with counsel (which
may be counsel to the Guarantor or any of its Affiliates and may include any of
its employees) selected by it in good faith and with due care and the written
advice or opinion of such counsel with respect to legal matters shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice and opinion and (B) shall have the right at any time
to seek instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction;
(iii) the Guarantee Trustee may execute any
of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by it in
good faith and with due care;
(iv) the Guarantee Trustee shall be under no
obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holder, unless such Holder shall have offered to the
Guarantee Trustee security and indemnity satisfactory to the Guarantee Trustee
against the costs, expenses (including its attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction; provided that nothing contained in this clause (iv) shall relieve the
Guarantee Trustee of the obligation, upon the occurrence of an Event of Default
(which has not been cured or waived) to exercise such of the rights and powers
vested in it by this Guarantee Agreement, and to use the same degree of care and
skill in this exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; and
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(v) any action taken by the Guarantee T
rustee or its agents hereunder shall bind the Holders and the signature of the
Guarantee Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire as
to the authority of the Guarantee Trustee to so act, or as to its compliance
with any of the terms and provisions of this Guarantee Agreement, both of
which shall be conclusively evidenced by the Guarantee Trustee's or its
agent's taking such action.
SECTION 3.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE. The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee Agreement.
SECTION 3.04. GUARANTEE TRUSTEE MAY OWN PREFERRED SECURITIES. The
Guarantee Trustee, in its individual or any other capacity, may become the owner
or pledgee of Preferred Securities and may otherwise deal with the Guarantor
with the same rights it would have if it were not Guarantee Trustee.
SECTION 3.05. MONEYS RECEIVED BY GUARANTEE TRUSTEE TO BE HELD IN TRUST
WITHOUT INTEREST. All moneys received by the Guarantee Trustee shall, until used
or applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by law. The Guarantee Trustee shall be under no liability for interest
on any moneys received by it hereunder except such as it may agree in writing to
pay thereon.
SECTION 3.06. GUARANTEE TRUSTEE ENTITLED TO COMPENSATION,
REIMBURSEMENT AND INDEMNITY.
(a) The Guarantor covenants and agrees to pay to the Guarantee Trustee
from time to time, and the Guarantee Trustee shall be entitled to, such
compensation as the Guarantor and the Guarantee Trustee shall from time to time
agree in writing (which shall not be limited by any provision of law in regard
to the compensation of a Guarantee Trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Guarantee
Trustee, and the Guarantor will pay or reimburse the Guarantee Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Guarantee Trustee in accordance with any of the provisions of this
Guarantee Agreement (including the reasonable compensation and the reasonable
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Guarantor also covenants to indemnify each of
the Guarantee Trustee or any predecessor Guarantee Trustee and their officers,
agents, directors and employees for, and to hold them harmless against, any and
all loss, liability, damage, claim or expense including taxes (other than taxes
based upon, measured by or determined by the income of the Guarantee
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Trustee) incurred without negligence or bad faith on the part of the Guarantee
Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs and expenses of
defending itself against any claim (whether asserted by the Guarantor, any
Holder or any other Person) of liability in the premises. The provisions of this
Section 3.06 shall survive the termination of this Guarantee Agreement and
resignation or removal of the Guarantee Trustee.
(b) The obligations of the Guarantor under this Section 3.06 to
compensate and indemnify the Guarantee Trustee and to pay or reimburse the
Guarantee Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder. Such additional indebtedness shall be secured
by a lien prior to that of the Preferred Securities upon all property and funds
held or collected by the Guarantee Trustee as such, except funds held in trust
for the benefit of the holders of particular Preferred Securities.
SECTION 3.07. RIGHT OF GUARANTEE TRUSTEE TO RELY ON CERTIFICATE OF
OFFICERS OF GUARANTOR WHERE NO OTHER EVIDENCE SPECIFICALLY PRESCRIBED. Except as
otherwise provided in Section 3.02, whenever in the administration of the
provisions of this Guarantee Agreement the Guarantee Trustee shall deem it
necessary or
desirable that a matter be proved or established prior to taking or suffering or
omitting to take any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Guarantee Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to the
Guarantee Trustee and such certificate, in the absence of negligence or bad
faith on the part of the Guarantee Trustee, shall be full warrant to the
Guarantee Trustee for any action taken, suffered or omitted to be taken by it
under the provisions of this Guarantee Agreement upon the faith thereof.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. QUALIFICATIONS. There shall at all times be a Guarantee
Trustee that shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a national banking association or corporation organized and
doing business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this clause (ii), the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
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If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i) and (ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02. If
the Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of ss.310(b) of the Trust Indenture Act, the Guarantee Trustee and the
Guarantor shall in all respects comply with the provisions of ss.310(b) of the
Trust Indenture Act.
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF THE
GUARANTEE TRUSTEE.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed
or removed without cause by the Guarantor upon 60 days' prior written notice.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by written instrument executed by such
Successor Guarantee Trustee and delivered to the Guarantor and the Guarantee
Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold office until
its successor shall have been appointed or until its removal or resignation.
(d) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of a notice of removal or a Resignation Request, the
Guarantee Trustee being removed or resigning as the case may be may petition any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon after such notice, if any, as it may deem
proper and prescribe, appoint a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01.
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid
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by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
SECTION 5.02. WAIVER OF NOTICE. The Guarantor hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands. Notwithstanding anything to the
contrary herein, the Guarantor retains all of its rights under the Indenture to
extend the interest payment period on the Debentures and the Guarantor shall not
be obligated hereunder to make any Guarantee Payment during any Extended
Interest Payment Period (as defined in the Supplemental Indenture) with respect
to the Distributions on the Preferred Securities.
SECTION 5.03. OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that result from any Extended Interest Payment Period), Redemption
Price, Liquidation Distribution (as defined in the Declaration) or any other
sums payable under the terms of the Preferred Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions that result from any Extended Interest Payment Period);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
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(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. ENFORCEMENT OF GUARANTEE. The Guarantor and the Guarantee
Trustee expressly acknowledge that (i) this Guarantee Agreement will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on
behalf of the Holders; (iii) Holders representing not less than a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or other power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement as provided in clauses (ii) and (iii) above, any Holder may institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Issuer, the Guarantee Trustee or any other Person. Notwithstanding the
foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may
directly institute a proceeding against the Guarantor for enforcement of this
Guarantee Agreement for such payment without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other Person.
SECTION 5.05. GUARANTEE OF PAYMENT. This Guarantee Agreement creates a
guarantee of payment and not merely of collection. This Guarantee Agreement will
not be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer) or upon the distribution
of the Debentures to the Holders as provided in the Declaration.
SECTION 5.06. SUBROGATION. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
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SECTION 5.07. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. LIMITATION OF TRANSACTIONS. So long as any Preferred
Securities remain outstanding, the Guarantor agrees that it will not declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
(other than (a) dividends or distributions in shares of, or options, warrants,
rights to subscribe for or purchase shares of, common stock of the Guarantor,
(b) any declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
as a result of a reclassification of the Guarantor's capital stock or the
exchange or the conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (d) the
payment of accrued dividends and the purchase of fractional interests in shares
of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
or (e) purchases of the Guarantor's common stock related to the issuance of the
Guarantor's common stock or rights under any of the Guarantor's benefit plans
for its directors, officers or employees, any of the Guarantor's dividend
reinvestment plans or stock purchase plans, or any of the benefit plans of any
of the Guarantor's Affiliates, for such Affiliate's directors, officers or
employees) or make any guarantee payment with respect thereto, if at such time
(i) the Guarantor shall be in default with respect to its Guarantee Payments or
other payment obligations hereunder, (ii) there shall have occurred any event of
default under the Declaration or (iii) the Guarantor shall have given notice of
its election of an Extended Interest Payment Period and such period, or any
extension thereof, is continuing. In addition, so long as any Preferred
Securities remain outstanding, the Guarantor agrees that it (i) will remain the
sole direct or indirect owner of all of the outstanding Common Securities and
shall not cause or permit the Common Securities to be transferred except to the
extent such transfer is permitted under Section 9.01 of the Declaration;
provided that any permitted successor of the Guarantor under the Indenture may
succeed to the Guarantor's ownership of the Common Securities and (ii) will use
reasonable efforts to cause the Issuer to continue to be treated as a grantor
trust for United States federal income tax purposes except in connection with a
distribution of Debentures as provided in the Declaration.
SECTION 6.02. SUBORDINATION. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to all other liabilities of the Guarantor,
including the Debentures, except those made pari passu or
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subordinate by their terms, and (ii) senior to all capital stock (other than
the most senior preferred stock issued, from time to time, if any, by the
Guarantor, which preferred stock will rank pari passu with this Guarantee
Agreement) now or hereafter issued by the Guarantor and to any guarantee now or
hereafter entered into by the Guarantor in respect of any of its capital stock
(other than the most senior preferred stock issued, from time to time, if any,
by the Guarantor). The Guarantor's obligations under this Guarantee Agreement
will rank pari passu with respect to obligations under other guarantee
agreements which it may enter into from time to time to the extent that (i) such
agreements shall be entered into in substantially the form hereof and provide
for comparable guarantees by the Guarantor of payment on preferred securities
issued by other trusts, partnerships or other entities affiliated with the
Guarantor that are financing vehicles of the Guarantor and (ii) the debentures
or other evidences of indebtedness of the Guarantor relating to such preferred
securities are junior subordinated, unsecured indebtedness of the Guarantor.
ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION. This Guarantee Agreement shall terminate and
be of no further force and effect (i) upon full payment of the Redemption Price
of all Preferred Securities, (ii) upon the distribution of Debentures to Holders
and holders of Common Securities in exchange for all of the Preferred Securities
and Common Securities or (iii) upon full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer. Notwithstanding
the foregoing, this Guarantee Agreement will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to the Preferred Securities or under this
Guarantee Agreement.
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.01. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Holder for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Guarantee Agreement and
in a manner such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee
Agreement or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
-17-
care by or on behalf of the Guarantor, including information, opinions, reports
or statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
SECTION 8.02. INDEMNIFICATION. To the fullest extent permitted by
applicable law, the Guarantor shall indemnify and hold harmless each Indemnified
Person from and against any loss, liability, expense, damage or claim incurred
by such Indemnified Person by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Guarantee
Agreement and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Guarantee Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, liability, expense, damage or claim incurred
by such Indemnified Person by reason of negligence or willful misconduct with
respect to such acts or omissions.
SECTION 8.03. SURVIVE TERMINATION. The provisions of Sections 8.01 and
8.02 shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assignees,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Ten of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 9.02. AMENDMENTS. Except with respect to any changes which do
not adversely affect the rights of Holders in any material respect (in which
case no consent of Holders will be required), this Guarantee Agreement may only
be amended with the prior approval of the Guarantor and the Holders of not less
than a Majority in liquidation amount of the Preferred Securities. The
provisions of Section 12.02 of the Declaration concerning meetings of Holders
shall apply to the giving of such approval.
SECTION 9.03. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
Litchfield Financial Corporation, 430 Main Street, P.O. Box 488,
Williamstown, MA 01267,
Telecopy: (413) 458-1020
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(b) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice of to the
Holders:
The Bank of New York 101 Barclay Street Floor 21 West New York,
New York 10286
Attention: Corporate Trust Trustee Administration Telecopy:
(212) 815-5915
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.04. GENDERS. The masculine, feminine and neuter genders
used herein shall include the masculine, feminine and neuter genders.
SECTION 9.05. BENEFIT. This Guarantee Agreement is solely for the
benefit of the Holders and subject to Section 3.01(a) is not separately
transferable from the Preferred Securities.
SECTION 9.06. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS).
SECTION 9.07. COUNTERPARTS. This Guarantee Agreement may be executed
in counterparts, each of which shall be an original; but such counterparts
shall together constitute one and the same instrument.
SECTION 9.08. LIMITED LIABILITY. The Holders, in their capacities as
such, shall not be personally liable for any liabilities or obligations of the
Guarantor arising out of this Guarantee Agreement, and the parties hereby agree
that the Holders, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to the stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
LITCHFIELD FINANCIAL CORPORATION
By:/s/ R. A. Stratton
Richard A. Stratton
President and Chief Executive Officer
THE BANK OF NEW YORK, as Guarantee Trustee
By:/s/ Michael Culhane
Michael Culhane
Vice President
HWD2: 555183-1
-20-
Exhibit10.193
AMENDMENT NO. 1 TO INDENTURE OF TRUST (this "Amendment"), dated as of March
1, 1999, by and between LITCHFIELD HYPOTHECATION CORP. 1997-B, a corporation
organized under the laws of the State of Delaware (the "Issuer"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, as trustee (together
with its permitted successors in the trusts hereunder, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer and the Trustee are parties to an Indenture of
Trust, dated as of August 1, 1997 (the "Indenture"), providing for the
issuance by the Issuer from time to time of its Hypothecation Loan
Collateralized Notes in an aggregate outstanding principal amount not to
exceed $45,295,000 (collectively, the "Notes");
WHEREAS, pursuant to the Indenture, the Issuer has pledged and
assigned all of the Issuer's right, title and interest in and to the Trust
Estate to the Trustee as security for the Notes;
WHEREAS, on the Closing Date, the Issuer issued Series A Notes in
an initial aggregate principal amount of $25,465,228.47 which Series A Notes
were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, the Issuer desires to issue additional Series A Notes in
an initial aggregate principal amount of $7,240,512.37 (the "Additional
Series A Notes"), to authorize the Trustee to authenticate and deliver the
Additional Series A Notes to the Purchaser and to increase the aggregate
principal amount of Notes that may be issued pursuant to the Indenture to
$61,000,000;
WHEREAS, as security for the Additional Series A Notes and all
other Notes now or from time to time hereafter outstanding, the Issuer
desires to pledge and assign the additional loans specified on Schedule A
hereto (the "Additional Loans") and the Loan Collateral and related assets
(but excluding Unassigned Rights) relating to the Additional Loans to the
Trustee as additional assets comprising the Trust Estate;
WHEREAS, the Purchaser, Litchfield Financial Corporation and
Berkshire Bank and Green Tree Financial Servicing Corporation, as the Holders
of 100% of the aggregate outstanding principal amount of the Notes on the
date hereof have consented to the execution and delivery of this Amendment by
the parties hereto;
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Issuer and
the Trustee agree as follows;
1. Amendments. (a) Schedule 1 to the Indenture is hereby amended and
restated in its entirety by the revised Schedule 1 attached hereto as
Exhibit A, and all references to Schedule 1 in the Indenture and
Appendix A incorporated by reference therein shall refer to Schedule 1
as so amended and restated.
(b) The Indenture is further amended to provide that each and every
Additional Loan shall be deemed a "Loan" for all purposes of the
Indenture and Appendix A incorporated by reference therein and all
references to a "Loan" and the "Loans" in the Indenture and Appendix
A incorporated by reference therein shall include each Additional
Loan.
(c) Appendix A as incorporated by reference into the Indenture is
hereby amended by the addition of the term "Second Closing Date" as follows:
"Second Closing Date" shall mean March 23, 1999."
(d) Clause (iii) of the definition of "List of Loans" in Appendix A as
incorporated by reference into the Indenture is hereby amended by the
addition of the following at the end thereof: "(or, with respect to
Loans contributed to the Trust Estate after the Closing Date, the
first day of the month in which such Loans are contributed to the
Trust Estate).".
(e) The definition of "Note Limit" in Appendix A as incorporated by
reference into the
Indenture is hereby amended to read as follows: "'Note Limit' shall mean
$61,000,000."
(f) Section 2.1 of the Indenture is hereby amended by the addition of the
following sentence at the end thereof: "The Trustee is hereby
authorized on the Second Closing Date to authenticate and deliver to
the Purchaser Series A Notes in the initial principal amount of
$7,240,512.37.
(f) The first recital and Section 2.3 of the Indenture are hereby
amended by deleting the references to "$45,295,000" contained therein and
replacing the same with "$61,000,000."
(g) Section 2.4(i) of the Indenture is hereby amended by deleting the
reference to "$750,000" contained therein and replacing the same with
"$100,000."
(h) Clause (b) (i) of Section 2.9 of the Indenture is hereby amended to
read as follows: "August 28, 1997 in the case of the Series A Notes issued
and authenticated on the Closing Date and March 23, 1999, in the case of the
Series A Notes issued and authenticated on the Second Closing Date, and."
2. Further Agreements. The parties each agree to execute and deliver to
the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Amendment.
3. Costs and Expenses. The Issuer shall reimburse the Trustee for the
reasonable costs and expenses, including costs and expenses of
counsel, incurred by Trustee in connection with this Amendment.
4. Indenture in Full Force and Effect. The amendments set forth herein
are limited precisely as written and shall not be deemed to (i) modify
any other term or condition of the Indenture or (ii) prejudice any
right the Noteholders may have now or in the future under or in
connection with the Notes, the Indenture or any related document or
agreement. Except as expressly amended hereby, the Indenture shall
remain unchanged and in full force and effect.
5. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
6. Successors and Assigns. All covenants and agreements in this Amendment
by the Issuer shall bind its successors and assigns, whether so
expressed or not.
7. Severability. In case any provision in this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
8. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York, without regard to
the conflict-of-law provisions thereof.
9. Counterparts. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ Cynthia Kerpen
Title: Vice President
LITCHFIELD HYPOTHECATION CORP. 1997-B
By: /s/ Heather A. Sica
Title: Executive Vice President
Exhibit 10.194
AMENDMENT NO. 2 TO INDENTURE OF TRUST (this "Amendment"), dated
as of June 1, 1999, by and between LITCHFIELD HYPOTHECATION CORP. 1997-B, a
corporation organized under the laws of the State of Delaware (the "Issuer"),
and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee
(together with its permitted successors in the trusts hereunder, the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer and the Trustee are parties to an Indenture of
Trust, as amended, dated as of August 1, 1997 (the "Indenture"), providing
for the issuance by the Issuer from time to time of its Hypothecation Loan
Collateralized Notes in an aggregate outstanding principal amount not to
exceed $61,000,000 (collectively, the "Notes");
WHEREAS, pursuant to the Indenture, the Issuer has pledged and
assigned all of the Issuer's right, title and interest in and to the Trust
Estate to the Trustee as security for the Notes;
WHEREAS, on the Closing Date, the Issuer issued Series A Notes in
an initial aggregate principal amount of $25,465,228.47 which Series A Notes
were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, on the Second Closing Date, the Issuer issued Series A
Notes in an aggregate principal amount of $7,240,512.37 which Series A Notes
were authenticated and delivered by the Trustee to the Union Bank of
California, N.A. ("Union Bank");
WHEREAS, the Issuer desires to issue additional Series A Notes in
an initial aggregate principal amount of $1,776,419.96 (the "Additional
Series A Notes"), to authorize the Trustee to authenticate and deliver the
Additional Series A Notes to the Purchaser and to increase the aggregate
principal amount of Notes that may be issued pursuant to the Indenture to
$64,000,000;
WHEREAS, as security for the Additional Series A Notes and all
other Notes now or from time to time hereafter outstanding, the Issuer
desires to pledge and assign the additional loan specified on Schedule A
hereto (the "Additional Loan") and the Loan Collateral and related assets
(but excluding Unassigned Rights) relating to the Additional Loan to the
Trustee as additional assets comprising the Trust Estate;
WHEREAS, the Purchaser, Litchfield Financial Corporation, Berkshire
Bank, Green Tree Financial Servicing Corporation and Union Bank, as the
Holders of 100% of the aggregate outstanding principal amount of the Notes on
the date hereof have consented to the execution and delivery of this
Amendment by the parties hereto;
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Issuer and
the Trustee agree as follows;
10. Amendments. (a) Schedule 1 to the Indenture is hereby amended and
restated in its entirety by the
revised Schedule 1 attached hereto as Exhibit A, and all references to
Schedule 1 in the Indenture and Appendix A incorporated by reference therein
shall refer to Schedule 1 as so amended and restated.
(c) The Indenture is further amended to provide that the Additional Loan
shall be deemed a "Loan" for all purposes of the Indenture and Appendix A
incorporated by reference therein and all references to a "Loan" and the
"Loans" in the Indenture and Appendix A incorporated by reference therein
shall include each Additional Loan.
(c) Appendix A as incorporated by reference into the Indenture is
hereby amended by the addition of the term "Third Closing Date" as follows:
"Third Closing Date" shall mean June 28, 1999."
(g) The definition of "Note Limit" in Appendix A as incorporated by
reference into the
Indenture is hereby amended to read as follows: "'Note Limit' shall mean
$64,000,000."
(h) Section 2.1 of the Indenture is hereby amended by the addition of the
following sentence at the end thereof: "The Trustee is hereby
authorized on the Third Closing Date to authenticate and deliver to
Union Bank the Series A Notes in the initial principal amount of
$1,776,419.96.
(f) The first recital and Section 2.3 of the Indenture as amended are
hereby amended by deleting the references to "$61,000,000" contained therein
and replacing the same with "$64,000,000."
(g) Clause (b) (i) of Section 2.9 of the Indenture is hereby amended
to read as follows: "August 28, 1997 in the case of the Series A Notes
issued and authenticated on the Closing Date, March 23, 1999, in the case of
the Series A Notes issued and authenticated on the Second Closing Date, and
June 28, 1999, in the case of the Third Closing Date, and.
11. Further Agreements. The parties each agree to execute and deliver to
the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Amendment.
12. Costs and Expenses. The Issuer shall reimburse the Trustee for the
reasonable costs and expenses, including costs and expenses of
counsel, incurred by Trustee in connection with this Amendment.
13. Indenture in Full Force and Effect. The amendments set forth herein
are limited precisely as written and shall not be deemed to (i) modify
any other term or condition of the Indenture or (ii) prejudice any
right the Noteholders may have now or in the future under or in
connection with the Notes, the Indenture or any related document or
agreement. Except as expressly amended hereby, the Indenture shall
remain unchanged and in full force and effect.
14. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
15. Successors and Assigns. All covenants and agreements in this Amendment
by the Issuer shall bind its successors and assigns, whether so
expressed or not.
16. Severability. In case any provision in this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
17. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York, without regard to
the conflict-of-law provisions thereof.
18. Counterparts. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ Cynthia Kerpen
Title: Vice President
LITCHFIELD HYPOTHECATION CORP. 1997-B
By: /s/ Heather A. Sica
Title: Executive Vice President
Exhibit 10.195
AMENDMENT NO. 3 TO INDENTURE OF TRUST (this "Amendment"), dated as of
March 1, 1999, by and between LITCHFIELD HYPOTHECATION CORP. 1998-A, a
corporation organized under the laws of the State of Delaware (the "Issuer"),
and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee
(together with its permitted successors in the trusts hereunder, the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer and the Trustee are parties to an Indenture of
Trust, dated as of June 1, 1998 as amended by Amendment No. 1 thereto dated
as of September 1, 1998 and Amendment No. 2 thereto dated as of November 1
1998 (the "Indenture"), providing for the issuance by the Issuer from time to
time of its Hypothecation Loan Collateralized Notes in an aggregate
outstanding principal amount not to exceed $55,000,000 (collectively, the
"Notes");
WHEREAS, pursuant to the Indenture, the Issuer has pledged and
assigned all of the Issuer's right, title and interest in and to the Trust
Estate to the Trustee as security for the Notes;
WHEREAS, on the Closing Date, the Issuer issued Series A Notes in
an initial aggregate principal amount of $10,027,636.73 which Series A Notes
were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, on the Second Closing Date, the Issuer issued Series A
Notes in an initial aggregate principal amount of $2,121,981.93, which Series
A Notes were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, on the Third Closing Date, the Issuer issued
Series A Notes in an initial aggregate principal amount of $7,792,239.88,
which Series A Notes were authenticated and delivered by the Trustee to the
Purchaser;
WHEREAS, the Issuer desires to issue additional Series A Notes in
an initial aggregate principal amount of $5,941,548.14 (the "Additional
Series A Notes"), to authorize the Trustee to authenticate and deliver
$5,000,000 original principal amount of the Additional Series A Notes to the
BSB Bank & Trust and $941,548.14 original principal amount of the Additional
Series A Notes to Litchfield Financial Corporation ("Litchfield") and to
increase the aggregate principal amount of Notes that may be issued pursuant
to the Indenture to $95,000,000;
WHEREAS, as security for the Additional Series A Notes and all
other Notes now or from time to time hereafter outstanding, the Issuer
desires to pledge and assign the additional loans specified on Schedule A
hereto (the "Additional Loans") and the Loan Collateral and related assets
(but excluding Unassigned Rights) relating to the Additional Loans to the
Trustee as additional assets comprising the Trust Estate;
WHEREAS, the Purchaser and Litchfield, as the Holders of 100% of
the aggregate outstanding principal amount of the Notes on the date hereof
have consented to the execution and delivery of this Amendment by the parties
hereto;
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Issuer and
the Trustee agree as follows;
19. Amendments. (a) Schedule 1 to the Indenture is hereby amended and
restated in its entirety by the revised Schedule 1 attached hereto as
Exhibit A, and all references to Schedule 1 in the Indenture and
Appendix A incorporated by reference therein shall refer to Schedule 1
as so amended and restated.
(d) The Indenture is further amended to provide that each and every
Additional Loan shall be deemed a "Loan" for all purposes of the
Indenture and Appendix A incorporated by reference therein and all
references to a "Loan" and the "Loans" in the Indenture and Appendix
A incorporated by reference therein shall include each Additional
Loan.
(c) Appendix A as incorporated by reference into the Indenture is
hereby amended by the addition of the term "Fourth Closing Date" as follows:
"Fourth Closing Date" shall mean March 23, 1999."
(i) Clause (iii) of the definition of "List of Loans" in Appendix A as
incorporated by reference into the Indenture is hereby amended by the
addition of the following at the end thereof: "(or, with respect to
Loans contributed to the Trust Estate after the Closing Date, the
first day of the month in which such Loans are contributed to the
Trust Estate).".
(j) The definition of "Note Limit" in Appendix A as incorporated by
reference into the
Indenture is hereby amended to read as follows: "'Note Limit' shall mean
$95,000,000."
(k) Section 2.1 of the Indenture is hereby amended by the addition of the
following sentence at the end thereof: "The Trustee is hereby
authorized on the Fourth Closing Date to authenticate and deliver (i)
to BSB Bank & Trust Series A Notes in the initial principal amount of
$5,000,000 and (ii) to Litchfield Series A Notes in the initial
principal amount of $941,548.14.
(g) The first recital and Section 2.3 of the Indenture are hereby
amended by deleting the references to "$55,000,000" contained therein and
replacing the same with "$95,000,000."
(h) Clause (b) (i) of Section 2.9 of the Indenture is hereby amended to
read as follows: "June 29, 1998 in the case of the Series A Notes issued and
authenticated on the Closing Date, September 13, 1998 in the case of the
Series A Notes issued and authenticated on the Second Closing Date, November
20, 1998 in the case of the Series A Notes issued and authenticated on the
Third Closing Date, and March 23, 1999 in the case of the Series A Notes
issued and authenticated on the Fourth Closing Date ."
20. Further Agreements. The parties each agree to execute and deliver to
the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Amendment.
21. Costs and Expenses. The Issuer shall reimburse the Trustee for the
reasonable costs and expenses, including costs and expenses of
counsel, incurred by Trustee in connection with this Amendment.
22. Indenture in Full Force and Effect. The amendments set forth herein
are limited precisely as written and shall not be deemed to (i) modify
any other term or condition of the Indenture or (ii) prejudice any
right the Noteholders may have now or in the future under or in
connection with the Notes, the Indenture or any related document or
agreement. Except as expressly amended hereby, the Indenture shall
remain unchanged and in full force and effect.
23. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
24. Successors and Assigns. All covenants and agreements in this Amendment
by the Issuer shall bind its successors and assigns, whether so
expressed or not.
25. Severability. In case any provision in this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
26. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York, without regard to
the conflict-of-law provisions thereof.
27. Counterparts. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ Cynthia Kerpen
Title: Vice President
LITCHFIELD HYPOTHECATION CORP. 1998-A
By: /s/ Heather A. Sica
Title: Executive Vice President
Exhibit10.196
AMENDMENT NO. 4 TO INDENTURE OF TRUST (this "Amendment"), dated as of June 1,
1999, by and between LITCHFIELD HYPOTHECATION CORP. 1998-A, a corporation
organized under the laws of the State of Delaware (the "Issuer"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, as trustee (together
with its permitted successors in the trusts hereunder, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer and the Trustee are parties to an Indenture of
Trust, dated as of June 1, 1998 as amended by Amendment No. 1 thereto dated
as of September 1, 1998, Amendment No. 2 thereto dated as of November 1, 1998
and Amendment No. 3 thereto dated as of March 1, 1999 (the "Indenture"),
providing for the issuance by the Issuer from time to time of its
Hypothecation Loan Collateralized Notes in an aggregate outstanding principal
amount not to exceed $95,000,000 (collectively, the "Notes");
WHEREAS, pursuant to the Indenture, the Issuer has pledged and
assigned all of the Issuer's right, title and interest in and to the Trust
Estate to the Trustee as security for the Notes;
WHEREAS, on the Closing Date, the Issuer issued Series A Notes in
an initial aggregate principal amount of $10,027,636.73 which Series A Notes
were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, on the Second Closing Date, the Issuer issued Series A
Notes in an initial aggregate principal amount of $2,121,981.93, which Series
A Notes were authenticated and delivered by the Trustee to the Purchaser;
WHEREAS, on the Third Closing Date, the Issuer issued
Series A Notes in an initial aggregate principal amount of $7,792,239.88,
which Series A Notes were authenticated and delivered by the Trustee to the
Purchaser;
WHEREAS, on the Fourth Closing Date, the Issuer issued two Series A
Notes, one in an initial aggregate principal amount of $941,548.14, which
Series A Notes was authenticated and delivered by the Trustee to the
Purchaser and a second in an aggregate principal amount of $5,000,000.00,
which Series A Note was authenticated and delivered by the Trustee to BSB
Bank & Trust;
WHEREAS, the Issuer desires to issue additional Series A Notes in
an initial aggregate principal amount of $4,850,190.71 (the "Additional
Series A Notes"), to authorize the Trustee to authenticate and deliver the
Additional Series A Notes to the Purchaser and to increase the aggregate
principal amount of Notes that may be issued pursuant to the Indenture to
$110,000,000;
WHEREAS, as security for the Additional Series A Notes and all
other Notes now or from time to time hereafter outstanding, the Issuer
desires to pledge and assign the additional loan specified on Schedule A
hereto ("the Additional Loan") and the Loan Collateral and related assets
(but excluding Unassigned Rights) relating to the Additional Loan to the
Trustee as additional assets comprising the Trust Estate;
WHEREAS, the Purchaser, Litchfield Financial Corporation, MetroWest
Bank and BSB Bank & Trust, as the Holders of 100% of the aggregate
outstanding principal amount of the Notes on the date hereof have consented
to the execution and delivery of this Amendment by the parties hereto;
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Issuer and
the Trustee agree as follows;
28. Amendments. (a) Schedule 1 to the Indenture is hereby amended and
restated in its entirety by the revised Schedule 1 attached hereto as
Exhibit A, and all references to Schedule 1 in the Indenture and
Appendix A incorporated by reference therein shall refer to Schedule 1
as so amended and restated.
(b) The Indenture is further amended to provide that the Additional Loan
shall be deemed a "Loan" for all purposes of the Indenture and Appendix A
incorporated by reference therein and all references to a "Loan" and the
"Loans" in the Indenture and Appendix A incorporated by reference therein
shall include each Additional Loan.
(c) Appendix A as incorporated by reference into the Indenture is
hereby amended by the addition of the term "Fifth Closing Date" as follows:
"Fifth Closing Date" shall mean June 28, 1999."
(l) The definition of "Note Limit" in Appendix A as incorporated by
reference into the
Indenture is hereby amended to read as follows: "'Note Limit' shall mean
$110,000,000."
(m) Section 2.1 of the Indenture is hereby amended by the addition of the
following sentence at the end thereof: "The Trustee is hereby
authorized on the Fifth Closing Date to authenticate and deliver (i)
to Purchaser the Series A Notes in the initial principal amount of
$4,850,190.71."
(g) The first recital and Section 2.3 of the Indenture are hereby
amended by deleting the references to "$95,000,000" contained therein and
replacing the same with "$110,000,000."
(h) Clause (b) (i) of Section 2.9 of the Indenture is hereby amended to
read as follows: "June 29, 1998 in the case of the Series A Notes issued and
authenticated on the Closing Date, September 13, 1998 in the case of the
Series A Notes issued and authenticated on the Second Closing Date, November
20, 1998 in the case of the Series A Notes issued and authenticated on the
Third Closing Date, March 23, 1999 in the case of the Series A Notes issued
and authenticated on the Fourth Closing Date and June 28, 1999 in the case of
the Series A Notes issued and authenticated on the Fifth Closing Date."
29. Further Agreements. The parties each agree to execute and deliver to
the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Amendment.
30. Costs and Expenses. The Issuer shall reimburse the Trustee for the
reasonable costs and expenses, including costs and expenses of
counsel, incurred by Trustee in connection with this Amendment.
31. Indenture in Full Force and Effect. The amendments set forth herein
are limited precisely as written and shall not be deemed to (i) modify
any other term or condition of the Indenture or (ii) prejudice any
right the Noteholders may have now or in the future under or in
connection with the Notes, the Indenture or any related document or
agreement. Except as expressly amended hereby, the Indenture shall
remain unchanged and in full force and effect.
32. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
33. Successors and Assigns. All covenants and agreements in this Amendment
by the Issuer shall bind its successors and assigns, whether so
expressed or not.
34. Severability. In case any provision in this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
35. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York, without regard to
the conflict-of-law provisions thereof.
36. Counterparts. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ Cynthia Kerpen
Title: Vice President
LITCHFIELD HYPOTHECATION CORP. 1998-A
By: /s/ Heather A. Sica
Title: Executive Vice President
Exhibit10.197
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") dated as of May 28,
1999 by and between Litchfield Financial Corporation, a Massachusetts
corporation having its chief executive offices at 430 Main Street,
Williamstown, Massachusetts 01267, LFC Realty, Inc., a Delaware corporation
having its chief executive offices at 430 Main Street, Williamstown,
Massachusetts 01267 (hereinafter referred to, individually and collectively,
as the "Borrower") and MetroWest Bank, a Massachusetts savings bank having
its chief executive offices at 15 Park Street, Framingham, Massachusetts
01701 (the "Bank");
W I T N E S S E T H:
Recitals
On the terms and subject to the conditions set forth in this Agreement,
the Bank has agreed to provide to the Borrower a secured revolving credit
facility.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
S1. DEFINITIONS AND RULES OF INTERPRETATION.
S2. Definitions. In addition to those terms which are defined elsewhere in
this Agreement, the following terms contained in this Agreement shall have
the meanings set forth below.
Agreement has the meaning specified in the Preamble and all amendments,
modifications, restatements and supplements hereto.
Availability means, at the time of reference, an amount equal to the
lesser of (a) the Bank's Credit Commitment, and (b) the Collateral Value of
the Borrowing Base.
Balance Sheet Date means December 31, 1998.
Borrowing Base means the borrowing base amount determined by the Bank
pursuant to S3 hereof.
Borrowing Base Certificate means a Borrowing Base Certificate in
substantially the form of Exhibit B hereto.
Business Day means any day which is not a Saturday, Sunday or any other
day on which banking institutions in Boston, Massachusetts are permitted or
required by law to remain closed.
Closing Date means May 28, 1999.
Collateral means all property, and all proceeds thereof, from time to
time subject to the security interests created hereby securing the
indebtedness evidenced by the Note and the other obligations of the Borrower
hereunder, including, without limitation, the following:
(1) All Mortgage Loans, Mortgage Notes, Mortgages and other Collateral
Documents deposited with or possessed by or for the account of the Bank
hereunder, or held for delivery to the Bank hereunder, or delivered by
the Bank to the Borrower or a purchaser for purposes of correction or
sale, and all proceeds thereof;
(2) All payments and prepayments of principal, interest and other income due
or to become due on all Mortgage Loans, and all proceeds therefrom, and
the benefits and proceeds and all the right, title and interest of every
nature whatsoever of the Borrower in and to such property including,
without limitation, the following:
S2.1. All rights, liens and security interests existing with respect to, or as
security for, all Mortgage Loans;
S2.2. All hazard insurance policies, title insurance policies and condemnation
proceeds with respect to any Mortgage Notes and with respect to property
securing any Mortgage Loans; and
S2.3. All prepayment premiums and late payment charges;
(3) All files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records, and other records,
information and data of the Borrower relating to Mortgage Loans and
necessary or desirable for the Bank to have to administer, service or
sell such Mortgage Loans;
(4) The Proceeds Account;
(5) All other Related Assets; and
(6) Any other property and proceeds thereof that may, from time to time
hereafter, be subject to the security interests created by the Loan
Documents.
Collateral Documents means those documents required to be delivered to
the Bank in order for Mortgage Loans to be deemed to be Qualified Mortgage
Collateral.
Collateral Value means, with respect to any Qualified Mortgage
Collateral, an amount equal to the aggregate of (a) sixty-five percent (65%)
of the Origination Price of any Pre-Sold Mortgage Loans and (b) fifty percent
(50%) of the Origination Price of any Spec Mortgage Loans.
Credit means the line of credit established by this Agreement.
Credit Commitment means the Bank's commitment to make Loans to the
Borrower in the maximum aggregate amount of $5,000,000.00, as the same may be
reduced from time to time pursuant to the terms of the Agreement.
Default has the meaning set forth in S11 hereof.
Drawdown Date means the date on which any Loan is made or is to be made.
Event of Default has the meaning set forth in S11 hereof.
Financing Statements means financing statements for filing under the
Uniform Commercial Code necessary to perfect the Bank's security interests in
the Collateral.
Generally Accepted Accounting Principles or GAAP means, (1) when used in
general, principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on the Balance Sheet Date, as shall be
concurred in by independent certified public accountants of recognized
standing whose report expresses an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles)
as to financial statements in which such principles have been applied; and
(2) when used with reference to the Borrower, such principles shall include
(to the extent consistent with such principles) the accounting practices
reflected in the financial statements for the year ended on the Balance Sheet
Date.
Indebtedness means all obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be
classified upon the obligor's balance sheet as liabilities, or to which
reference should be made by footnotes thereto, including, in any event and
whether or not so classified: (a) all debt and similar monetary obligations,
whether direct or indirect; (b) all liabilities secured by any mortgage,
pledge, security interest, lien, charge, or other encumbrance existing on
property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; and (c) all guarantees, endorsements
and other contingent obligations whether direct or indirect in respect of
indebtedness of others, including any obligation to supply funds to or in any
manner to invest in, directly or indirectly, the debtor, to purchase
indebtedness, or to assure the owner of indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of
enabling the debtor to make payment of the indebtedness held by such owner or
otherwise, and the obligations to reimburse the issuer in respect of any
letters of credit.
Loan Documents means this Agreement, the Security Documents and the Note.
Loan or Loans means the loans made by the Bank to the Borrower pursuant
to this Agreement.
Loan Request means a written request for a Loan made pursuant to S2.5 of
this Agreement, substantially in the form of Exhibit C hereto.
Mortgage means a mortgage or deed of trust on a real property.
Mortgage Collateral means Mortgage Notes pledged to the Bank by the
Borrower pursuant to this Agreement.
Mortgage Loan means a loan secured by a Mortgage.
Mortgage Note means a note, bond or other evidence of indebtedness
secured by a Mortgage.
Net Proceeds means the total amount of proceeds realized by the Borrower
or seller (as appropriate) on account of any sale or other disposition of any
Mortgage Loan or Underlying Property, minus any reasonable customary closing
costs, approved by the Bank in each instance (in its reasonable discretion)
normally associated with said disposition.
Note means the promissory note delivered to the Bank pursuant to this
Agreement, substantially in the form of Exhibit D hereto, including all
amendments and allonges thereto and any replacements and renewals thereof.
Obligations means all indebtedness, obligations and liabilities of the
Borrower to the Bank under this Agreement or any of the other Loan Documents
or in respect of any of the Loans or the Note or other instruments at any
time evidencing any thereof, whether existing on the date of this Agreement
or arising or incurred hereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise.
Origination Price means the unpaid principal amount of a Mortgage Note.
Pre-Sold Mortgage Loan means those Mortgage Loans for which the
Underlying Property is the subject of a Purchase and Sale Agreement, to which
the Borrower has certified certain terms thereof to the Bank substantially in
the form of Exhibit A hereto.
Pre-Sold Mortgage Loan Certificate means a Pre-Sold Mortgage Loan
Certificate in substantially the form of Exhibit A hereto.
Proceeds Account means a non-interest paying demand deposit account
established for the Borrower with the Bank in which the Bank is granted a
security interest. Such account shall be in the name of the Bank and only
the Bank will have the right to withdraw funds from such account.
Purchase and Sale Agreement means an arms-length, fair market value
agreement between the mortgagor of any Mortgage Loan and a bona-fide third
party purchaser of the Underlying Property to which the purchaser has agreed
to buy and the mortgagor has agreed to sell.
Qualified Mortgage Collateral means a Mortgage Loan satisfying the
following requirements:
(1) The following documents have been delivered to the Bank:
(a) The original Mortgage Note endorsed in blank by the
Borrower.
(b) A true copy of Mortgage, with evidence of
appropriate recording and/or filing.
(c) An executed assignment from the Borrower in recordable
form of the Mortgage securing the Mortgage Note. All prior and
interim assignments of the Mortgage shall have been duly recorded
if, in the opinion of the Bank, local requirements require
recordation. If a recorded assignment is required but not yet
available, the Borrower shall instead deliver a copy of each such
assignment and either an Officer's Certificate certifying that such
copy is a true copy and that such assignment has been duly recorded
or delivered for recordation or evidence of a recorder's receipt.
(d) A marked-up title policy or a title insurance binder or
title certificate which is in full force and effect and meets the
requirements of subsection (ii)(b), below.
(2) Within thirty (30) days after initial delivery of such Mortgage Notes a
mortgagee title insurance policy insuring that the Mortgage is a valid
first lien on the real estate and being otherwise acceptable to the Bank
in its discretion as to insurer, form and content shall be delivered to
the Bank.
(3) Such Mortgage Loan is a binding and valid obligation of the obligor
thereon, in full force and effect and enforceable in accordance with its
terms.
(4) Such Mortgage Loan is free of any default of any party thereto
(including the Borrower), counterclaims, offsets and defenses and from
any rescission, cancellation or avoidance, and all right thereof,
whether by operation of law or otherwise.
(5) No payment under such Mortgage Loan is more than thirty (30) days past
due.
(6) Such Mortgage Loan is in all respects as required by and in accordance
with all applicable laws, and regulations governing the same, including,
without limitation, Fair Credit Reporting Act and Regulations, the
Federal Truth-in-Lending Act and Regulation Z, the Federal Equal Credit
Opportunity Act and Regulation B, the Federal Real Estate Settlement
Procedures Act and Regulation X, the Federal Debt Collection Practices
Act and any federal or state usury laws and regulations. All
disclosures required by law, federal, state or local, were properly
made by the Borrower (or, to the best of Borrower's knowledge, by the
respective loan originator) prior to the closing of the Mortgage Loan.
(7) All advance payments and other deposits on such Mortgage Loan have been
paid in cash, and no part of such sums has been loaned, directly or
indirectly, by the Borrower to the obligor thereon.
(8) At all times such Mortgage Loan will be owned by the Borrower free and
clear of all liens, encumbrances, charges, rights and interests of any
kind, except pursuant to this Agreement, and the Bank has a perfected
security interest in such Mortgage Loan.
(9) An appraisal has been obtained by the Borrower as of a date which is no
later than ninety (90) days prior to the origination of the subject
Mortgage Loan, and such appraisal satisfies all appraisal requirements
specified in 12 CFR 34.1 through 34.47 and requirements of other bank
regulatory agencies.
(10) Such Mortgage Loan is genuine, in all respects as appearing on its face
or as represented in the books and records of the Borrower, and all
information set forth therein is true and correct, and the current
principal balance reflects only proceeds of such Mortgage Loan which
have been fully disbursed.
(11) The property covered by such Mortgage Loan is insured against loss or
damage by fire and all other hazards normally included within standard
extended coverage in accordance with the provisions of such Mortgage
Loan with the Borrower named as loss payee thereon, and the Borrower has
furnished a letter of certification to the Bank (to be renewed annually)
indicating that fire and hazard insurance will be held on behalf of the
Bank for each Mortgage Loan.
(12) The property covered by such Mortgage Loan is free and clear of all
liens except in favor of the Borrower (which has assigned any and all
such liens to the Bank) and (1) the lien of current real property taxes
and assessments not yet due and payable; (2) covenants, conditions and
restrictions, rights of way, easements and other matters of the public
record, as of the date of recording, acceptable to mortgage lending
institutions generally and specifically referred to in a lender's title
insurance policy delivered to the Borrower and (i) referred to or
otherwise considered in the appraisal made for the Borrower or (ii)
which do not materially adversely affect the appraised value of such
property as set forth in such appraisal; and (3) other matters to which
like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by such
Mortgage Loan or the use, enjoyment, value or marketability of the
related property.
(13) Such Mortgage Loan was underwritten in compliance with the Underwriting
Standards set forth on Exhibit F hereto.
(14) The Mortgage Note requires monthly payments of principal and/or
interest, has a maximum maturity date of thirty years from its
origination, and either (A) fully amortizes over the term thereof, or
(B) provides for the amortization of principal over no greater than a
thirty (30) year schedule.
(15) Such Mortgage Loan is otherwise satisfactory to the Bank.
(16) There is no agreement with the mortgagor regarding any variation of the
interest rate and schedules of payment (except as described in the
Mortgage Note and Mortgage) or other terms and conditions of the
Mortgage Loan, no mortgagor has been released from liability on the
Mortgage Note, and no property has been released from the Mortgage
(except in consideration of an appropriate proportionate principal
payment which is reflected in the books and records of the Borrower).
If the Mortgage Loan is a variable rate loan, the Borrower represents
and warrants as of each Drawdown Date that all applicable notices
required by law or regulation have been provided to the mortgagor and
that the right to future changes in the interest rate and payment
schedules has not been waived by the Borrower or any previous holder of
the Mortgage Loan.
(17) There are no mechanic's lien or similar liens or claims which have been
filed for work, labor or material affecting the subject property which
are or may be liens prior to or equal with the lien of the Mortgage.
(18) The subject property is free of material damage and waste and is in
average repair and there is no proceeding pending or threatened for the
total or partial condemnation of the subject property, and the subject
property is free and clear of all hazardous material to the best of
Borrower's knowledge.
(19) The Borrower has no knowledge of any fact as to any Mortgage Loan which
it has failed to disclose which would materially and adversely affect
the value or marketability of such Mortgage Loan.
(20) The Borrower has no knowledge of any impediments to title that adversely
affect the value, enjoyment or marketability of the Underlying Property.
(21) Intentionally omitted.
(22) To the best of Borrower's knowledge, no hazardous or toxic materials or
wastes or products regulated by law or ordinance or asbestos or asbestos
products or materials or polychlorinated biphenyls or urea formaldehyde
insulation have ever been used or employed in the construction, use or
maintenance of the Underlying Property or have ever been stored, treated
at or disposed of on the Underlying Property. However, in the event it
has been determined that asbestos or asbestos products or asbestos
materials have been used or employed in construction, use, or
maintenance of the Underlying Property, a duly qualified appraiser or
engineer must state that the material is in good repair or has been
removed.
(23) To the best of Borrower's knowledge, there has not occurred nor has any
person or entity alleged that there has occurred upon the Underlying
Property any spillage, leakage, discharge or release into the air, soil
or groundwater of any hazardous materials or regulated wastes.
(24) All taxes, filing fees and similar fees assessed by any state or local
authority in connection with the execution, delivery or recording of the
Mortgage have been paid.
Related Assets means any and all documents, instruments, collateral
agreements and assignments and endorsements for all documents, instruments
and collateral agreements, referred to in the Mortgage Notes and/or Mortgages
or related thereto, including, without limitation, guaranties, current
insurance policies (flood insurance, if applicable; hazard insurance; title
insurance and other applicable insurance policies) covering the subject
property or relating to the Mortgage Notes and all files, books, papers,
ledger cards, reports and records, including, without limitation, loan
applications, mortgagor financial statements, credit reports and appraisals,
relating to the Mortgage Loans. In all cases, the Related Assets shall be
the original documents.
Security Documents means all documents delivered to the Bank which
evidence the Obligations and Collateral therefor.
Spec Mortgage Loans means those Mortgage Loans to which the Underlying
Property is not the subject of a Purchase and Sale Agreement. The Borrower
agrees that Spec Mortgage Loans will account for not more than 40% of all
Qualified Mortgage Loans. In the event that the aggregate of all Spec
Mortgage Loans exceeds 40% of the Qualified Mortgage Loans, such additional
Spec Mortgage Loans will not be available for inclusion in the Collateral
Value.
Termination Date means the date which is the earlier to occur of (i)
729 days after the Closing Date or (ii) the date on which the Bank
accelerates the Obligations as the result of the occurrences of an Event of
Default.
Transmittal Letter means a letter from the Borrower to the Bank
substantially in the form of Exhibit E hereto.
Underlying Property means a parcel or parcels of land and improvement
thereon encumbered by a Mortgage.
Uniform Commercial Code means the Uniform Commercial Code as enacted in
the Commonwealth of Massachusetts, as amended from time to time (M.G.L., c.
106, S9-101 et seq.)
S3. Rules of Interpretation.
S3.1. A reference to any document or agreement shall include such document or
agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.
S3.2. The singular includes the plural and the plural includes the singular.
S3.3. A reference to any law includes any amendment or modification to such
law.
S3.4. A reference to any person includes its permitted successors and
permitted assigns.
S3.5. Accounting terms not otherwise defined herein have the meanings assigned
to them by generally accepted accounting principles applied on a consistent
basis by the accounting entity to which they refer.
S3.6. The words "include," "includes" and "including" are not limiting.
S3.7. All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code
as in effect in Massachusetts, have the meanings assigned to them therein.
S3.8. Reference to a particular "S" refers to that section of this Agreement
unless otherwise indicated.
S3.9. The words "herein", "hereof", "hereunder" and words of like import shall
refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
S1.1.
S4. THE CREDIT FACILITY.
S5. Commitment to Make Loans.
S5.1. Subject to the terms and conditions set forth in this Agreement, the
Bank agrees to lend to the Borrower and the Borrower may borrow, repay, and
reborrow from time to time between the Closing Date and the Termination Date
upon notice by the Borrower to the Bank given in accordance with S2.5, such
sums as are requested by the Borrower up to a maximum aggregate principal
amount outstanding (after giving effect to all amounts requested) at any one
time equal to the Bank's Credit Commitment; provided, that the sum of the
outstanding amount of the Loans (after giving effect to all amounts
requested) shall not at any time exceed Availability.
S5.2. Upon the occurrence of any Default or Event of Default which is
continuing, the Bank shall have no obligation to make any Loans to the
Borrower hereunder.
S6. Advances in Excess of Availability. The Bank does not have any
obligation to make any Loan such that the outstanding principal balance of
the Loans exceeds Availability. The making of Loans and the providing of
financial accommodations by the Bank in excess of Availability is for the
benefit of the Borrower and does not affect the obligations of the Borrower
hereunder; such Loans constitute Obligations. The making of any such Loans
in excess of Availability on any one occasion shall not obligate the Bank to
make any such Loans on any other occasion nor to permit such Loans to remain
outstanding.
S7. Note. At the time of the making of the first Loan hereunder, the
Borrower shall deliver to the Bank its original Note, payable to the order of
the Bank in a principal amount equal to the Bank's Credit Commitment, and
dated the date of delivery. The Note shall be in the form of Exhibit D
hereto, shall mature on the Termination Date, and shall bear interest as set
forth herein.
S8. Interest on Loans. Prior to the occurrence of an Event of Default, the
outstanding principal amount of the Loans shall bear interest at the rate per
annum equal to the aggregate of (a) the Bank's Corporate Base Rate (b) plus
one percent (1.00%). Interest shall be payable (i) monthly in arrears on the
first day of each calendar month of each year, commencing July 1,1999, and
(ii) on the Termination Date. As used herein, the Bank's Corporate Base Rate
refers to that rate of interest announced from time to time by the Bank as
its Corporate Base Rate, with changes in such rate to be effective, for
purposes of calculation hereunder, on the same date such changes are made
generally effective by the Bank to loans made by it.
S9. Requests for Loans. The Borrower shall give to the Bank written notice
in the form of Exhibit C hereto (or telephonic notice confirmed in a writing
in the form of Exhibit C hereto) of each Loan requested hereunder (a "Loan
Request") no less than one (1) Business Day prior to the proposed Drawdown
Date of any Loan. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Loan requested from
the Bank on the proposed Drawdown Date. Each of the representations and
warranties made by or on behalf of the Borrower to the Bank in this Agreement
or any other Loan Document shall be true and correct in all material respects
when made and shall, for all purposes of this Agreement, be deemed to be
repeated on and as of the date of the submission of any Loan Request and on
and as of the Drawdown Date of such Loan (except to the extent of changes
resulting from transactions contemplated or permitted by this Agreement and
the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse and to
the extent that such representations and warranties expressly relate to an
earlier date). All Loans will be advanced by wire transfer in accordance
with procedures approved by the Bank in each instance.
S10. Maturity of the Loans. The Loans shall mature and shall be due and
payable on the Termination Date. The Borrower promises to pay on the
Termination Date, and there shall become absolutely due and payable on the
Termination Date, all Loans outstanding on such date, together with any and
all accrued and unpaid interest thereon.
S11. Mandatory Prepayments. If at any time the outstanding amount of the
Loans shall exceed Availability, the Borrower shall immediately pay to the
Bank in cash, or deliver to the Bank additional Collateral Documents meeting
the requirements of this Agreement, or both, so that the sum of the cash paid
and the Collateral Value of the Mortgage Loans related to the Collateral
Documents so delivered shall equal or exceed the amount by which the
outstanding amount of the Loans exceeds Availability. Any cash so paid shall
be deemed to be the payment of principal on the Loans and shall be applied by
the Bank in accordance with the provisions of S4.2 hereof.
S12. DETERMINATION OF BORROWING BASE; COLLATERAL DOCUMENTS.
S13. Inclusion of Qualified Mortgage Collateral in Borrowing Base. The
Borrower may, from time to time, transmit to the Bank Collateral Documents
together with a Transmittal Letter, in duplicate, in the form of Exhibit E
hereto. If the Bank, in its discretion, determines that such Collateral
Documents and the related Mortgage Loans meet the requirements of this
Agreement and that such Mortgage Loans are Qualified Mortgage Collateral, the
Collateral Value of such Qualified Mortgage Collateral shall be included in
the Borrowing Base, subject to the limitations set forth in this S3.1. In
addition, the Bank reserves the right, in its sole discretion, at any time,
to exclude Mortgage Loans from the Borrowing Base, whether or not the
Collateral Documents have been delivered and whether or not the Borrowing
Base limitations have been met.
S14. Custody of Collateral Documents. The Borrower will deliver to the Bank
or its custodian, as directed by the Bank, the Mortgage Notes and other
Collateral Documents with respect to all Mortgage Collateral included in the
Borrowing Base.
S15. Pre-Sold Mortgage Loans. In order for any Mortgage Loan to be
characterized as a Pre-Sold Mortgage Loan, the Borrower must deliver to the
Bank, in addition to any other documents, certificates or other instruments
which must be delivered pursuant to this Agreement, a Pre-Sold Mortgage Loan
Certificate substantially in the form of Exhibit A hereto. In the event that
any Mortgage Loan is not characterized by the Bank as a Pre-Sold Mortgage
Loan, then the Mortgage Loan shall be a Spec Mortgage Loan.
S16. CERTAIN GENERAL PROVISIONS.
S17. Method of Payment.
S17.1. All payments and prepayments of principal and all payments of
interest and fees shall be made by the Borrower in immediately available
funds.
S17.2. All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of
the other Loan Documents, the Borrower will pay to the Bank, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable
the Bank to receive the same net amount which the Bank would have received on
such due date had no such obligation been imposed upon the Borrower. The
Borrower will deliver promptly to the Bank certificates or other valid
vouchers for all taxes or other charges deducted from or paid with respect to
payments made by the Borrower hereunder or under such other Loan Document.
S17.3. All payments of interest hereunder shall be by wire transfer to the
Bank.
S18. Application of Payments. For the purposes of interest calculations,
payments of immediately available funds made by the Borrower to the Bank
prior to midnight on any Business Day will be credited as of such Business
Day.
S19. Computations. All computations of interest on the Loans and on any fees
shall, unless otherwise expressly provided herein, be based on a 360-day year
and paid for the actual number of days elapsed. Any rate of interest which
is determined with reference to the Base Rate shall vary from time to time as
the Base Rate varies, any change in the rate of interest to become effective
on the date of the announcement of the change in the Base Rate. Whenever a
payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue
during such extension.
S20. Interest After Default; Late Fees.
S20.1. After the occurrence of an Event of Default (and continuing for so
long as an Event of Default continues), principal and (to the extent
permitted by applicable law) interest on the Loans and all other amounts
payable hereunder or under any of the other Loan Documents shall bear
interest, at the Bank's option, compounded monthly and payable on demand at a
rate per annum equal to the Bank's Corporate Base Rate plus 5%. In no event,
however, shall the interest rate hereunder exceed 18%.
S20.2. Without derogating from the right of the Bank to accelerate the
Loans in the event of any default in the payment of any amounts due hereunder
or under any of the other Loan Documents, if any payment due hereunder or
under any of the other Loan Documents is not received by the Bank within
fifteen (15) days of the due date for such payment, the Borrower shall pay to
the Bank, on demand, a late charge equal to the greater of five percent (5%)
of the amount of such payment or Fifteen Dollars ($15.00).
S21. Interest Limitation. Notwithstanding any other term of this Agreement
or the Note or any other document referred to herein or therein, the maximum
amount of interest which may be charged to or collected from any person
liable hereunder or under the Note by the Bank shall be absolutely limited
to, and shall in no event exceed, the maximum amount of interest which could
lawfully be charged or collected under applicable law (including, to the
extent applicable, the provisions of Section 5197 of the Revised Statutes of
the United States of America, as amended, 12 U.S.C. Section 85, as amended),
so that the maximum of all amounts constituting interest under applicable
law, howsoever computed, shall never exceed as to any person liable therefor
such lawful maximum, and any term of this Agreement, the Note, or any other
document referred to herein or therein which could be construed as providing
for interest in excess of such lawful maximum shall be and hereby is made
expressly subject to and modified by the provisions of this paragraph.
S22. Additional Costs, Etc. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to the Bank by any central bank or other fiscal, monetary
or other authority (whether or not having the force of law), shall impose on
the Bank any tax, levy, impost, duty, charge fees, deduction or withholdings
of any nature or requirements with respect to this Agreement, the other Loan
Documents, the Loans, the Bank's Credit Commitment, or any class of loans or
commitments of which any of the Loans or the Credit Commitment forms a part,
and the result of any of the foregoing is:
(1) to increase the cost to the Bank of issuing, renewing, extending or
maintaining the Loans or the Bank's Credit Commitment; or
(2) to reduce the amount of principal, interest or other amount payable to
the Bank hereunder on account of the Bank's Credit Commitment or the
Loans; or
(3) to require the Bank to make any payment or to forego any interest or
other sum payable hereunder, the amount of which payment or foregone
interest or other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by the Bank from the Borrower
hereunder,
then, and in each such case, the Borrower will, upon demand made by the Bank
at any time and from time to time and as often as the occasion therefor may
arise, pay to the Bank the additional amounts as will be sufficient to
compensate the Bank for such additional cost, reduction, payment or foregone
interest or other sum (after the Bank shall have allocated the same fairly
and equitably among all customers of any class generally affected thereby).
S23. DELIVERY OF COLLATERAL FOR SALE.
S24. Sale of Mortgage Collateral; Delivery to Purchasers. So long as no Event
of Default has occurred and is continuing, any Mortgage Loan may be sold upon
request of the Borrower, provided that such sale is evidenced by a bona-fide
agreement to an unaffiliated third-party purchaser and is for adequate
consideration (provided that after giving effect to such sale the Borrower is
in compliance with the terms contained in all of the Loan Documents). The
Borrower may direct the delivery of any of the Mortgage Loans for the purpose
of sale and the Bank agrees to release its lien in the Mortgage Loan upon
payment to the Bank (for credit against the Obligations of the Borrower under
this Agreement) of all Net Proceeds realized by the Borrower on account of
any such sale or disposition, or such lesser amount thereof necessary to
cause the outstanding balance of the Loans not to exceed the Availability.
S25. Sale of Underlying Property; Delivery to Purchasers. So long as no Event
of Default has occurred and is continuing, any Underlying Property may be
sold upon request of the Borrower, provided that such sale is evidenced by a
bona-fide agreement to an unaffiliated third-party purchaser and is for
adequate consideration (provided that after giving effect to such sale the
Borrower is in compliance with the terms contained in all of the Loan
Documents) the Bank agrees to release its lien against the subject Underlying
Property upon payment to the Bank (for credit against the Obligations of the
Borrower under this Agreement) of all Net Proceeds realized by the Borrower
on account of any such sale or disposition, or such lesser amount thereof
necessary to cause the outstanding balance of the Loans not to exceed the
Availability.
S26. Proceeds. All Net Proceeds of the sale of Collateral shall be paid
directly to the Bank or its designee and applied to the payment of the
Obligations. Any balance shall be deposited in the Proceeds Account. If
proceeds are inadvertently remitted to the Borrower, it shall receive the
proceeds in trust for the Bank subject to the security interests created
hereby, and immediately remit the proceeds to the Bank.
S27. COLLATERAL SECURITY.
S28. To secure the repayment of the Obligations and the performance of the
Borrower's other obligations to the Bank hereunder and under the other Loan
Documents, the Borrower hereby grants to the Bank a security interest in the
Collateral.
S29. Unless a Default or Event of Default shall have occurred and then be
continuing, the Borrower shall be entitled to receive and collect directly
all sums payable to the Borrower in respect of the Collateral (such as
regularly scheduled principal and interest payments) except proceeds from the
prepayment, sale or other disposition thereof shall be deposited in to the
Proceeds Account as provided in Section 5.2 hereof.
S30. Upon and during the occurrence of a Default or Event of Default, the
Bank shall be entitled to receive and collect all sums payable to the
Borrower in respect of any Collateral and (a) the Bank may, at its option, in
its own name or in the name of the Borrower or otherwise, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, (b) the Borrower shall,
if requested by the Bank, forthwith pay to the Bank all amounts thereafter
received by the Borrower upon or in respect of any of the Collateral,
advising the Bank of the source of such funds, and (iii) all amounts so
received and collected by the Bank shall be applied to the Loans as provided
herein.
S31. The Borrower appoints the Bank as the Borrower's attorney-in-fact, with
full power of substitution, for the purpose of taking such action and
executing such documents, in the name of Borrower or otherwise, as the Bank
may deem necessary or advisable to accomplish the purposes of this Agreement,
which appointment is coupled with an interest and is irrevocable. The Bank
agrees promptly to notify Borrower after any such action or execution of
instruments, provided that the failure to give such notice shall not affect
the validity of such action or execution of instruments.
S32. Any item of Collateral (including Related Assets to any Mortgage Loan)
held by the Borrower shall be held in trust by the Borrower for the benefit
of, and as bailee for, the Bank, and shall be delivered to the Bank promptly
upon the Bank's request.
S33. This Agreement shall create a continuing security interest in the
Collateral and shall: (i) remain in full force and effect until payment in
full of the Borrower's Note; (ii) be binding upon the Borrower, its
successors and assigns; and (iii) inure to the benefit of the Bank and its
successors, transferees and assigns.
S34. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Bank as follows:
S35. Corporate Authority; Etc.
S35.1. Incorporation; Good Standing. Each party comprising the Borrower
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (ii) has all
requisite power to own its property and conduct its business as now conducted
and as presently contemplated, and (iii) is in good standing as a foreign
entity and is duly authorized to do business in each jurisdiction where the
nature of its properties or its business requires such qualifications. Each
party comprising the Borrower is duly licensed or approved to conduct a
mortgage banking business under the laws of all states in which it conducts
business and which require such licenses or approvals, and no such license or
approval has been revoked or suspended, or an application therefor denied.
S35.2. Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is or is to
become a party and the consummation of the transactions contemplated hereby
and thereby (i) are within the authority of the Borrower, (ii) have been duly
authorized by all necessary proceedings on the part of the Borrower, (iii) do
not conflict with or result in any breach or contravention of any provision
of law, statute, rule or regulation to which the Borrower is subject or any
judgment, order, writ, injunction, license or permit applicable to the
Borrower, (iv) do not conflict with any provision of the charter documents or
bylaws of, or any agreement or other instrument binding upon, the Borrower,
and (v) will not result in the imposition of any liens or encumbrances on any
of the assets of the Borrower other than liens or security interests granted
to the Bank pursuant to the Loan Documents.
S35.3. Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which the Borrower is or is to become a party
will result in valid and legally binding obligations of the Borrower
enforceable against it in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
S36. Governmental Approvals. The execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents to which the Borrower
is or is to become a party, the consummation of the transactions contemplated
hereby and thereby and the validity and enforceability hereof and thereof do
not require the approval or consent of, or filing with, any governmental
agency or authority.
S37. No Default or Event of Default. No Default or Event of Default has
occurred and is continuing and the Borrower is not in default in any respect
under any obligation for borrowed money or in default under any other
contract, agreement or obligation which default could result in an impairment
of the ability of the Borrower to fulfill its obligations hereunder or an
impairment of its financial position or business prospects.
S38. Financial Statements. The Borrower has furnished to the Bank a
consolidated balance sheet of the Borrower as of the Balance Sheet Date, and
a statement of income for the fiscal year then ended, accompanied by an
auditor's report. Such balance sheet and statement of income have been
prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Borrower as at the close of
business on the date thereof and the results of operations for the fiscal
year then ended. There are no contingent liabilities of the Borrower as of
such date involving material amounts, known to the officers of the Borrower,
not disclosed in said balance sheet and the related notes thereto.
S39. No Material Changes, Etc. Since the Balance Sheet Date, there have been
no changes in the assets, liabilities, financial condition or business of the
Borrower other than changes in the ordinary course of business, the effect of
which has not been in any case, or in the aggregate materially adverse.
S40. Taxes. The Borrower has filed all tax returns required to be filed with
the United States and each State and possession of the United States where
the Borrower is qualified to do business and in all other jurisdictions where
such filings are required, and all taxes, assessments and other governmental
charges due have been fully paid (except for payment of those amounts with
respect to which the Borrower has contested in good faith by appropriate
proceedings and has established adequate reserves in accordance with
generally accepted accounting principles), and no extensions of the time of
payment have been requested. The Borrower has paid or set up on its books
reserves adequate for the payment of federal and state income and withholding
tax liabilities.
S41. Litigation. There are no actions, suits, proceedings or investigations
of any kind pending or threatened against the Borrower before any court,
tribunal or administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially adversely affect
the properties, assets, financial condition or business of the Borrower or
materially impair the right of the Borrower to carry on business
substantially as now conducted by it, or result in any substantial liability
not adequately covered by insurance, or for which adequate reserves are not
maintained on the balance sheet of the Borrower, or which question the
validity or enforceability of this Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
S42. Disclosure. Neither this Agreement nor any document delivered to the
Bank hereunder by the Borrower or on its behalf to induce the Bank to enter
into this Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements herein or therein
not misleading.
S43. Franchises, Patents, Copyrights, Etc. The Borrower possess all
franchises, patents, copyrights, trademarks, trade names, licenses and
permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as conducted without known conflict with any
rights of, or by, others.
S44. No Materially Adverse Contracts, Etc. The Borrower is not subject to any
charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation that has or is expected in the future to have a
materially adverse effect on the business, assets or financial condition of
the Borrower. The Borrower is not a party to any contract or agreement that
has or is expected, in the judgment of the Borrower's officers, to have any
materially adverse effect on the business of the Borrower.
S45. Compliance With Other Instruments, Laws, Etc. The Borrower is not in
violation of any provision of its charter or other organization documents,
by-laws, or any agreement or instrument to which it may be subject or by
which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases
in a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or
business of the Borrower.
S46. Perfection of Security Interest. All filings, assignments, pledges and
deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Bank's security interest in the Collateral. The
Collateral and the Bank's rights with respect to the Collateral are not
subject to any setoff, claims, withholdings or other defenses. The Borrower
is the owner of the Collateral in which it has granted a security interest to
the Bank free from any lien, security interest, encumbrance and any other
claim or demand.
S47. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and
agrees that from the date hereof and as long as the Credit remains in effect
or any indebtedness is outstanding hereunder:
S48. Punctual Payment. The Borrower will duly and punctually pay or cause to
be paid the principal and interest on the Loans and all and fees provided for
in this Agreement and the Note as well as all other sums owing pursuant to
the Loan Documents.
S1.
S49. Maintenance of Office. The Borrower will maintain its chief executive
office in Williamstown, Massachusetts, or at such other place in the United
States of America as the Borrower shall designate upon written notice to the
Bank, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents may be given or made.
S50. Records and Accounts. The Borrower will (a) keep true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with generally accepted accounting principles and (b)
maintain accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties, contingencies, and other
reserves, all in accordance with generally accepted accounting principles.
S51. Financial Statements, Certificates and Information. The Borrower will
deliver to the Bank:
S51.1. as soon as available, but in any event not later than ninety (90)
days after the end of each fiscal year of each party comprising the Borrower,
the consolidated audited balance sheet of the Borrower at the end of such
year, and the related audited statements of earnings and cash flows for such
year, setting forth in comparative form the figures for the previous fiscal
year and all such statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and accompanied by
an auditor's report prepared by an independent certified public accountant
acceptable to the Bank together with a written statement from such
accountants to the effect that they have read a copy of this Agreement, and
that, in making the examination necessary for said certification, they have
obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any then existing Default or
Event of Default, they shall disclose in such statement any such Default or
Event of Default;
S51.2. as soon as available, but in any event not later than forty-five
(45) days after the end of each of fiscal quarters of each party comprising
the Borrower, copies of the consolidated unaudited balance sheet of the
Borrower as at the end of such quarter, and the related unaudited statements
of income and cash flows for the portion of the Borrower's fiscal year then
elapsed, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the
principal financial or accounting officer of each party comprising the
Borrower that the information contained in such financial statements fairly
presents the financial position of the Borrower on the date thereof (subject
to year-end audit adjustments);
S51.3. from time to time such other financial data and information as the
Bank may reasonably request.
S51.4. Notices.
S51.5. Defaults. The Borrower will promptly notify the Bank in writing of
the occurrence of any Default or Event of Default, which writing will contain
a detailed description of such Default or Event of Default and the action to
be taken by the Borrower in response thereto. If any person shall give any
notice or take any other action in respect of a claimed default (whether or
not constituting an Event of Default) under this Agreement or under any note,
evidence of indebtedness, indenture or other obligation to which or with
respect to which the Borrower is a party or obligor, whether as principal or
surety, and such default would permit the holder of such note or obligation
or other evidence of indebtedness to accelerate the maturity thereof, which
acceleration would have a material adverse effect on the Borrower, the
Borrower shall forthwith give written notice thereof to the Bank, describing
the notice or action, the nature of the claimed default, and the action to be
taken by the Borrower in response thereto.
S51.6. Notification of Claims against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Bank in writing of any
setoff, claims, withholdings or other defenses to which any of the
Collateral, or the rights of the Bank with respect to the Collateral, are
subject.
S51.7. Notice of Litigation and Judgments. The Borrower will give notice
to the Bank in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower or to which the Borrower is or is to
become a party involving any claim against the Borrower that could reasonably
be expected to have a materially adverse effect on the Borrower and stating
the nature and status of such litigation or proceedings. The Borrower will
give notice to the Bank, in writing, in form and detail satisfactory to the
Bank, (i) immediately upon (and in any event within three (3) days of) the
commencement thereof, notice of any litigation questioning the validity or
enforceability of the Loan Documents, and (ii) within ten (10) days of any
judgment not covered by insurance, final or otherwise, against the Borrower
in an amount in excess of $10,000.00.
S52. Existence; Maintenance of Properties. The Borrower will do or cause to
be done all things necessary to preserve and keep in full force and effect
its existence as a corporation. The Borrower will do or cause to be done all
things necessary to preserve and keep in full force all of its rights and
franchises. The Borrower (a) will cause all of its properties used or useful
in the conduct of its business or the business to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will continue to engage primarily in the businesses now conducted by it and
in related businesses.
S53. Insurance. The Borrower will maintain with financially sound and
reputable insurers, insurance with respect to its properties and its business
against such casualties and contingencies as the Bank shall require, each of
which policies shall be in form and with such companies and in such amounts
as are acceptable to the Bank, including, without limitation, maintenance of
its mortgage banker's blanket bond or individual errors and omissions policy
and indemnity bond. Such insurance shall be endorsed in each case to require
not less than 30 days' prior notice by the insurer in the event of
cancellation to the Bank at the address first written above.
S54. Taxes. The Borrower will pay or cause to be paid and discharged, before
the same shall become overdue, all taxes, assessments and other governmental
charges imposed upon it or on any of its real properties, sales and
activities or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that, if unpaid, might
by law become a lien or charge upon any of such properties; provided that any
such tax, assessment, charge, levy or claim with respect to properties need
not be paid if the validity or amount thereof shall currently be contested in
good faith by appropriate proceedings and if the Borrower shall have set
aside on its books adequate reserves with respect thereto; and provided
further that the Borrower will pay all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose
any lien that may have attached as security therefor.
S55. Inspection of Properties and Books. The Borrower shall permit the Bank,
or any designated representative of the Bank, to visit and inspect any of the
properties of the Borrower to examine the books of account of the Borrower
(and to make copies thereof and extracts therefrom) and to discuss the
affairs, finances and accounts of the Borrower with, and to be advised as to
the same by, its officers, all at such reasonable times and intervals as the
Bank may reasonably request. The Bank may conduct the foregoing
examinations, visitations, inspections and discussions at the Borrower's
expense at such reasonable times and intervals as the Bank may reasonably
request.
S56. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower
will comply with (a) all applicable laws and regulations now or hereafter in
effect wherever its business is conducted, (b) the provisions of its
corporate charter, and other charter documents and by-laws, (c) all material
agreements and instruments to which it is a party or by which it or any of
its properties may be bound and (d) all applicable decrees, orders, and
judgments. If at any time while any Loan or the Note is outstanding or the
Bank has any obligation to make Loans hereunder, any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of
any government shall become necessary or required in order that the Borrower
may fulfill any of its obligations hereunder, the Borrower will immediately
take or cause to be taken all reasonable steps within the power of the
Borrower to obtain such authorization, consent, approval, permit or license
and furnish the Bank with evidence thereof.
S57. Further Assurances. The Borrower will cooperate with the Bank and
execute such further instruments and documents as Bank shall reasonably
request to carry out to the Bank's satisfaction the transactions contemplated
by this Agreement and the other Loan Documents.
S58. Appraisals. The Borrower will obtain appraisals for each Underlying
Properties which appraisals will satisfy the requirements of 12 CFR 34.1 -
34.47, and the requirements of any other bank regulatory agency to which the
Bank is subject. The Borrower will hold such appraisals as agent for the
Bank. In addition, the Borrower will, at the request of the Bank, deliver
originals or copies of such appraisals to the Bank.
S59. Use of Proceeds. The Borrower will use the proceeds of all Loans for
its general working capital purposes.
S60. Qualified Mortgage Collateral. Each Mortgage Loan submitted by the
Borrower to the Bank, or the Bank's custodian, for inclusion in the Borrowing
Base will be a Qualified Mortgage Loan at the time of such submission.
S61. CONDITIONS TO INITIAL LOAN. The obligations of the Bank to make the
initial Loan hereunder shall be subject to the satisfaction of the following
conditions precedent:
S62. Certified Copies of Organization Documents. The Bank shall have received
from the Borrower a copy, certified as of a recent date by a duly authorized
officer of Borrower to be true and complete, of the corporate charter and any
other organization documents of the Borrower as in effect on such date of
certification.
S63. By-laws; Resolutions. All action on the part of the Borrower necessary
for the valid execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents to which it is or is to become a party
shall have been duly and effectively taken, and evidence thereof satisfactory
to the Bank shall have been provided to the Bank. The Bank shall have
received from the Borrower true copies of its by-laws and the resolutions
adopted by its board of directors authorizing the transactions described
herein, each certified by its secretary as of a recent date to be true and
complete and not amended, modified or rescinded, and in full force and effect.
S64. Incumbency Certificate; Authorized Signers. The Bank shall have received
from the Borrower an incumbency certificate, dated as of the Closing Date,
signed by a duly authorized officer of the Borrower and giving the name and
bearing a specimen signature of each individual who shall be authorized:
S64.1. to sign, in the name and on behalf of the Borrower, each of the
Loan Documents to which the Borrower is or is to become a party;
S1.1.
S64.2. to make Loan Requests; and
S64.3. to give notices and to take other action on behalf of the Borrower
under the Loan Documents.
S65. Opinion of Counsel Concerning Organization and Loan Documents. The Bank
shall have received a favorable opinion addressed to the Bank and dated as of
the Closing Date, in form and substance satisfactory to the Bank from
independent counsel to the Borrower as to the matters described on Exhibit G
hereto.
S66. Good Standing Certificates; Licenses. The Bank shall have received a
certificate of good standing of the Borrower issued as of a recent date by
the Secretary of State (and if applicable, the Department of Revenue) of the
State in which the Borrower is incorporated, together with satisfactory
opinions as to the currently effective licenses or approvals (if required) to
conduct a mortgage banking business in each such State.
S67. Borrowing Base Certificate. The Bank shall have received the initial
Borrowing Base Certificate dated as of the Closing Date.
S68. Note. The Bank shall have original of the Note duly executed and
delivered by the Borrower.
S69. Insurance. The Bank shall have received true copies of documents
evidencing the insurance required by S8.7 hereof.
S70. Other Documents. The Bank shall have received a copy of such other
documents as the Bank in its sole discretion may require.
S71. UCC Lien Searches. The Bank shall have received the UCC Perfection
Certificate in the form of Exhibit H hereto, dated as of the Closing Date,
signed by the Borrower's chief financial officer, and the results of the UCC
lien searches of the Borrower in the appropriate States reflected thereon.
S72. CONDITIONS TO ALL LOANS. The following conditions must be satisfied or
waived in writing by the Bank, prior to the making of any Loan:
S73. Notice. Receipt by the Bank of the Loan Request required by S2.5 hereof.
S74. Collateral Documents. The Bank shall have received the Collateral
Documents required by S3 hereof.
S75. Borrowing Base Certificate. The Bank shall have received an updated
Borrowing Base Certificate dated as of the Drawdown Date.
S76. Representations and Warranties. The representations and warranties made
by the Borrower in this Agreement and in the other Loan Documents and all
other representations in writing made hereafter by or on behalf of the
Borrower in connection with the transactions contemplated by this Agreement
shall be true as of the date as of which they were made and shall also be
true at and as of the time each such Loan is requested (except to the extent
of changes resulting from transactions contemplated by this Agreement and
changes occurring in the ordinary course of business which are not materially
adverse singly or in the aggregate to the Borrower taken as a whole, and to
the extent that such representations and warranties relate expressly to an
earlier date).
S77. No Defaults. After giving effect to the requested Loan, no event shall
have occurred and be continuing and no condition shall exist which
constitutes, or with the giving of notice or lapse of time or both, would
constitute, an Event of Default.
S78. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof which in the opinion of
special counsel for the Bank would make it illegal for the Bank to make Loans
hereunder.
S79. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to
the Bank and to special counsel to the Bank such special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as either of them may reasonably request.
S80. Availability Not Exceeded. Following the funding of the requested Loan,
the aggregate principal amount of Loans outstanding will not exceed the
Availability.
S81. EVENTS OF DEFAULT; ACCELERATION; ETC.
S82. Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both
is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
S82.1. the Borrower shall fail to pay any principal of the Loans when the
same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment,
including, without limitation, any mandatory prepayments required pursuant to
S2.7 hereof;
S82.2. the Borrower shall fail to pay any interest on the Loans or any
other sums due hereunder or under any of the other Loan Documents when the
same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;
S82.3. the Borrower shall fail to comply with any of its covenants
contained in S8 hereof or any of the other covenants contained in the Loan
Documents;
S82.4. the Borrower shall fail to perform any other term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified elsewhere in this S11) for fifteen (15) days after written
notice of such failure has been given to the Borrower by the Bank;
S82.5. any representation or warranty of the Borrower in this Agreement or
any of the other Loan Documents or in any other document or instrument
delivered pursuant to or in connection with this Agreement shall prove to
have been false in any material respect upon the date when made or deemed to
have been made or repeated;
S82.6. the Borrower shall fail to pay at maturity, or within any
applicable period of grace, any obligation for borrowed money or credit
received, or fail to observe or perform any term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing
borrowed money or credit received for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or holders
thereof or of any obligations issued thereunder to accelerate the maturity
thereof;
S82.7. the Borrower shall make an assignment for the benefit of creditors,
or admit in writing its inability to pay or generally fail to pay its debts
as they mature or become due, or shall petition or apply for the appointment
of a trustee or other custodian, liquidator or receiver of the Borrower or of
any substantial part of the assets of the Borrower or shall commence any case
or other proceeding relating to the Borrower under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect,
or shall take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be filed or any such
case or other proceeding shall be commenced against the Borrower and the
Borrower shall indicate its approval thereof, consent thereto or acquiescence
therein;
S82.8. a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of the Borrower in an
involuntary case under federal bankruptcy laws as now or hereafter
constituted;
S82.9. if any involuntary proceeding shall be commenced, against the
Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law or similar law of any
jurisdiction, now or hereafter in effect, and the Borrower has not discharged
such proceeding within sixty (60) days after commencement thereof;
S82.10. there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
uninsured final judgment against the Borrower that, with other outstanding
uninsured final judgments, undischarged, against the Borrower, exceeds in the
aggregate $50,000.00;
S82.11. if any of the Loan Documents shall be canceled, terminated, revoked
or rescinded otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of each Bank party
thereto, or interested therein, or any action at law, suit in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents shall
be commenced by or on behalf of the Borrower, or any court or any other
governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or ruling
to the effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof; or
S82.12. the Borrower shall be indicted for a federal crime, a punishment
for which could include the forfeiture of any assets of the Borrower;
then, and in every such event, so long as the same may be continuing, the
Bank may, by notice in writing to the Borrower declare all amounts owing with
respect to this Agreement and the Note to be, and they shall thereupon
forthwith become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Borrower.
S83. Termination of Commitments. If any one or more Events of Default
specified in S11.1(g), S11.1(h), S11.1(i) hereof shall occur, the Credit
Commitment shall forthwith terminate and the Bank shall be relieved of all
obligations to make Loans to the Borrower. If any other Event of Default
shall have occurred and be continuing, the Bank may, by notice to the
Borrower, terminate the Credit Commitment hereunder, and, upon such notice
being given, the Credit Commitment hereunder shall terminate immediately and
the Bank shall be relieved of the further obligations to make Loans. No
termination of Credit Commitment hereunder shall relieve the Borrower of any
of the Obligations or any of its existing obligations to the Bank arising
under other agreements or instruments.
S84. Rights of Enforcement. The Bank shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which
the Bank shall have all and each of the following rights and remedies:
S84.1. To collect the Collateral with or without the taking of possession
of any of the Collateral;
S84.2. To take possession of all or any portion of the Collateral.
S84.3. To sell, lease, or otherwise dispose of any or all of the
Collateral, with or without the taking of possession of any of the
Collateral.
S84.4. To apply the Collateral or the proceeds of the Collateral towards
(but not necessarily in complete satisfaction of) the Obligations.
S84.5. To exercise all or any of the rights, remedies, powers, privileges,
and discretions under all or any of the Loan Documents.
S85. Sale of Collateral. (a) Any sale or other disposition of the Collateral
may be at public or private sale upon such terms and in such manner as the
Bank deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit, or apply to the Bank's disposition of
the Collateral.
(b) Unless the Collateral threatens to decline speedily in value,
or is of a type customarily sold on a recognized market (in which event the
Bank may provide the Borrower with such notice as may be practicable under
the circumstances), the Bank shall give the Borrower at least seven (7) days
prior written notice of the date, time, and place of any proposed public
sale, and of the date after which any private sale or other disposition of
the Collateral may be made. The Borrower agrees that such written notice
shall satisfy all requirements for notice to the Borrower which are imposed
under the UCC or other applicable law with respect to the Bank's exercise of
the Bank's rights and remedies upon default.
(c) The Bank may purchase the Collateral, or any portion of it at
any sale held under this Article.
S86. Occupation of Business Location. In connection with the Bank's exercise
of the Bank's rights under this Article, the Bank may enter upon, occupy, and
use any premises owned or occupied by the Borrower. The Bank shall not be
required to remove any of the Collateral from any such premises upon the
Bank's taking possession thereof. In no event shall the Bank be liable to
the Borrower for use or occupancy by the Bank of any premises pursuant to
this Article, nor for any charge (such as wages for the Borrower's employees
and utilities) incurred in connection with the Bank's exercise of the Bank's
rights and remedies.
S87. Assembly of Collateral. The Bank may require the Borrower to assemble
the Collateral and make it available to the Bank at the Borrower's sole risk
and expense at a place or places which are reasonably convenient to the Bank.
S88. Remedies.
S88.1. Without limiting the foregoing remedies upon the occurrence of any
Event of Default, the Bank may exercise any and all rights it has under this
Agreement and the Note and any other documents or instruments executed or
delivered as collateral therefor or in connection therewith, under law or
equity, and proceed to protect and enforce the Bank's rights by any actions
of law, suit and equity or other appropriate proceeding, whether for specific
performance, or for an injunction against a violation of any covenant
contained herein or in the Loan Documents or in furtherance of the exercise
any power granted hereby or thereby or by law.
(b) No remedy herein conferred upon the Bank or the holder of the
Note is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
S89. Appointment as Attorney-in-Fact. The Borrower hereby irrevocably
constitutes and appoints the Bank, exercisable upon the occurrence (and
during the continuance) of any Event of Default, as the Borrower's true and
lawful attorney, with full power of substitution, to convert the Collateral
into cash at the sole risk, cost, and expense of the Borrower, but for the
sole benefit of the Bank. The rights and powers granted the Bank by the
within appointment include but are not limited to the right and power to:
S89.1. Prosecute, defend, compromise, or release any action relating to
the Collateral;
S89.2. Endorse the name of the Borrower in favor of the Bank upon any and
all checks, drafts, notes, acceptances, or other items or instruments; sign
and endorse the name of the Borrower on, and receive as secured party, any of
the Collateral; and
S89.3. Sign the name of the Borrower on any notice to the obligors on the
Collateral; sign the Borrower's name on any proof of claim in bankruptcy
against any obligor on the Collateral.
S90. No Obligation to Act. The Bank shall not be obligated to do any of the
acts or to exercise any of the powers authorized herein, but if the Bank
elects to do any such act or to exercise any of such powers, it shall not be
accountable for more than it actually receives as a result of such exercise
of power, and shall not be responsible to the Borrower for any act or
omission to act except for any act or omission to act as to which there is a
final determination made in a judicial proceeding (in which proceeding the
Bank has had an opportunity to be heard) which determination includes a
specific finding that the subject act or omission to act had been grossly
negligent or in actual bad faith.
S91. Distribution of Collateral Proceeds. In the event that, following the
occurrence or during the continuance of any Event of Default, the Bank
receives any monies in connection with the enforcement of any of the security
interest granted to the Bank hereunder, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
S91.1. First, to the payment of, or (as the case may be) the reimbursement
of, the Bank for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Bank in connection with the collection of such monies by the Bank, for the
exercise, protection or enforcement by the Bank of all or any of the rights,
remedies, powers and privileges of the Bank under this Agreement or any of
the other Loan Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Bank against any taxes or liens which
by law shall have, or may have, priority over the rights of the Bank to such
monies;
S91.2. Second, to the payment of (i) any Obligations owing to the Bank
for the payment of interest, principal, fees and expenses, and (ii) all other
Obligations in such order or preference as the Bank may determine; provided,
that the Bank may in its discretion make proper allowance to take into
account any Obligations not then due and payable;
S91.3. Third, upon payment and satisfaction in full or other provision for
payment in full satisfactory to the Bank and the Bank of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to S9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts; and
S91.4. Fourth, the excess, if any, shall be returned to the Borrower or to
such other persons as are entitled thereto.
S92. SETOFF. Regardless of the adequacy of any Collateral, during the
continuance of any Event of Default, any deposits (general or specific, time
or demand, provisional or final, regardless of currency, maturity, or the
branch where such deposits are held, but not including any custodial accounts
held for the benefit of others) or other sums credited by or due from the
Bank to the Borrower and any securities or other property of the Borrower in
the possession of the Bank may be applied to or set off against the payment
of Obligations and any and all other liabilities, direct, or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, of the Borrower to the Bank.
S93. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of
producing and reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein (b) any taxes (including
any interest and penalties in respect thereof) payable by the Bank (other
than taxes based upon the Bank's net income imposed by the jurisdiction in
which its office is located), including any recording, mortgage, documentary
or intangibles taxes in connection with the security interest granted
hereunder and the other Loan Documents, or other taxes payable on or with
respect to the transactions contemplated by this Agreement or any other Loan
Document, including any taxes payable by the Bank after the Closing Date (the
Borrower hereby agreeing to indemnify the Bank with respect thereto), (c) all
title insurance premiums, appraisal fees, and the reasonable fees, expenses
and disbursements of the Bank's counsel or any local counsel to the Bank
incurred in connection with the preparation or enforcement of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or
hereunder, (d) the reasonable out-of-pocket fees, expenses and disbursements
of the Bank incurred by the Bank in connection with the administration or
interpretation of the Loan Documents and other instruments mentioned therein,
(e) all reasonable out-of-pocket expenses (including reasonable attorneys'
fees and costs, which attorneys may be employees of the Bank and the fees and
costs of appraisers, engineers, or other experts retained by the Bank in
connection with any enforcement proceedings) incurred by the Bank in
connection with (i) the enforcement of or preservation of rights under any of
the Loan Documents against the Borrower or the administration thereof, and
(ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to the Bank's relationship with the Borrower,
and (f) all reasonable out-of-pocket fees, expenses and disbursements of the
Bank incurred in connection with UCC searches, UCC filings and/or mortgage
recordings. The covenants of this S11 shall survive payment or satisfaction
of payment of amounts owing with respect to the Note.
S94. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the
Bank from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of
this Agreement or any of the other Loan Documents or the transactions
contemplated hereby or thereby including, without limitation, (a) any claims
or actions commenced against the Bank by virtue of its entry into or
participation in any Loan Document, (b) any actual or proposed use by the
Borrower of the proceeds of any of the Loans, (c) any actual or alleged
infringement of any patent, copyright, trademark, service mark or similar
right of the Borrower comprised in the Collateral, (d) the Borrower's
entering into or performing this Agreement or any of the other Loan
Documents, in each case including, without limitation, the reasonable fees
and disbursements of counsel and allocated costs of internal counsel incurred
in connection with any such investigation, litigation or other proceeding.
In litigation, or the preparation therefor, the Bank shall be entitled to
select its own counsel and, in addition to the foregoing indemnity, the
Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrower under
this S14 are unenforceable for any reason, the Borrower hereby agrees to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The provisions of this S14 shall
survive the repayment of the Loan and the termination of the obligations of
the Bank hereunder.
S95. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations
and warranties made herein, in the Note, in any of the other Loan Documents
or in any documents or other papers delivered by or on behalf of the Borrower
pursuant hereto or thereto shall be deemed to have been relied upon by the
Bank, notwithstanding any investigation heretofore or hereafter made by any
of them, and shall survive the making by the Bank of any of the Loans, as
herein contemplated, and shall continue in full force and effect so long as
any amount due under this Agreement or the Note or any of the other Loan
Documents remains outstanding or the Bank has any obligation to make any
Loans. The indemnification obligations of the Borrower provided herein and
the other Loan Documents shall survive the full repayment of amounts due and
the termination of the obligations of the Bank hereunder and thereunder to
the extent provided herein and therein. All statements contained in any
certificate or other paper delivered to the Bank at any time by or on behalf
of the Borrower pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower hereunder.
S96. NAME CHANGE AND ASSIGNMENT BY BORROWER. The Borrower shall give the Bank
30 days prior written notice of any change of name of the Borrower. All the
terms of this Agreement, the other Loan Documents, and the Note shall be
binding upon and inure to the benefit of the successors and assigns of the
Borrower; provided that the Borrower shall not assign or transfer its rights
under any of such documents without the prior written consent of the Bank,
other than any assignment or transfer required as a matter of law or in
connection with a merger or consolidation of the Borrower.
S97. ASSIGNMENT AND PARTICIPATION.
S98. Conditions to Assignment by the Bank. Except as provided herein, the
Bank may assign all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of Credit Commitment and the
same portion of the Loans at the time owing to it, and the Note held by it).
From and after the effective date specified in any assignment agreement, the
assignee thereunder shall be a party hereto and, to the extent provided in
such assignment, have the rights and obligations of the Bank hereunder and
this agreement shall be amended to reflect such assignment.
S99. Participations. The Bank may sell Participations to one or more banks
or other entities in all or a portion of the Bank's rights and obligations
under this Agreement and the other Loan Documents.
S100. Pledge By Lender. The Bank may at any time pledge all or any portion of
its interest and rights under this Agreement (including all or any portion of
its Note) to any of the Federal Reserve Banks organized under S4 of the
Federal Reserve Act, 12 U.S.C. S341. No such pledge or the enforcement
thereof shall release the Bank from its obligations hereunder or under any of
the other Loan Documents.
S101. No Assignment by the Borrower. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents, other than
any assignment or transfer required as a matter of law or in connection with
a merger or consolidation of the Borrower.
S102. Disclosure. The Borrower agrees that in addition to disclosures made in
accordance with standard banking practices the Bank may disclose information
obtained by the Bank pursuant to this Agreement to assignees or participants
and potential assignees or participants hereunder.
S103. NOTICES, ETC. Except as otherwise expressly provided in this Agreement,
all notices and other communications made or required to be given pursuant to
this Agreement or any of the other Loan Documents shall be in writing and
shall be delivered by hand, mailed by United States registered or certified
first class mail, postage prepaid, sent by overnight courier, or sent by
facsimile and confirmed by delivery via one of the other acceptable means of
delivery of notices, addressed as follows:
S103.1. if to the Borrower,
Litchfield Financial Corporation
430 Main Street
Williamstown, Massachusetts 01267
Fax: (413) 458-1015
Attention:Amy S. Backiel, Vice President
and
LFC Realty, Inc.
430 Main Street
Williamstown, MA 01267
Fax: (413) 450-1015
Attention: Amy S. Backiel
(1) if to the Bank,
MetroWest Bank
15 Park Street
Framingham, Massachusetts 01701
Fax: (508) 879-8237
Attention:Mr. Barry D. Bliss, Vice President
with a copy to:
Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Fax: (617) 723-6831
Attention:Michael S. Fallman, Esquire
Any such notice or demand shall be deemed to have been duly given or made and
to have become effective:
(2) if delivered by hand, overnight courier or facsimile to a responsible
officer of the party to which it is directed, at the time of the receipt
thereof by such officer or the sending of such facsimile; and
(3) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
S104. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND
EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT
THE ADDRESS SPECIFIED IN S19 HEREOF. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
S105. HEADINGS. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
S106. COUNTERPARTS. This Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Agreement it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
S107. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding
of the parties with respect to the transactions contemplated hereby and
thereby. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except as provided in S24 hereof.
S108. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. THE BORROWER HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT
EXPRESSLY PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE BANK HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO
WHICH IT ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
S109. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly
provided in this Agreement, any consent or approval required or permitted by
this Agreement may be given, and any term of this Agreement or of any other
Loan Document or other instrument related hereto or thereto or mentioned
herein or therein may be amended, and the performance or observance by the
Borrower of any terms of this Agreement or such other Loan Document or other
instrument or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Bank. No
waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the Borrower shall entitle the Borrower to other or further
notice or demand in similar or other circumstances.
S110. SEVERABILITY. The provisions of this Agreement are severable, and if any
one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as an
instrument under seal as of the date first written above.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Amy S. Backiel
Title: Vice President
LFC REALTY, INC.
By: /s/ Amy S. Backiel
Title: Vice President
METROWEST BANK
By: /s/ Barry Bliss
Title: Vice President
Exhibit 10.198
LITCHFIELD HYPOTHECATION CORP. 1997-B
NOTE PURCHASE AGREEMENT
June 28, 1999
LITCHFIELD HYPOTHECATION CORP.1997-B, a Delaware corporation, and
its successors and assigns (the "Issuer"), and LITCHFIELD FINANCIAL
CORPORATION, a Massachusetts corporation ("Litchfield"), hereby agree with
UNION BANK OF CALIFORNIA, N.A. (the "Purchaser"), as follows:
1. The Notes. The Issuer has authorized the execution and
delivery to The Chase Manhattan Bank, as trustee (the "Trustee"), of an
Indenture of Trust, dated as of August 1, 1997, as amended (the "Indenture"),
providing for the issuance and sale by the Issuer of its Hypothecation Loan
Collateralized Notes (the "Notes"), in one or more series, secured by the
Trust Estate granted to the Trustee by the Issuer pursuant to the Indenture,
which includes, among other assets, a pool of certain hypothecation Loans
owned by the Issuer and serviced by Litchfield Financial Corporation, a
Massachusetts corporation (in such capacity, the "Servicer"). Unless
otherwise specifically defined herein, all capitalized terms shall have the
meanings ascribed to them in the Indenture.
2. Purchase and Sale. In reliance upon the representations and
warranties contained herein and subject to the terms and conditions set forth
herein, (i) the Issuer agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Issuer, $1,776,419.96 principal amount of
Hypothecation Loan Collateralized Notes, Series A and (ii) the Seller agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the
Seller, $3,123,580.04 principal amount of Hypothecation Loan Collateralized
Notes, Series C (the foregoing notes are referred to herein collectively as
the "Notes") at an aggregate price (the "Purchase Price") equal to the
aggregate outstanding principal amount of the Notes on the Closing Date (as
hereinafter defined). The Purchase Price shall be allocated among the Seller
and the Issuer in proportion to the principal amount of Notes sold by each.
The Purchase Price shall be payable to or upon the instructions of the Issuer
and the Seller on the Closing Date by wire transfer in immediately available
Federal funds.
3. The Closing; Delivery of the Notes. The closing of the
purchase and sale of the Notes pursuant hereto (the "Closing") shall be held
on June 28, 1999 (the "Closing Date"). The Closing shall take place by mail
or at such place as the parties hereto shall designate. At the Closing, the
Issuer and the Seller, respectively, will deliver to the Purchaser, against
payment of the Purchase Price therefor, one Series A Note in the denomination
of $1,776,419.96 and one Series C Note in the denomination of $3,123,580.04
registered in the Purchaser's name, or in the name of its nominee; provided
however, that if the Purchaser requests the Issuer or the Seller in writing
not less than one Business Day prior to the Closing Date to deliver to the
Purchaser Notes in other denominations (authorized pursuant to the Indenture)
that equal in the aggregate the denominations specified above, the Seller and
the Issuer shall comply with such request.
4. Conditions of the Purchaser's Obligation. The obligation
of the Purchaser set forth in Section 2 to purchase the Notes on the Closing
Date shall be subject to the accuracy as of the date hereof and as of the
Closing Date of (i) the representations and warranties of the Issuer set
forth in Section 5 hereof, (ii) the representations and warranties of the
Seller in the Purchase and Sale Agreement and in Section 5 hereof, and (iii)
the representations and warranties of the Servicer in the Servicing
Agreement, and shall also be subject to the following additional conditions:
(a) Each of this Purchase Agreement, the Notes, the Indenture, the
Servicing Agreement, and the Purchase and Sale Agreement (collectively,
the "Agreements") shall have been duly authorized, executed and
delivered by each of the parties thereto and be in full force and
effect; and
(b) The Purchaser shall have received copies of all documents and
other information as it may reasonably request, in form and substance
reasonably satisfactory to it, with respect to such transactions and the
taking of all proceedings in connection therewith.
5. Representations and Warranties. (a) The Issuer represents and
warrants to the Purchaser as of the date hereof as follows:(i) Each of the
Agreements to which the Issuer is a party has been duly authorized, executed
and delivered by the Issuer and, assuming due execution and delivery by the
other parties thereto, constitutes a legal, valid and binding agreement of
the Issuer enforceable against the Issuer in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law). The Notes have been validly issued and are
entitled to the benefits of the Indenture and constitute valid instruments
enforceable in accordance with their terms subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(ii) Neither the issuance or sale of the Notes, nor the
consummation of any other of the transactions contemplated in any of the
Agreements to which the Issuer is a party, nor the execution, delivery
or performance of the terms of any of the Agreements to which the Issuer
is a party, has or will result in the breach of any term or provision of
the certificate of incorporation or by-laws of the Issuer, or conflict
with, result in a breach or violation on the part of the Issuer of or
the acceleration of indebtedness under or constitute a default under,
the terms of any indenture or other agreement or instrument to which the
Issuer is a party or by which it is bound, or any statute or regulation
applicable to the Issuer or any order applicable to the Issuer of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Issuer.
(iii) No consent, approval, authorization of, registration or
filing with, or notice to, any governmental or regulatory authority,
agency, department, commission, board, bureau, body or instrumentality
is required on the part of the Issuer for the execution and delivery or
by the Issuer with any of the Agreements to which the Issuer is a party
or the Notes, or the issuance of the Notes, or the consummation by the
Issuer of any transaction contemplated under any of the Agreements to
which the Issuer is a party, or such consent, approval or authorization
has been obtained or such registration, filing or notice has been made
(or, with respect to assignments of mortgages and financing statements,
will be made by the Issuer as contemplated by the Indenture).
(iv) There is no action, suit or proceeding against, or investigation of, the
Issuer pending or, to the best of its knowledge, threatened,
before any court, administrative agency or other tribunal
which, either individually or in the aggregate, (A) may result
in any material adverse change in the financial condition,
properties, or assets of the Issuer or in any material and
adverse impairment of the right or ability of the Issuer to
perform its obligations under the Agreements, or (B) asserts
the invalidity of any of the Agreements to which either the
Issuer is a party or the Notes or (C) seeks to prevent the
consummation of any of the transactions contemplated by any of
the Agreements to which the Issuer is a party.
(v)
(vi) (v) Based in part on the representations and warranties contained in
Section 6 hereof, the Issuer is not, and the sale of the Notes
in the manner contemplated by this Purchase Agreement will not
cause the Issuer to be, subject to registration or regulation
as an investment company or affiliate of any investment
company under the Investment Company Act of 1940, as amended.
(vi) Each Loan included in the Trust Estate securing the Notes has
been delivered to the Trustee or its collateral agent, together with an
assignment thereof by the Issuer, which immediately prior to such
assignment will own full legal and equitable title to each Loan, free
and clear of any lien, charge, encumbrance or participation or ownership
interest in favor of any other Person. Upon endorsement and delivery to
the Trustee or its collateral agent of the executed original promissory
notes and execution and delivery of the Indenture, all of the Issuer's
right, title and interest in and to the Loans will be validly and
effectively transferred to the Indenture Trustee as collateral security
for the benefit of the Holders of the Notes.
(vii) On the Closing Date after giving effect to the sale of the
Notes to the Purchaser hereunder, the aggregate principal amount of all
Hypothecation Loan Collateralized Notes outstanding shall be
$41,359,206.81 of which $8,625,465.99 aggregate principal amount shall
be Series A Notes owned of record by the Purchaser, $10,498,579.60
aggregate principal amount shall be Series A Notes owned by Green Tree
Financial Servicing Corporation ("Green Tree"), $1,541,153.87 aggregate
principal amount shall be Series B Variable Funding Notes owned of
record by the Seller, $7,034,989.52 aggregate principal amount shall be
Series C Notes owned of record by the Purchaser, $9,068,627.78 aggregate
principal amount shall be Series C Notes owned of record by Green Tree
and $4,590,390.05 aggregate principal amount shall be Series C Notes
owned of record by Berkshire Bank. Such outstanding amounts are fully
authorized (and do not exceed any limitations under the Indenture).
(b) The Seller represents and warrants to the Purchaser as of the date
hereof as follows:
(i) Each of the Agreements to which the Seller is a party has been
duly authorized, executed and delivered by the Seller and, assuming due
execution and delivery by the other parties thereto, constitutes a
legal, valid and binding agreement of the Seller enforceable against the
Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
(ii) Neither the sale of the Notes, nor the consummation of any
other of the transactions contemplated in any of the Agreements to which
the Seller is a party, nor the execution, delivery or performance of the
terms of any of the Agreements to which the Seller is a party, has or
will result in the breach of any term or provision of the certificate of
incorporation or by-laws of the Seller, or conflict with, result in a
breach or violation on the part of the Seller of or the acceleration of
indebtedness under or constitute a default under, the terms of any
indenture or other agreement or instrument to which the Seller is a
party or by which it is bound, or any statute or regulation applicable
to the Seller or any order applicable to the Seller of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Seller.
(iii)No consent, approval, authorization of, registration or filing
with, or notice to, any governmental or regulatory authority, agency,
department, commission, board, bureau, body or instrumentality is
required on the part of the Seller for the execution and delivery or by
the Seller with any of the Agreements to which the Seller is a party, or
the sale of the Notes, or the consummation by the Seller of any
transaction contemplated under any of the Agreements to which the Seller
is a party, or such consent, approval or authorization has been obtained
or such registration, filing or notice has been made (or, with respect
to assignments of mortgages and financing statements, will be made by
the Seller as contemplated by the Indenture).
(iv) There is no action, suit or proceeding against, or
investigation of, the Seller pending or, to the best of its knowledge,
threatened, before any court, administrative agency or other tribunal
which, either individually or in the aggregate, (A) may result in any
material adverse change in the financial condition, properties, or
assets of the Seller or in any material and adverse impairment of the
right or ability of the Seller to perform its obligations under the
Agreements, or (B) asserts the invalidity of any of the Agreements to
which either the Seller is a party or the Notes or (C) seeks to prevent
the consummation of any of the transactions contemplated by any of the
Agreements to which either the Seller is a party.(v) Neither the
Seller nor any Affiliate of the Seller nor any Person authorized or
employed by the Seller will, directly or indirectly, offer or sell any
Note or similar security in a manner which would render the sale of the
Notes pursuant to this Purchase Agreement a violation of Section 5 of
the 1933 Act, or require registration pursuant thereto. Based in part
on the representations and warranties contained in Section 6 hereof, the
offering and sale of the Notes by the Seller to Purchaser at closing are
exempt from the registration requirements of the 1933 Act and the
Indenture is not required to be qualified under the Trust Indenture Act
of 1939, as amended.
The Issuer and the Seller agree that the representations and warranties
set forth in this Section 5 shall be fully assignable to the initial party to
whom the Purchaser may sell the Notes.
6. The Purchaser's Representations. The Purchaser represents
to the Issuer as follows:
(a) The Purchaser is acquiring the Notes for its own account. The
Purchaser understands that the Notes are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), or any State
securities or "Blue Sky" law and are being sold to the Purchaser in
reliance upon the Purchaser's representations contained herein in a
transaction that is exempt from the registration requirements of the
1933 Act and any applicable State law. The Purchaser agrees that the
Notes may not be Transferred unless subsequently registered under the
1933 Act and any applicable State securities or "Blue Sky" law or unless
exemptions from the registration requirements of the 1933 Act and
applicable State laws are available. Subject to the express provisions
of this Purchase Agreement and the Indenture, the disposition of the
Notes shall at all times be within the control of the owner thereof.
Notwithstanding anything to the contrary, express or implied, in this
Agreement, the Indenture or otherwise, the Purchaser understands that
none of the Trust, the Note Registrar or the Indenture Trustee is
obligated to register the Notes under the 1933 Act or any other
securities law and that any Transfer in violation of the provisions of
the Indenture shall be void ab initio. The foregoing shall in no way
limit the ability or the right of the Purchaser to sell participation
interests in any Notes owned by the Purchaser.
(b) The Purchaser is either (i) an "accredited investor" as
defined in rule 501(a) under the 1933 Act or (ii) a Qualified
Institutional Buyer as defined in Rule 144A under the 1933 Act.
(c) The Purchaser is authorized to enter into this Purchase
Agreement and to purchase the Notes. This Purchase Agreement has been
duly authorized executed and delivered by the Purchaser and constitutes
the Purchaser's legal, valid and binding agreement enforceable against
the Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) The Purchaser has sufficient knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Notes and the Purchaser is able to
bear the economic risk of investment in the Notes. The Purchaser
acknowledges that in connection with the making of its investment
decision, the Purchaser has been afforded the opportunity to ask
questions of, and receive answers regarding, and to conduct its
investigation of, the Issuer, the Loans and the Loan Collateral, the
Trust Estate, the Notes and the Servicer as is sufficient and necessary
for the Purchaser to make an informed investment decision with respect
to the Notes.
(e) No placement agent, broker, finder or investment banker has
been employed by or has acted for the Seller or the Purchaser in
connection with the transactions with the Purchaser contemplated in this
Purchase Agreement or otherwise in connection with the Notes; and the
Purchaser is solely responsible for, and the Purchaser shall indemnify
the Seller for the fees, expenses or commissions of any placement agent,
broker, finder or investment banker and any other person or entity
claiming to have acted in such capacity for or under the authority of
the Purchaser.
(f) The Purchaser agrees to treat, and to take no action
inconsistent with the treatment of, the Notes as debt of the Issuer for
tax purposes.
7. Notices. All notices and other communications hereunder shall
be in writing and shall be sent by first class registered or certified mail,
return receipt requested, or by facsimile transmission, provided such
transmission is confirmed by overnight mail delivered by a nationally
recognized overnight delivery service, addressed (a) if to the Purchaser,
Union Bank of California, N.A., 445 South Figueroa Street, 15th Floor, Los
Angeles, California 90071, Attention: Stephen R. Sweeney, and (b) if to the
Issuer or Litchfield, c/o Litchfield Financial Corporation, 430 Main Street,
Williamstown, Massachusetts 01267, Attention: Executive Vice President, or to
such other address as the Issuer or Litchfield shall have furnished to the
Purchaser in writing. Any notice so given by registered or certified mail
shall be deemed to have been given five days after being deposited in a
depository of the United States mails. Any notice given by means of a
nationally recognized overnight delivery service shall be deemed to have been
given upon receipt thereof.
8. Miscellaneous. (a) This Purchase Agreement shall be
construed and enforced in accordance with and governed by the law of the
State of New York.
(b) Any action or proceeding relating in any way to this Purchase
Agreement may be brought and enforced in the courts of the State of New York
or of the United States for the Southern District of New York and each of the
Issuer, Litchfield and the Purchaser irrevocably submits to the jurisdiction
of each such court (and any appellate court from any thereof) in respect of
any such action or proceeding.
Each of the Issuer, Litchfield and the Purchaser irrevocably
waives, to the fullest extent permitted by applicable law, any objection that
it may now or hereafter have to the laying of venue of any such action or
proceeding in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York, and any claim that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
(d) The headings in this Purchase Agreement are for the purposes
of reference only and shall not limit or define the meaning hereof.
(e) This Purchase Agreement shall be binding upon the respective
successors and assigns of the parties hereto and shall inure to the benefit
of and be enforceable by any registered owner or owners at the time of each
Note then issued, or any part thereof. This Purchase Agreement may be
assigned by the Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the Indenture.
(f) This Purchase Agreement may be amended, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such amendment, waiver, discharge or termination is sought.
(g) This Purchase Agreement may be executed simultaneously in
several counterparts, or by different parties in separate counterparts, each
of which counterparts shall be an original, but all of which shall constitute
one instrument.
9. No Recourse. It is expressly understood and agreed by the
parties hereto that (a) the representations, undertakings and agreements
herein made on the part of the Issuer are made and intended not as personal
representations, undertakings and agreements by Litchfield but are made and
intended for the purpose of binding only the Issuer, (b) nothing herein
contained shall be construed as creating any liability on Litchfield to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto, and (c)
under no circumstances shall Litchfield be personally liable for the payment
of any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Agreement; it being understood that the
foregoing shall in no way limit the obligations of Litchfield under the
Guarantee or the Purchase and Sale Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed on the date first written above.
LITCHFIELD HYPOTHECATION CORP. 1997-B
By: /s/ Heather A. Sica
Title: Executive Vice President
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
Title: Executive Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Stephen R. Sweeney
Title: Vice President
Exhibit 10.199
LIMITED GUARANTEE
LIMITED GUARANTEE dated as of June 1, 1999 by LITCHFIELD FINANCIAL
CORPORATION, a Massachusetts corporation (the "Guarantor"), in favor of UNION
BANK OF CALIFORNIA, N.A., a California banking corporation with an address at
445 South Figueroa Street, 15th Floor, Los Angeles, California 90071("Union
Bank"), as a Noteholder under the Indenture hereinafter referred to.
WHEREAS, Litchfield Hypothecation Corp.1997-B, a Delaware corporation (the
"Issuer") and a wholly-owned subsidiary of the Guarantor, and The Chase
Manhattan Bank, as trustee (the "Trustee")are parties to an Indenture
of Trust, as amended, (the "Indenture") (capitalized terms used but not
defined herein shall have the meanings attributed thereto in the
Indenture or in Appendix A thereto), dated as of August 1, 1997
providing for the issuance by the Issuer from time to time of its
Hypothecation Loan Collateralized Notes (collectively, the "Notes");
WHEREAS, the Issuer and the Trustee have executed and delivered
Amendment No. 2 to the Indenture, dated as of June 1, 1999 ("Amendment No. 2
to the Indenture") providing for the issuance by the Issuer of Series A Notes
in an initial aggregate principal amount of $1,776,419.96 (the "Additional
Series A Notes") and to authorize the Trustee to authenticate and deliver the
Additional Series A Notes to Union Bank; and
WHEREAS, pursuant to the Indenture, the Issuer has issued the
Additional Series A Notes which Additional Series A Notes the Issuer has sold
to Union Bank pursuant to a Note Purchase Agreement dated as of June 28, 1999
(the "Note Purchase Agreement"); and
WHEREAS, pursuant to the Indenture, the Issuer has issued and the
Guarantor has purchased certain Series C Notes in the original principal
amount of $3,123,580.04 (the "Series C Notes")which Series C Notes the
Guarantor has sold to Union Bank pursuant to the Note Purchase Agreement; and
WHEREAS, it is a condition to the purchase by Union Bank of the
Additional Series A Notes and the Series C Notes (collectively, the
"Guaranteed Notes")that the Guarantor issue a guarantee in the form hereof of
certain of the obligations of the Issuer under the Guaranteed Notes.
NOW, THEREFORE, in consideration of the premises and in order to
induce Union Bank to purchase the Guaranteed Notes, the Guarantor hereby
agrees as follows:
98
Section 1. Guarantee. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, after maturity, by acceleration or otherwise, of principal of and
interest on the Guaranteed Notes (the "Guaranteed Obligations") in an
aggregate amount not to exceed $245,000 (the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a Guaranteed
Obligation upon receipt of written demand therefor from Union Bank (a "Demand
Notice") which Demand Notice shall specify that an Event of Default has
occurred and is continuing under either or both of Sections 7.1(a) and 7.1(b)
of the Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to Union Bank under the
Guaranteed Notes and the Indenture. The obligation of the Guarantor hereunder
shall in no event exceed the Guaranteed Amount. The Guaranteed Amount shall
be reduced by (i) the amount of any payments made by Guarantor hereunder or
(ii) the portion allocable to the Guaranteed Notes of any unreimbursed
Servicer Advances pursuant to the Indenture.
Notwithstanding the limitation contained in the preceding sentence,
the Guarantor shall also pay all costs and expenses, including attorneys'
fees, costs relating to all costs and expenses arising out of or with respect
to the validity, enforceability, collection, defense, administration or
preservation of this Guarantee.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE OF THE
HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS OF THE INDENTURE
OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH SUCH OPTION OR OBLIGATION OR
THE PAYMENT OR PERFORMANCE BY GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER
UNDER THE INDENTURE OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS
OF GUARANTOR TO UNION BANK UNDER THIS GUARANTEE AND UNION BANK'S CONSENT TO
SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF UNION BANK'S RIGHTS
HEREUNDER.
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent permitted by
law, (i) promptness, diligence, notice of acceptance and any other notice
with respect to this Guarantee,(ii) any requirement that Union Bank protect,
secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Issuer or
any other person or any collateral, (iii) any and all right to assert any
defense, set-off, counterclaim or cross-claim of any nature whatsoever with
respect to this Guarantee, the obligations of the Guarantor hereunder or the
obligations of any other person or party (including, without limitation, the
Issuer) relating to this Guarantee or the obligations of the Guarantor
hereunder or otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by Union Bank to collect the Guaranteed
Obligations or any portion thereof or to enforce the obligations of the
Guarantor under this Guarantee, and (iv) any other action, event or
precondition to the enforcement of
this Guarantee or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor guarantees
that, to the fullest extent permitted by law, the Guaranteed Obligations will
be paid or performed strictly in accordance with their terms, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of Union Bank with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Indenture or the Guaranteed Notes or of all or any
part of the Guaranteed Obligations or of any security therefor, shall affect,
impair or be a defense to this Guarantee.
(c) The liability of the Guarantor under this Guarantee shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or performance, and/or
any change or extension of the time of payment or performance of, renewal or
alteration of, any Guaranteed Obligation, any security therefor, or any
liability incurred directly or indirectly in respect thereof, or any other
amendment or waiver of or any consent to departure from the Indenture or the
Guaranteed Notes , including any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Issuer;
(ii) any sale, exchange, release, surrender, realization upon any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever securing,
all or any of the Guaranteed Obligations, and/or any offset thereagainst, or
failure to perfect, or continue the perfection of, any lien in any such
property, or delay in the perfection of any such lien, or any amendment or
waiver of or consent to departure from any other guarantee for all or any of the
Guaranteed Obligations;
(iii)any exercise or failure to exercise any rights against the Issuer or others
(including the Guarantor);
(iv) any settlement or compromise of any Guaranteed Obligation, any security
therefor or any liability (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and any subordination of the payment
of all or any part thereof to the payment of any Guaranteed Obligations (whether
due or not) of the Issuer to creditors of the Issuer other than the Guarantor;
(v) any manner of application of any collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Guaranteed Obligations or any other assets
of the Issuer or any of its subsidiaries; or
(vi) any change, restructuring or termination of the existence of the Issuer.
(d) Union Bank may at any time and from time to time (whether or
not after revocation or termination of this Guarantee) without the consent
of, or notice (except as shall be required by applicable statute and cannot
be waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever realized to any
Guaranteed Obligation regardless of what Guaranteed Obligations remain unpaid.
(e) This Guarantee shall continue to be effective or be reinstated, as the
case may be, if claim is ever made upon Union Bank for repayment or recovery of
any amount or amounts received by Union Bank in payment or on account of any of
the Guaranteed Obligations and Union Bank repays all or part of said amount by
reason of any judgment, decree or order of any court or administrative body
having jurisdiction over Union Bank, or any settlement or compromise of any such
claim effected by Union Bank with any such claimant (including the Issuer), then
and in such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor, notwithstanding
any revocation hereof or the cancellation of the Guaranteed Notes, and the
Guarantor shall be and remain liable to Union Bank hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by Union Bank.
Section 4. Continuing Guarantee. This Guarantee is a continuing
one and shall (i) remain in full force and effect until the indefeasible
payment and satisfaction in full of the Guaranteed Obligations, (ii) be
binding upon the Guarantor, its successors and assigns, and (iii) inure to
the benefit of, and be enforceable by, Union Bank and its successors,
transferees and assigns. All obligations to which this Guarantee applies or
may apply under the terms hereof shall be conclusively presumed to have been
created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and covenants to and with Union Bank
that:
(a) The Guarantor has the corporate power to execute and deliver
this Guarantee and to incur and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guarantee and to
incur and perform its obligations hereunder;
(c) No consent, approval, authorization or other action by, and no
notice to or of, or declaration or filing with, any governmental or other
public body, or any other person, is required for the due authorization,
execution, delivery and performance by the Guarantor of this Guarantee or the
consummation of the transactions contemplated hereby; and
Exhibit 10.200
(d) The Guarantor shall provide to Union Bank (i) within 60 days
of the end of each fiscal quarter, the report on form-10-Q of the Guarantor
and (ii) within 135 days of the end of each fiscal year of the Guarantor, the
report on form 10-K of the Guarantor.
Section 6. Terms. (a) The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
(b) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guarantee unless
the context shall otherwise require.
Section 7. Amendments and Modification. No provision hereof shall
be modified, altered or limited except by written instrument expressly
referring to this Guarantee and to such provision, and executed by the party
to be charged.
Section 8. Waiver of Subrogation Rights. Guarantor hereby waives
until the Guaranteed Obligations are paid in full any right of indemnity,
reimbursement, contribution, or subrogation arising as a result of payment by
Guarantor hereunder, and will not prove any claim in competition with Union
Bank in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature. Guarantor will not claim any set-off or
counterclaim against Issuer in respect of any liability of Guarantor to
Issuer. Guarantor waives any benefit of and any right to participate in any
collateral which may be held by Union Bank.
Section 9. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether
by the Issuer or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against Union Bank shall have commenced to run, toll the running of
such statute of limitations and, if the period of such statute of limitations
shall have expired, prevent the operation of such statute of limitations.
Section 10. Rights and Remedies Not Waived. No act, omission or
delay by Union Bank shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by Union Bank of any
default hereunder or right or remedy which it may have shall operate as a
waiver of any other default, right or remedy or of the same default, right or
remedy on a future occasion.
Section 11. Admissibility of Guarantee. The Guarantor agrees that
any copy of this Guarantee signed by the Guarantor and transmitted by
telecopier for delivery to Union Bank shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not
the original is in existence.
Section 12. Notices. All notices, requests and demands to or upon
Union Bank or the Guarantor under this Agreement shall be in writing and
given as provided in the Indenture (with respect to the Guarantor, to the
address of the Issuer as set forth in the Indenture and with respect to Union
Bank, at its address set forth above).
Section 13. Counterparts. This Guarantee may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original and all of which shall together constitute one and the same
agreement.
Section 14. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTEE MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY
OF THIS GUARANTEE, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (iii) THE RIGHT TO
INTERPOSE ANY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS GUARANTEE
IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY VOLUNTARILY WAIVES
GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER ANY APPLICABLE STATE OR
FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH UNION BANK MAY
DESIRE TO USE.
(b) The Guarantor irrevocably consents to the service of process
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by certified mail, postage prepaid, to the
Guarantor at its address determined pursuant to Section 12 hereof.
(c) Nothing herein shall affect the right of Union Bank to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice of dishonor
and protests of all instruments included in or evidencing any of the
Guaranteed Obligations, and any and all other notices and demands whatsoever
(except as expressly provided herein).
Section 15. GOVERNING LAW. THIS GUARANTEE AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 16. Captions; Separability. (a) The captions of the
Sections and subsections of this Guarantee have been inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Guarantee.
(b) If any term of this Guarantee shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no
way be affected thereby.
Section 17. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guarantee.
Section 18. This Guarantee shall inure to the benefit of and be
enforceable by Union Bank, its successors, transferees and assigns, and it
shall be binding upon Guarantor and the successors and assigns of Guarantor.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guarantee to be duly executed in the State of New York as of the date first
above set forth.
LITCHFIELD FINANCIAL CORPORATION
By:/s/ Heather A. Sica
Title: Executive Vice President
LITCHFIELD HYPOTHECATION CORP. 1998-A
Exhibit 10.200
NOTE PURCHASE AGREEMENT
June 28, 1999
LITCHFIELD HYPOTHECATION CORP., a Delaware corporation, and its
successors and assigns (the "Issuer"), and LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation (the "Seller"), hereby agree with BANKBOSTON,
N.A. (the "Purchaser"), as follows:
1. The Notes. The Issuer has authorized the execution and
delivery to The Chase Manhattan Bank, as trustee (the "Trustee"), of an
Indenture of Trust, dated as of June 1, 1998, as amended (the "Indenture"),
providing for the issuance and sale by the Issuer of its Hypothecation Loan
Collateralized Notes, in one or more series, secured by the Trust Estate
granted to the Trustee by the Issuer pursuant to the Indenture, which
includes, among other assets, a pool of certain hypothecation Loans owned by
the Issuer and serviced by Litchfield Financial Corporation, a Massachusetts
corporation (in such capacity, the "Servicer"). Unless otherwise specifically
defined herein, all capitalized terms shall have the meanings ascribed to
them in the Indenture.
2. Purchase and Sale. In reliance upon the representations and
warranties contained herein and subject to the terms and conditions set forth
herein, the Seller agrees to sell to the Purchaser, and the Purchaser agrees
to purchase from the Seller, (i) $4,850,190.71 principal amount of
Hypothecation Loan Collateralized Notes, Series A and (ii) $7,349,809.29
principal amount of Hypothecation Loan Collateralized Notes, Series C (the
foregoing notes are referred to herein collectively as the "Notes") at an
aggregate price (the "Purchase Price") equal to the aggregate outstanding
principal amount of the Notes on the Closing Date (as hereinafter defined).
The Purchase Price shall be payable to or upon the instructions of the Seller
on the Closing Date by wire transfer in immediately available Federal funds.
3. The Closing; Delivery of the Notes. The closing of the
purchase and sale of the Notes pursuant hereto (the "Closing") shall be held
on June 28, 1999 (the "Closing Date"). The Closing shall take place by mail
or at such place as the parties hereto shall designate. At the Closing, the
Seller will deliver to the Purchaser, against payment of the Purchase Price
therefor, one Series A Note in the denomination of $4,850,190.71 and one
Series C Note in the denomination of $7,349,809.29 registered in the
Purchaser's name, or in the name of its nominee; provided however, that if
the Purchaser requests the Seller in writing not less than one Business Day
prior to the Closing Date to deliver to the Purchaser Notes in other
denominations (authorized pursuant to the Indenture) that equal in the
aggregate the denominations specified above, the Seller shall comply with
such request.
4. Conditions of the Purchaser's Obligation. The obligation
of the Purchaser set forth in Section 2 to purchase the Notes on the Closing
Date shall be subject to the accuracy as of the date hereof and as of the
Closing Date of (i) the representations and warranties of the Issuer set
forth in Section 5 hereof, (ii) the representations and warranties of the
Seller in the Purchase and Sale Agreement and in Section 5 hereof, and (iii)
the representations and warranties of the Servicer in the Servicing
Agreement, and shall also be subject to the following additional conditions:
(a) Each of this Purchase Agreement, the Notes, the Indenture, the
Servicing Agreement, and the Purchase and Sale Agreement (collectively, the
"Agreements") shall have been duly authorized, executed and delivered by each
of the parties thereto and be in full force and effect; and
(b)The Purchaser shall have received copies of all documents and other
information as it may reasonably request, in form and substance
reasonably satisfactory to it, with respect to such transactions and
the taking of all proceedings in connection therewith.
5. Representations and Warranties. (a) The Issuer represents and
warrants to the Purchaser as of the date hereof as follows:
(i) Each of the Agreements to which the Issuer is a party has been
duly authorized, executed and delivered by the Issuer and, assuming due
execution and delivery by the other parties thereto, constitutes a
legal, valid and binding agreement of the Issuer enforceable against the
Issuer in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law). The Notes have been validly issued and are entitled to the
benefits of the Indenture and constitute valid instruments enforceable
in accordance with their terms subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
(ii) Neither the issuance or sale of the Notes, nor the
consummation of any other of the transactions contemplated in any of the
Agreements to which the Issuer is a party, nor the execution, delivery
or performance of the terms of any of the Agreements to which the Issuer
is a party, has or will result in the breach of any term or provision of
the certificate of incorporation or by-laws of the Issuer, or conflict
with, result in a breach or violation on the part of the Issuer of or
the acceleration of indebtedness under or constitute a default under,
the terms of any indenture or other agreement or instrument to which the
Issuer is a party or by which it is bound, or any statute or regulation
applicable to the Issuer or any order applicable to the Issuer of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Issuer.
(iii) No consent, approval, authorization of, registration or
filing with, or notice to, any governmental or regulatory authority,
agency, department, commission, board, bureau, body or instrumentality
is required on the part of the Issuer for the execution and delivery or
by the Issuer with any of the Agreements to which the Issuer is a party
or the Notes, or the issuance of the Notes, or the consummation by the
Issuer of any transaction contemplated under any of the Agreements to
which the Issuer is a party, or such consent, approval or authorization
has been obtained or such registration, filing or notice has been made
(or, with respect to assignments of mortgages and financing statements,
will be made by the Issuer as contemplated by the Indenture).
(iv) There is no action, suit or proceeding against, or
investigation of, the Issuer pending or, to the best of its knowledge,
threatened, before any court, administrative agency or other tribunal
which, either individually or in the aggregate, (A) may result in any
material adverse change in the financial condition, properties, or
assets of the Issuer or in any material and adverse impairment of the
right or ability of the Issuer to perform its obligations under the
Agreements, or (B) asserts the invalidity of any of the Agreements to
which either the Issuer is a party or the Notes or (C) seeks to prevent
the consummation of any of the transactions contemplated by any of the
Agreements to which the Issuer is a party.
(v) Based in part on the representations and warranties contained
in Section 6 hereof, the Issuer is not, and the sale of the Notes in the
manner contemplated by this Purchase Agreement will not cause the Issuer
to be, subject to registration or regulation as an investment company or
affiliate of any investment company under the Investment Company Act of
1940, as amended.
(vi) Each Loan included in the Trust Estate securing the Notes has
been delivered to the Trustee or its collateral agent, together with an
assignment thereof by the Issuer, which immediately prior to such
assignment will own full legal and equitable title to each Loan, free
and clear of any lien, charge, encumbrance or participation or ownership
interest in favor of any other Person. Upon endorsement and delivery to
the Trustee or its collateral agent of the executed original promissory
notes and execution and delivery of the Indenture, all of the Issuer's
right, title and interest in and to the Loans will be validly and
effectively transferred to the Indenture Trustee as collateral security
for the benefit of the Holders of the Notes.
(vii) On the Closing Date after giving effect to the sale of the
Notes to the Purchaser hereunder, the aggregate principal amount of all
Hypothecation Loan Collateralized Notes outstanding shall be $44,262,214.41,
of which $13,718,496.44, aggregate principal amount shall be Series A Notes
owned of record by the Purchaser, $4,492,787.00 aggregate principal amount
shall be Series A Notes owned of record by BSB Bank & Trust, $1,460,682.44
aggregate principal amount shall be Series A Notes owned of record by
MetroWest Bank, $256,994.39 aggregate principal amount shall be Series B
Variable Funding Notes owned of record by the Seller, $15,286,723.58
aggregate principal amount shall be Series C Notes owned of record by the
Purchaser, $3,539,317.56 aggregate principal amount shall be Series C Notes
owned of record by MetroWest Bank., and $5,507,213.00 aggregate principal
amount shall be Series C Notes owned of record by BSB Bank & Trust.
(b) The Seller represents and warrants to the Purchaser as of the date hereof
as follows:
(i) Each of the Agreements to which the Seller is a party has been
duly authorized, executed and delivered by the Seller and, assuming due
execution and delivery by the other parties thereto, constitutes a
legal, valid and binding agreement of the Seller enforceable against the
Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
(ii) Neither the sale of the Notes, nor the consummation of any
other of the transactions contemplated in any of the Agreements to which
the Seller is a party, nor the execution, delivery or performance of the
terms of any of the Agreements to which the Seller is a party, has or
will result in the breach of any term or provision of the certificate of
incorporation or by-laws of the Seller, or conflict with, result in a
breach or violation on the part of the Seller of or the acceleration of
indebtedness under or constitute a default under, the terms of any
indenture or other agreement or instrument to which the Seller is a
party or by which it is bound, or any statute or regulation applicable
to the Seller or any order applicable to the Seller of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Seller.
(iii)No consent, approval, authorization of, registration or filing
with, or notice to, any governmental or regulatory authority, agency,
department, commission, board, bureau, body or instrumentality is
required on the part of the Seller for the execution and delivery or by
the Seller with any of the Agreements to which the Seller is a party, or
the sale of the Notes, or the consummation by the Seller of any
transaction contemplated under any of the Agreements to which the Seller
is a party, or such consent, approval or authorization has been obtained
or such registration, filing or notice has been made (or, with respect
to assignments of mortgages and financing statements, will be made by
the Seller as contemplated by the Indenture).
(iv) There is no action, suit or proceeding against, or
investigation of, the Seller pending or, to the best of its knowledge,
threatened, before any court, administrative agency or other tribunal
which, either individually or in the aggregate, (A) may result in any
material adverse change in the financial condition, properties, or
assets of the Seller or in any material and adverse impairment of the
right or ability of the Seller to perform its obligations under the
Agreements, or (B) asserts the invalidity of any of the Agreements to
which either the Seller is a party or the Notes or (C) seeks to prevent
the consummation of any of the transactions contemplated by any of the
Agreements to which either the Seller is a party.
(v) Neither the Seller nor any Affiliate of the Seller nor any
Person authorized or employed by the Seller will, directly or
indirectly, offer or sell any Note or similar security in a manner which
would render the sale of the Notes pursuant to this Purchase Agreement a
violation of Section 5 of the 1933 Act, or require registration pursuant
thereto. Based in part on the representations and warranties contained
in Section 6 hereof, the offering and sale of the Notes by the Seller to
Purchaser at closing are exempt from the registration requirements of
the 1933 Act and the Indenture is not required to be qualified under the
Trust Indenture Act of 1939, as amended.
The Issuer and the Seller agree that the representations and warranties
set forth in this Section 5 shall be fully assignable to the initial party to
whom the Purchaser may sell the Notes.
6. The Purchaser's Representations. The Purchaser represents
to the Issuer as follows:
(a) The Purchaser is acquiring the Notes for its own account. The
Purchaser understands that the Notes are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), or any State
securities or "Blue Sky" law and are being sold to the Purchaser in
reliance upon the Purchaser's representations contained herein in a
transaction that is exempt from the registration requirements of the
1933 Act and any applicable State law. The Purchaser agrees that the
Notes may not be Transferred unless subsequently registered under the
1933 Act and any applicable State securities or "Blue Sky" law or unless
exemptions from the registration requirements of the 1933 Act and
applicable State laws are available. Subject to the express provisions
of this Purchase Agreement and the Indenture, the disposition of the
Notes shall at all times be within the control of the owner thereof.
Notwithstanding anything to the contrary, express or implied, in this
Agreement, the Indenture or otherwise, the Purchaser understands that
none of the Trust, the Note Registrar or the Indenture Trustee is
obligated to register the Notes under the 1933 Act or any other
securities law and that any Transfer in violation of the provisions of
the Indenture shall be void ab initio. The foregoing shall in no way
limit the ability or the right of the Purchaser to sell participation
interests in any Notes owned by the Purchaser.
(b) The Purchaser is either (i) an "accredited investor" as
defined in rule 501(a) under the 1933 Act or (ii) a Qualified
Institutional Buyer as defined in Rule 144A under the 1933 Act.
(c) The Purchaser is authorized to enter into this Purchase
Agreement and to purchase the Notes. This Purchase Agreement has been
duly authorized executed and delivered by the Purchaser and constitutes
the Purchaser's legal, valid and binding agreement enforceable against
the Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) The Purchaser has sufficient knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Notes and the Purchaser is able to
bear the economic risk of investment in the Notes. The Purchaser
acknowledges that in connection with the making of its investment
decision, the Purchaser has been afforded the opportunity to ask
questions of, and receive answers regarding, and to conduct its
investigation of, the Issuer, the Loans and the Loan Collateral, the
Trust Estate, the Notes and the Servicer as is sufficient and necessary
for the Purchaser to make an informed investment decision with respect
to the Notes.
(e) No placement agent, broker, finder or investment banker has
been employed by or has acted for the Seller or the Purchaser in
connection with the transactions with the Purchaser contemplated in this
Purchase Agreement or otherwise in connection with the Notes; and the
Purchaser is solely responsible for, and the Purchaser shall indemnify
the Seller for the fees, expenses or commissions of any placement agent,
broker, finder or investment banker and any other person or entity
claiming to have acted in such capacity for or under the authority of
the Purchaser.(f) The Purchaser agrees to treat, and to take no action
inconsistent with the treatment of, the Notes as debt of the Issuer for
tax purposes.
7. Notices. All notices and other communications hereunder shall
be in writing and shall be sent by first class registered or certified mail,
return receipt requested, or by facsimile transmission, provided such
transmission is confirmed by overnight mail delivered by a nationally
recognized overnight delivery service, addressed (a) if to the Purchaser,
BankBoston, N.A.,15 Westminster Street, Providence, Rhode Island 02903,
Attention: Thomas Morris, and (b) if to the Issuer or the Seller, c/o
Litchfield Financial Corporation, 430 Main Street, Williamstown,
Massachusetts 01267, Attention: Executive Vice President, or to such other
address as the Issuer or the Seller shall have furnished to the Purchaser in
writing. Any notice so given by registered or certified mail shall be deemed
to have been given five days after being deposited in a depository of the
United States mails. Any notice given by means of a nationally recognized
overnight delivery service shall be deemed to have been given upon receipt
thereof.
8. Miscellaneous. (a) This Purchase Agreement shall be
construed and enforced in accordance with and governed by the law of the
State of New York.
(b) Any action or proceeding relating in any way to this Purchase
Agreement may be brought and enforced in the courts of the State of New York
or of the United States for the Southern District of New York and each of the
Issuer, the Seller and the Purchaser irrevocably submits to the jurisdiction
of each such court (and any appellate court from any thereof) in respect of
any such action or proceeding.
Each of the Issuer, the Seller and the Purchaser irrevocably
waives, to the fullest extent permitted by applicable law, any objection that
it may now or hereafter have to the laying of venue of any such action or
proceeding in any state court of the State of New York or the United States
District Court for the Southern District of New York, and any claim that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
(d) The headings in this Purchase Agreement are for the purposes
of reference only and shall not limit or define the meaning hereof.
(e) This Purchase Agreement shall be binding upon the respective
successors and assigns of the parties hereto and shall inure to the benefit
of and be enforceable by any registered owner or owners at the time of each
Note then issued, or any part thereof. This Purchase Agreement may be
assigned by the Purchaser to an eligible purchaser of the Notes in connection
with a permitted transfer of the Notes in accordance with the Indenture.
(f) This Purchase Agreement may be amended, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such amendment, waiver, discharge or termination is sought.
(g) This Purchase Agreement may be executed simultaneously in
several counterparts, or by different parties in separate counterparts, each
of which counterparts shall be an original, but all of which shall constitute
one instrument.
9. No Recourse. It is expressly understood and agreed by the
parties hereto that (a) the representations, undertakings and agreements
herein made on the part of the Issuer are made and intended not as personal
representations, undertakings and agreements by the Seller but are made and
intended for the purpose of binding only the Issuer, (b) nothing herein
contained shall be construed as creating any liability on the Seller to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto, and (c)
under no circumstances shall the Seller be personally liable for the payment
of any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Agreement; it being understood that the
foregoing shall in no way limit the obligations of the Seller under the
Guarantee or the Purchase and Sale Agreement.
10. Repurchase Right. The Seller hereby agrees that the
Purchaser shall have the right, exercisable in the Purchaser's sole
discretion, to require the Seller to repurchase all or any portion of the
Notes at any time during the 90 days immediately following the Closing Date
at a purchase price equal to the outstanding principal amount of the Notes to
be repurchased on the date of repurchase together with all accrued and unpaid
interest on the Notes to be repurchased to the date of repurchase. Exercise
of the foregoing right shall be in writing delivered to the Seller no less
than 30 days prior to the date of repurchase.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed on the date first written above.
LITCHFIELD HYPOTHECATION CORP. 1998-A
By: /s/ Heather A. Sica
Title: Executive Vice President
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
Title: Executive Vice President
BANKBOSTON, N.A.
By: /s/ Thomas Morris
Title: Director
Exhibit 10.201
LIMITED GUARANTEE
LIMITED GUARANTEE dated as of June 1, 1999 by LITCHFIELD FINANCIAL
CORPORATION, a Massachusetts corporation (the "Guarantor"), in favor of
BankBoston, N.A., a national banking association with an address at 15
Westminster Street, Providence, Rhode Island ("BankBoston"), as a Noteholder
under the Indenture hereinafter referred to.
WHEREAS, Litchfield Hypothecation Corp. 1998-A, a Delaware
corporation (the "Issuer") and a wholly-owned subsidiary of the Guarantor, is
a party to an Indenture of Trust dated as of June 1, 1998, as amended by
Amendment No. 1 thereto dated as of September 1, 1998, Amendment No. 2
thereto dated as of November 1, 1998, Amendment No. 3 thereto dated as of
March 1, 1999 and Amendment No. 4 thereto dated as of June 1, 1999 (the
"Indenture") (capitalized terms used but not defined herein shall have the
meanings attributed thereto in the Indenture or in Appendix A thereto) with
The Chase Manhattan Bank (the "Trustee") pursuant to which on the date
hereof the Issuer has issued (i) that certain Series A Note in the original
principal amount of $4,850,190.71 and (ii) that certain Series C Note in the
original principal amount of $7,349,809.29 (collectively, the "Guaranteed
Notes"); and
WHEREAS, the Issuer, the Guarantor and BankBoston are parties to
a Note Purchase Agreement, dated the date hereof, pursuant to which and
subject to the terms and conditions contained therein, BankBoston shall
purchase the Guaranteed Notes from the Issuer; and
WHEREAS, it is a condition to the purchase by BankBoston of the
Guaranteed Notes that the Guarantor issue a guarantee in the form hereof of
certain of the obligations of the Issuer under the Guaranteed Notes.
NOW, THEREFORE, in consideration of the premises and in order to
induce BankBoston to purchase the Guaranteed Notes, the Guarantor hereby
agrees as follows:
Section 1. Guarantee. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, after maturity, by acceleration or otherwise, of principal of and
interest on the Guaranteed Notes (the "Guaranteed Obligations") in an
aggregate amount not to exceed $610,000.00 (the "Guaranteed Amount"). The
Guarantor hereby agrees that it shall make the payment of a Guaranteed
Obligation upon receipt of written demand therefor from BankBoston (a "Demand
Notice") which Demand Notice shall specify that an Event of Default has
occurred and is continuing under either or both of Sections 7.1(a) and 7.1(b)
of the Indenture due to the failure of the Issuer to make the applicable
payment of principal and/or interest due and owing to BankBoston under the
Guaranteed Notes and the Indenture. The obligation of the Guarantor
hereunder shall in no event exceed the Guaranteed Amount. The Guaranteed
Amount shall be reduced by (i) the amount of any payments made by Guarantor
hereunder or (ii) the amount of any unreimbursed Servicer Advances pursuant
to the Indenture.
Notwithstanding the limitation contained in the preceding sentence,
the Guarantor shall also pay all costs and expenses, including attorneys'
fees, costs relating to all costs and expenses arising out of or with respect
to the validity, enforceability, collection, defense, administration or
preservation of this Guarantee.
GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY REPURCHASE OF THE
HYPOTHECATION LOANS BY THE GUARANTOR PURSUANT TO THE TERMS OF THE INDENTURE
OR ANY OTHER DOCUMENT PROVIDING GUARANTOR WITH SUCH OPTION OR OBLIGATION OR
THE PAYMENT OR PERFORMANCE BY GUARANTOR OF ANY OTHER OBLIGATION OF ISSUER
UNDER THE INDENTURE OR THE GUARANTEED NOTES SHALL NOT REDUCE THE OBLIGATIONS
OF GUARANTOR TO BANKBOSTON UNDER THIS GUARANTEE AND BANKBOSTON'S CONSENT TO
SUCH REPURCHASE SHALL NOT CONSTITUTE A WAIVER OF BANKBOSTON'S RIGHTS
HEREUNDER.
Section 2. Waiver. The Guarantor hereby absolutely,
unconditionally and irrevocably waives, to the fullest extent permitted by
law, (i) promptness, diligence, notice of acceptance and any other notice
with respect to this Guarantee,(ii) any requirement that BankBoston protect,
secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Issuer or
any other person or any collateral, (iii) any and all right to assert any
defense, set-off, counterclaim or cross-claim of any nature whatsoever with
respect to this Guarantee, the obligations of the Guarantor hereunder or the
obligations of any other person or party (including, without limitation, the
Issuer) relating to this Guarantee or the obligations of the Guarantor
hereunder or otherwise with respect to the Guaranteed Obligations in any
action or proceeding brought by BankBoston to collect the Guaranteed
Obligations or any portion thereof or to enforce the obligations of the
Guarantor under this Guarantee, and (iv) any other action, event or
precondition to the enforcement of this Guarantee or the performance by the
Guarantor of the obligations hereunder.
Section 3. Guarantee Absolute. (a) The Guarantor guarantees that,
to the fullest extent permitted by law, the Guaranteed Obligations will be
paid or performed strictly in accordance with their terms, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of BankBoston with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Indenture or the Guaranteed Notes or of all or any
part of the Guaranteed Obligations or of any security therefor, shall affect,
impair or be a defense to this Guarantee.
(c) The liability of the Guarantor under this Guarantee shall
be absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or performance,
and/or any change or extension of the time of payment or performance of,
renewal or alteration of, any Guaranteed Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Indenture or the Guaranteed Notes, including any increase in
the Guaranteed Obligations resulting from the extension of additional
credit to the Issuer;
(ii) any sale, exchange, release, surrender, realization upon any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, all or any of the Guaranteed Obligations, and/or any offset
thereagainst, or failure to perfect, or continue the perfection of, any
lien in any such property, or delay in the perfection of any such lien,
or any amendment or waiver of or consent to departure from any other
guarantee for all or any of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the
Issuer or others (including the Guarantor);
(iv) any settlement or compromise of any Guaranteed Obligation, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any
subordination of the payment of all or any part thereof to the payment
of any Guaranteed Obligations (whether due or not) of the Issuer to
creditors of the Issuer other than the Guarantor;
(v) any manner of application of any collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Guaranteed Obligations or any other assets of the Issuer or any of its
subsidiaries; or
(vi) any change, restructuring or termination of the existence of the Issuer.
(d) BankBoston may at any time and from time to time (whether
or not after revocation or termination of this Guarantee) without the consent
of, or notice (except as shall be required by applicable statute and cannot
be waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever realized to any
Guaranteed Obligation regardless of what Guaranteed Obligations remain unpaid.
(e) This Guarantee shall continue to be effective or be
reinstated, as the case may be, if claim is ever made upon BankBoston for
repayment or recovery of any amount or amounts received by BankBoston in
payment or on account of any of the Guaranteed Obligations and BankBoston
repays all or part of said amount by reason of any judgment, decree or order
of any court or administrative body having jurisdiction over BankBoston, or
any settlement or compromise of any such claim effected by BankBoston with
any such claimant (including the Issuer), then and in such event the
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any
revocation hereof or the cancellation of the Guaranteed Notes, and the
Guarantor shall be and remain liable to BankBoston hereunder for the amount
so repaid or recovered to the same extent as if such amount had never
originally been received by BankBoston.
Section 4. Continuing Guarantee. This Guarantee is a continuing
one and shall (i) remain in full force and effect until the indefeasible
payment and satisfaction in full of the Guaranteed Obligations, (ii) be
binding upon the Guarantor, its successors and assigns, and (iii) inure to
the benefit of, and be enforceable
by, BankBoston and its successors, transferees and assigns. All obligations
to which this Guarantee applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The
Guarantor hereby represents, warrants and covenants to and with BankBoston
that:
(a) The Guarantor has the corporate power to execute and deliver
this Guarantee and to incur
and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution,
delivery and performance of this Guarantee and to incur and perform its
obligations hereunder;
(c) No consent, approval, authorization or other action by, and no
notice to or of, or declaration or filing with, any governmental or other
public body, or any other person, is required for the due authorization,
execution, delivery and performance by the Guarantor of this Guarantee or the
consummation of the transactions contemplated hereby; and
(d) The Guarantor shall provide to BankBoston (i) within 60
days of the end of each fiscal quarter, the report on form 10-Q of the
Guarantor and (ii) within 135 days of the end of each fiscal year of the
Guarantor, the report on form 10-K of the Guarantor.
Section 6. Terms. (a) The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
(b) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guarantee unless
the context shall otherwise require.
Section 7. Amendments and Modification. No provision hereof shall
be modified, altered or limited except by written instrument expressly
referring to this Guarantee and to such provision, and executed by the party
to be charged.
Section 8. Waiver of Subrogation Rights. Guarantor hereby waives
until the Guaranteed Obligations are paid in full any right of indemnity,
reimbursement, contribution, or subrogation arising as a result of payment by
Guarantor hereunder, and will not prove any claim in competition with
BankBoston in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature. Guarantor will not claim any set-off or
counterclaim against Issuer in respect of any liability of Guarantor to
Issuer. Guarantor waives any benefit of and any right to participate in any
collateral which may be held by BankBoston .
Section 9. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether
by the Issuer or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against BankBoston shall have commenced to run, toll the running of
such statute of limitations and, if the period of such statute of limitations
shall have expired, prevent the operation of such statute of limitations.
Section 10. Rights and Remedies Not Waived. No act, omission or
delay by BankBoston shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by BankBoston of any
default hereunder or right or remedy which it may have shall operate as a
waiver of any other default, right or remedy or of the same default, right or
remedy on a future occasion.
Section 11. Admissibility of Guarantee. The Guarantor agrees that
any copy of this Guarantee signed by the Guarantor and transmitted by
telecopier for delivery to BankBoston shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not
the original is in existence.
Section 12. Notices. All notices, requests and demands to or upon
BankBoston or the Guarantor under this Agreement shall be in writing and
given as provided in the Indenture (with respect to the Guarantor, to the
address of the Issuer as set forth in the Indenture and with respect to
BankBoston, at its address set forth above).
Section 13. Counterparts. This Guarantee may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original and all of which shall together constitute one and the same
agreement.
Section 14. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTEE MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY
OF THIS
GUARANTEE, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (iii) THE RIGHT TO
INTERPOSE ANY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
GUARANTEE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY VOLUNTARILY
WAIVES GUARANTOR'S RIGHTS TO NOTICE AND HEARING UNDER ANY APPLICABLE
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANKBOSTON
MAY DESIRE TO USE.
(b) The Guarantor irrevocably consents to the service of
process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by certified mail, postage prepaid, to the
Guarantor at its address determined pursuant to Section 12 hereof.
(c) Nothing herein shall affect the right of BankBoston to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Guarantor in any other
jurisdiction.
(d) The Guarantor hereby waives presentment, notice of dishonor
and protests of all instruments included in or evidencing any of the
Guaranteed Obligations, and any and all other notices and demands whatsoever
(except as expressly provided herein).
Section 15. GOVERNING LAW. THIS GUARANTEE AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 16. Captions; Separability. (a) The captions of the
Sections and subsections of this Guarantee have been inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Guarantee.
(b) If any term of this Guarantee shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no
way be affected thereby.
Section 17. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guarantee.
Section 18. This Guarantee shall inure to the benefit of and be
enforceable by BankBoston , its successors, transferees and assigns, and it
shall be binding upon Guarantor and the successors and assigns of Guarantor.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guarantee to be duly executed as of the date first above set forth.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Heather A. Sica
Title: Executive Vice President
Exhibit 10.202
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement") is entered into
as of June 30, 1999, by and between LITCHFIELD FINANCIAL
CORPORATION, a Massachusetts corporation with its chief executive
office at 430 Main Street, Williamstown, Massachusetts 01267
("Seller") and FIRST MASSACHUSETTS BANK, N.A. a national banking
association with a place of business located at 99 West Street,
Pittsfield, Massachusetts 01201(the "Purchaser").
WHEREAS, the Seller now owns the consumer receivables specified on
Schedule 1 hereto (the "Receivables") representing purchase money
indebtedness of purchasers (each a "Consumer") of fee simple interests in
real property (each a "Property");
WHEREAS, the Receivables were acquired by the Seller from the
originators of the Receivables (each an "Originator");
WHEREAS, the Seller desires to sell the Receivables to the Purchaser in
accordance with the terms and conditions of this Agreement;
WHEREAS, the Purchaser desires to purchase the Receivables from the
Seller in accordance with the terms and conditions of this Agreement; and
WHEREAS, the Purchaser desires to engage the Seller to service the
Receivables upon the sale of the Receivables to the Purchaser and the Seller
desires to perform such services;
NOW THEREFORE, for and in consideration of the foregoing, and the
covenants and agreements hereinafter set forth and other good and valuable
consideration, the legal adequacy and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby,
hereby agree:
1. Definition of Receivable; Sale and Purchase of Eligible
Receivables. (a) As used herein, the term "Receivable" shall mean with respect
to each Receivable specified on Schedule 1 hereto: each and every promissory
note, instrument, installment sales contract, contract for deed, purchase
contract, or other evidence of indebtedness executed and delivered by the
Consumer or any other Obligor (as defined in paragraph 4 below) to evidence
the obligation to repay indebtedness, each mortgage, deed of trust, or other
security instrument, if any, creating a first lien on the related Property
(each a "Mortgage"), each other instrument, document, guarantee, contract,
or agreement of whatever nature evidencing or securing the indebtedness of
the Consumer and each other Obligor incurred in connection with the purchase
of a Property, all guarantees or reserves provided by Originators securing
the Receivables, and all payments, revenues, proceeds, property, contract
rights, general intangibles, claims, powers, benefits and remedies arising
from, or in any way related to, any of the foregoing.
(b) Subject to the terms and conditions of this Agreement, the accuracy
of all representations and warranties of the Seller contained herein, and the
payment of the Purchase Price (as defined in Paragraph 3 below) by the
Purchaser to the Seller on the Closing Date (as defined in Paragraph 2
below), the Seller hereby agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Seller, the Receivables.
2. Closing Date; Conditions Precedent to Purchase of Receivables. The
"Closing Date" with respect to the Receivable shall be the date on which the
purchase and sale of the Receivables shall occur and be funded. As a
condition to closing, the Seller shall have delivered to the Purchaser or its
designee or collateral agent the documents with respect to each Receivable
specified on Schedule A hereto.
In addition, the obligation of the Purchaser to purchase the Receivables
is subject to the fulfillment of each of the following conditions:
(a) all Receivable Documents (as defined in paragraph 4 below) shall be
in form and substance satisfactory to the Purchaser and shall have been duly
executed by all parties thereto, with the signatures properly notarized and
the instruments in proper form for recordation, as required, and, where
applicable, shall have been recorded; provided that the Seller shall have (i)
15 days from the Closing Date to deliver to the Purchaser the original files
comprising the Receivable Documents and (ii) 90 days from the Closing Date to
have filed in the appropriate recording office(s) any executed assignments
necessary for assigning the Receivables or the Receivable Documents to the
Purchaser;
(b) all representations and warranties of the Seller contained herein
shall be true and correct as of the Closing Date; and
(c) the Seller shall be in compliance with all of its duties,
obligations and covenants contained herein.
3. Purchase Price. The purchase price (the "Purchase Price") for each
Receivable shall be the outstanding principal amount of the Receivable on the
Closing Date. The Purchase Price shall be paid by the Purchaser to the Seller
in immediately available funds on the Closing Date. In addition, on and
after the Closing Date the Seller shall be entitled to a deferred purchase
price (the "Deferred Purchase Price") payable in arrears on the 25th business
day of each month equal to the aggregate remaining cash collections from the
Receivables in the previous calendar month (each a "Remittance Period,"
provided that the first Remittance Period shall commence on the Closing Date
and end on July 31, 1999) after payment to the Purchaser of (i) the greater
of (A) all principal collected in respect of the Receivables during the
Remittance Period or (B) all scheduled principal payments due to be paid in
respect of the Receivables during the Remittance Period and (ii) interest
accrued on the outstanding principal balance of the Receivables during the
Remittance Period at a rate equal to the LIBOR Rate plus 180 basis points
(the "Pass-through Rate") (the foregoing required payment to the Purchaser on
each Remittance Date is referred to herein as the "Required Monthly
Payment"). As used herein "LIBOR Rate" shall mean the rate published in The
Wall Street Journal under "Money Rates" (or if such publication shall cease
to publish such rate, then the rate published in such other nationally
recognized publication as the Purchaser may from time to time specify) as the
average of the interbank offered rates for U.S. Dollar deposits in the London
interbank market for a term of 90 days, based on quotations at 5 major
banks. The LIBOR Rate for each day of a Remittance Period shall be the rate
so published on the first business day of such Remittance Period.
Payment to LFC of the Deferred Purchase Price on any Remittance Date
shall be subordinate to the payment to the Purchaser of the Required Monthly
Payment on such Remittance Date. In the event collections on the Receivables
during any Remittance Period are insufficient to pay the Required Monthly
Payment on the related Remittance Date after giving effect to the
subordination of the Deferred Purchase Price, the Seller shall advance such
shortfall to the Purchaser. Any such advance shall be reimbursed to the
Seller on subsequent Remittance Dates prior to payment of the Required
Monthly Payment on such Remittance Date. The Seller's repurchase obligation
in Paragraph 7 hereof shall be reduced to the extent of any unreimbursed
advances.
4. Representations and Warranties. To induce the Purchaser to execute
this Agreement and to purchase the Receivables, the Seller makes the
following warranties and representations to the Purchaser and its successors
and assigns, each of which is true and correct as of the date of this
Agreement and on and as of the Closing Date, with the understanding that all
of the warranties and representations contained herein shall survive each
closing of the purchase and sale of Receivables hereunder:
(a) With respect to each Receivable:
(i) each promissory note, instrument, installment sales contract,
contract for deed, purchase contract, or other evidence of indebtedness
evidencing the obligation to repay indebtedness, each Mortgage, if any, and
each other instrument, document, guarantee, contract, or agreement of
whatever nature evidencing or securing each Receivable (each of the
foregoing a "Receivable Document") has been duly executed and/or endorsed by
the Consumer and/or any other person or entity that is or who may become
obligated under the Receivable whether as the maker or guarantor (each an
"Obligor"). All recordings or filings required to effectively assign all
right, title and interest in and to the Receivable to the Purchaser have been
recorded or filed or will be filed and recorded during the 90 day period
referred to in Paragraph 2(a)(ii) above. Each Receivable Document represents
the genuine, legal, valid and binding obligation of each Obligor, enforceable
against each Obligor by the holder of the Receivable in accordance with its
terms. Each party to the Receivable Documents had legal capacity to enter
into the Receivable and to execute and deliver the Receivable Documents. No
fraud, omission, misrepresentation or similar occurrence with respect to a
Receivable has taken place on the part of any person;
(ii) the Receivable is not and will not be subject to any right of
rescission, set-off, recoupment, counterclaim or defense, including the
defense of usury, whether or not arising out of transactions relating to the
Receivable, and no Obligor has asserted either orally or in writing any
illegality, breach, defense, set-off or counterclaim or otherwise disputed,
contested or repudiated the Receivable or the related Property;
(iii) immediately prior to the purchase by the Purchaser, the Seller is
the sole owner of the Receivable, and the Seller has good, indefeasible and
marketable title thereto, and has full right to transfer and sell the
Receivable to the Purchaser, free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Receivable pursuant
to this Agreement. Upon the sale of each Receivable, the Seller will have
transferred and conveyed good, indefeasible and marketable title in and to
such Receivable to the Purchaser free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim, or security
interest;
(iv) the related Mortgage, if any, secures and creates a first lien on
an estate in fee simple in real property and is a valid, subsisting and
enforceable first lien on the related Property, and the Property is not
subject to any other lien, mortgage, security interest claim or encumbrance.
The related Property has not been released from the lien of the Mortgage, in
whole or in part, except in consideration of principal payments which are
reflected in the principal balance of the Receivable;
(v) the solicitation, origination and servicing of the Receivable did
not, and the terms and conditions of the Receivable as of any date do not
and will not, contravene or violate any applicable laws, rules or regulations
(including, without limitation, laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair
credit reporting, real estate settlement procedures, disclosure, equal credit
opportunity, fair debt collection practices and privacy) and no party to the
related Receivable Documents is in violation of any such law, rule or
regulation. At the time of origination of the Receivable, the Originator was
qualified to transact business and in good standing in the jurisdiction in
which the Receivable was originated;
(vi) the Receivable is denominated and payable in United States dollars
in the United States and relates to a Property located in the United States;
(vii) no payment, in whole or in part, on the Receivable is more than
30 days contractually past due;
(viii) the Receivable was originated by the related Originator in the
ordinary course of its business and the Originator and the Seller have
fulfilled all of their obligations in respect thereof. The Receivable
evidences a purchase money obligation incurred by the Consumer solely for the
purpose of financing the Consumer's purchase of the related Property;
(ix) the Receivable is required to be paid pursuant to the terms of the
related Receivable Documents, has not been paid in full or been compromised,
adjusted, extended, re-negotiated, released, cancelled, satisfied,
subordinated, rescinded or modified, and is not subject to compromise,
adjustment, extension, satisfaction, subordination, rescission, or
modification. The Seller has not waived the performance by any Obligor of any
action, if the Obligor's failure to perform such action would cause the
Receivable to be in default, nor has the Seller waived any default resulting
from any action or inaction by the Obligor;
(x) there are no proceedings or investigations pending or threatened
(a) asserting the invalidity of the Receivable or (b) seeking to enforce the
payment of the Receivable or (c) involving the condemnation or public taking
of the Property related to the Receivable;
(xi) no Obligor is subject to any bankruptcy, insolvency or
reorganization law or proceeding;
(xii) the Mortgage, if any, contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the benefits of
the security provided thereby. There is no homestead or other exemption
available to a Consumer that would interfere with the right to sell the
related Property at a trustee's sale or the right to foreclose the Mortgage;
(xiii) each Obligor is a natural person and citizen of the United
States or Canada and meets the Seller's creditworthiness standards; and
(xiv) To the best of the Seller's knowledge the related Property does
not possess the presence of Hazardous Materials and neither the current nor
any proposed operation of the Property is likely to cause the production or
location upon the Property of Hazardous Materials. As used herein,
"Hazardous Materials" means (a) those substances as defined as "hazardous
substances," "hazardous materials," "toxic substances," or "solid waste" in
CERCLA, RCRA, and the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et. seq., and in the regulations promulgated pursuant thereto;
(b) those substances designated as a "hazardous substance" under or pursuant
to the Federal Water Pollution Control Act, 33 U.S.C. S1257, et seq., and in
the regulations promulgated pursuant thereto; (c) those substances listed in
the United States Department of Transportation Table (40 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any
successor agency) as hazardous substances (40 CFR Part 302 and amendments
thereto); and (d) such other substances and materials classified as hazardous
or toxic under any local, state or federal law or regulation;
(b) The Seller is duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each state wherein it owns or leases any
material properties if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the
Seller, and in any event the Seller and its business and operations are in
full compliance with all applicable federal, state and local laws and
regulations; the Seller has the full power, authority and legal right to
hold, transfer and convey the Receivables and to execute and deliver this
Agreement and to perform its obligations hereunder; the execution, delivery
and performance of this Agreement (including all instruments of transfer to
be delivered pursuant to this Agreement) by the Seller and the consummation
of the transactions contemplated hereby have been duly and validly authorized
by all necessary action; this Agreement and all agreements contemplated
hereby have been duly executed and delivered and constitute the valid, legal,
binding and enforceable obligations of the Seller, regardless of whether such
enforcement is sought in a proceeding in equity or at law; and all requisite
corporate action has been taken by the Seller to make this Agreement and all
agreements contemplated hereby valid and binding upon the Seller in
accordance with their terms;
(c) The consummation of the transactions contemplated by this Agreement
are in the ordinary course of business of the Seller, and the transfer,
assignment, and conveyance of the Receivables by the Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(d) Neither the execution and delivery of this Agreement, the sale of
the Receivables to the Purchaser, the consummation of the transactions
contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement, will conflict with or result in a breach of any
of the terms, conditions or provisions of the Seller's organizational
documents or any legal restriction or any agreement or instrument to which
the Seller is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which
the Seller or its property is subject, or result in the creation or
imposition of any lien, charge or encumbrance that would have an adverse
effect upon any of its properties pursuant to the terms of any mortgage,
contract, deed of trust or other instrument, or impair the ability of the
Purchaser to realize on the Receivables or impair the value of the
Receivables;
(e) There is no action, suit, proceeding, or investigation pending or
threatened against the Seller which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Seller, or in
any material impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material liability on the
part of the Seller, or which would draw into question the validity of this
Agreement or the Receivables or of any action taken or to be taken in
connection with the obligations of the Seller contemplated herein, or which
would be likely to impair materially the ability of the Seller to perform
under the terms of this Agreement;
(f) No consent of any other party and no consent, approval,
authorization or order of, or
registration or filing with, or notice to any court or governmental agency or
body is required for the execution, delivery or performance by the Seller of
or compliance by the Seller with this Agreement or the sale of the
Receivables or the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the
Closing Date;
(g) All information heretofore or contemporaneously herewith furnished
by the Seller to the Purchaser for the purposes of or in connection with this
Agreement or any related document or any transaction contemplated hereby or
thereby is, and all information hereafter furnished by or on behalf of the
Seller to the Purchaser will be, true and accurate in every material respect
on the date as of which such information is dated or certified; and none of
such information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading;
(h) The Seller has delivered to the Purchaser such financial
information as requested by the Purchaser (including audited or unaudited
financial statements). All such financial statements fairly present the
pertinent results of operations and changes in financial position for each of
the periods requested and the financial position at the end of each such
period of the Seller and its subsidiaries and have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth in the notes thereto.
There has been no material adverse change in the business, operations,
financial condition, properties or assets of the Seller since the date of the
Seller's financial statements delivered to the Purchaser;
(i) The Seller has not dealt with any broker, investment banker, agent
or other person that may be entitled to any commission or compensation in
connection with the sale of the Receivables;
(j) The Seller understands and agrees that the Purchaser, without
independent investigation, is relying upon the above representations and
warranties in purchasing the Receivables from the Seller. The Seller further
agrees that the foregoing representations and warranties shall be continuing
in nature and shall remain in full force and effect until such time as the
Receivables shall be paid in full.
5. Protective Covenants. So long as any of the Receivables remain
outstanding, the Seller shall:
(a) Take no actions which are inconsistent with the Purchaser's purchase
of the Receivables hereunder and take all actions as may reasonably be
requested to further prove and demonstrate the Purchasers definitive
purchase and the Seller's definitive sale of the Receivables hereunder;
(b) Upon the request of the Purchaser, execute or cause the execution,
acknowledgment and delivery of such further instruments (including, without
limitation, declarations of no set-off) and do such further acts as may be
necessary, desirable or proper to carry out more effectively or otherwise
further the purposes of this Agreement;
(c) Not take any action with respect to any Receivable which is
inconsistent with the
provisions and the purpose of this Agreement; and
(d) Not solicit any Customer to refinance any performing Receivable.
6. Repurchase Obligation. All Receivables purchased by the Purchaser
hereunder are sold by the Seller to the Purchaser subject to the right of the
Purchaser to require the Seller to repurchase at the Repurchase Price (as
hereinafter defined) (i) any Receivable for which the Seller has breached any
representation or warranty contained in paragraph 4(a) (each an "Ineligible
Receivable") and (ii) any Receivable which at any time becomes more than one
hundred and twenty (120) days contractually past due or which at any time
becomes more than ninety (90) days contractually past due with respect to
which no payment has been made in the preceding 90 days (each a "Defaulted
Receivable"). The obligation of the Seller to purchase Defaulted Receivables
shall be limited to 10% of the principal balance of the Receivables at the
Closing Date (subject to reinstatement in the amount of any recovery proceeds
received by the Seller from the liquidation of any Defaulted Receivables
repurchased by the Seller). Immediately upon any Receivable becoming an
Ineligible Receivable or a Defaulted Receivable, the Seller shall repurchase
the Ineligible Receivable or Defaulted Receivable at a price (the "Repurchase
Price") equal to the then outstanding principal amount of the related
Receivable together with all accrued and unpaid interest accrued at the
Pass-through Rate to the date of repurchase. The Seller shall have thirty
(30) days after the date of notice by the Purchaser to repurchase an
Ineligible Receivable or Defaulted Receivable. Upon the repurchase of any
Ineligible Receivable or Defaulted Receivable hereunder, the Purchaser shall
convey and transfer back to the Seller, without recourse or warranty of
whatever nature, the Ineligible Receivable or Defaulted Receivable.
7. Servicing. (a) The Purchaser hereby engages and authorizes the
Seller to service and administer the Receivables in accordance with the terms
of this Paragraph 7. The Seller agrees that (i) its servicing of the
Receivables shall be carried out in accordance with the Seller's credit
criteria and prudent, customary and usual procedures of financial
institutions which service assets similar to the Receivables and, (ii) to the
extent more exacting, the procedures which the Seller would use if the
Receivables were beneficially owned by the Seller. The Seller, and its
officers, employees, and agents and representatives shall be responsible for
servicing of the Receivables, including, without limitation, the processing,
application and collection of payments due under the Receivable, the
accounting functions with regard to the Receivables, and such other
administrative actions as the Seller and the Purchaser shall deem necessary
and desirable.
(b) Subject to the provisions herein, the Seller shall have full power
and authority, acting alone and subject only to the specific requirements and
prohibitions of this Paragraph 7, to do and take any and all actions, or to
refrain from taking any such actions and to do any and all things in
connection with such servicing and administration which it may deem necessary
or desirable, including, without limitation, calculating and compiling
information required in connection with any report to be delivered pursuant
to this Paragraph 7. Without limiting the generality of the foregoing, but
subject to the provisions of this Paragraph 7, the Seller is hereby
authorized and empowered by the Purchaser on behalf of and for the benefit of
the Purchaser (i) to execute and deliver, in the Seller's own name, on behalf
of the Purchaser, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables, including, without limitation,
consenting to sales, transfers or encumbrances of the collateral or
assignments and assumptions of the Receivable Documents, all in accordance
with the terms of the Receivables and the Receivable Documents, (ii) take any
and all actions or refrain from taking any action to enforce, foreclose upon,
exercise any right, remedy or privilege in respect of, manage, administer,
settle, compromise, or amend, modify, supplement, otherwise deal with the
Receivables and the Receivable Documents and (iii) grant or withhold consent
or approvals under the Receivables and the Receivable Documents, including,
without limitation (A) the right to approve any amendment, modification
(including any modification to any Receivable having a balloon principal
payment to provide for monthly amortization payments), or waiver of any
provision of the Receivable Documents; (B) controlling of the collection and
enforcement of the Receivable Documents or realization thereon by suit,
foreclosure, set-off, or otherwise; (C) consulting with legal counsel
(including counsel for the Obligor), independent public accountants and other
experts; (D) the employing of agents and attorneys-in-fact; (E) inspection of
the subject real property; (F) the disbursement of insurance proceeds for the
repair of damaged property; (G) the performance of such other matters as the
Seller may deem necessary. Notwithstanding the foregoing, the Purchaser
shall be notified of any proposed material modification to the terms of a
Receivable covered by this Agreement and such a material modification may be
made only if the Purchaser consents to such material modification.
(c) In connection with its servicing and administration of the
Receivables, the Seller will provide the Purchaser with periodic reports in a
form agreeable to the Purchaser. Such reports will be delivered on such
periodic basis as will be agreed by the parties from time to time, but in no
event less often than monthly.
(d) After the occurrence of an event of default under a Receivable, or
an event which with the lapse of time would be an event of default under a
Receivable, the Purchaser shall be notified of such event and shall have the
right, but not the obligation, to administer, manage, perform, and enforce
the terms of such Receivable and the related Receivable Documents (including,
without limitation, the right to foreclose on any Mortgage securing such loan
and security). The Purchaser may exercise such rights directly or indirectly,
by directing the Seller as to the desired course of action with regard to
such Receivable, or employ others to do so. The Purchaser shall not have the
foregoing rights with respect to Receivables that have been repurchased by
the Seller.
(e) The Seller's and the Purchaser's obligations hereunder shall
terminate with respect to a Receivable at the close of business at the
earliest of (i) the date that the obligations of the Obligor to make payments
or perform with respect to a Receivable shall have been irrevocably satisfied
in full in accordance with the terms of the Receivable Documents and all
obligations under this Agreement are satisfied; or (ii) the repurchase of a
Receivable by Seller in accordance with Section 6 hereof (except for the
obligation to reinstate the Seller's repurchase obligation under Paragraph 6
hereof in the event of any recoveries in respect of such Receivable) or (iii)
with respect to each Receivable, the Purchaser's assignment of its interest
in the Receivable; provided, however, this Agreement shall remain in full
force and effect with respect to the remaining Receivables. The parties may
also terminate this Agreement at any time upon mutual agreement.
(f) The Seller, in its capacity as servicer, shall have the right to
purchase all, but not less than all, of the Receivables at any time after
which the outstanding principal amount of the Receivables is equal to or less
than 10% of the outstanding principal balance of the Receivables on the
Closing Date. The purchase price for such Receivables shall be the Repurchase
Price on the date of purchase.
8. Relationship of Parties. The relationship between the Seller and
the Purchaser is and shall be that of a seller and purchaser, not a
debtor-creditor relationship. Neither this Agreement nor the performance
hereof shall be deemed as creating a joint venture or a partnership between
the Seller and the Purchaser or any employer-employee, agency or other
relationship of any nature. Each transfer of a Receivable to the Purchaser
hereunder constitutes an outright sale and assignment, negotiated at arm's
length, by the Seller to the Purchaser of all of the Seller's legal and
equitable ownership interest in such Receivable and in no way shall any such
transfer be construed as an extension of credit by the Purchaser to the
Seller or any Obligor. The Purchaser does not in any respect assume or incur
any obligation, liability or tax of the Seller with respect to the
Receivables or otherwise.
9. Notices. Any notice, approval, consent or other communication under
this Agreement shall be in writing and shall be considered given when (1)
delivered personally, or (2) mailed by registered or certified mail, return
receipt requested or (3) transmitted by telecopy with a confirming copy sent
by overnight mail or courier service to the parties at the addresses
indicated below (or at such other address as a party may specify by notice to
the others pursuant hereto). Notice given by a party's counsel shall be
considered notice given by that party.
(a) If to the Seller, to it at:
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: James Shippee
Telecopier No. 413-458-1015
(b) If to the Purchaser, to it at:
First Massachusetts Bank
99 West Street
Pittsfield, MA 01201
Attention: Richard Henderson
Telecopier No. 413-442-6983
(c) In each, with a copy to:
Cain, Hibbard, Myers & Cook, PC
66 West Street
Pittsfield, MA 01201
Attention: Michael E. MacDonald, Esquire
Telecopier No. 413-443-7694
and
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: John J. Malloy, Esquire
Telecopier 413-458-1015
10. Rights of the Purchaser. The Seller shall, upon the request of the
Purchaser or the Purchaser's assigns, do everything reasonably necessary or
advisable to put the Purchaser in a position to enforce the payment of all
Receivables and security interests or instruments covered by this Agreement
(including the execution of separate endorsements and assignments) or to
exercise all other rights and remedies that the Seller would have with
respect to the Receivables and security interests or instruments but for
their purchase by and assignment to the Purchaser.
11. Intention as True Sale. It is the express intention of the parties
hereto that the sale and purchase of Receivables hereunder is to absolutely
be categorized as a true sale of the Receivables rather than a conveyance as
security for the repayment of indebtedness. However, to the extent that the
transfers described herein are subsequently determined or found not to be a
sale under applicable law, it is fully and completely intended that this
agreement shall constitute a security agreement under applicable law and that
the Seller does hereby grant to the Purchaser and shall be deemed to have
granted to the Purchaser a first priority security interest in (i) all of the
Seller's right, title and interest in, to and under the Receivables,
including without limitation all payments of interest and principal received
by the Seller subsequent to the date of delivery of the Receivables to the
Purchaser, (ii) all of the Seller's right, title and interest in, to and
under the Receivables Documents related to the Receivables, if any, which are
being conveyed and assigned to the Purchaser by the Seller, (iii) all of the
Seller's servicing records as they relate to Receivable which are
contemporaneously being delivered to the Purchaser by the Seller, (iv) all
other property rights of whatever nature being conveyed by the Seller to the
Purchaser hereunder, and (v) any interest on or other proceeds from the
foregoing and all replacements and substitutions associated with the
foregoing.
12. No Third-Party Beneficiary. Notwithstanding anything to the
contrary contained herein, the parties hereto hereby expressly acknowledge
and agree that the terms and provisions set forth in this Agreement are
intended to inure solely to the benefit of the parties hereto and their
respective successors and assigns.
13. Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties concerning the sale and purchase of the
Receivables, and merges and extinguishes all prior agreements, understandings
and negotiations, and no amendments or modifications hereof shall be valid
unless they are in writing and signed by all of the parties hereto.
14. Assignment; Binding Effect. All of the terms, covenants,
conditions, representations and warranties hereof shall inure to the benefit
of, and be binding upon, the successors and assigns of the parties hereto.
15. Interpretation. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. All paragraph headings are for
convenience only and do not define or limit any terms or provisions. The
invalidity or unenforceability of any one or more provisions of this
Agreement will in no way affect any other term or provision. This Agreement
shall not be construed more strictly against any one party than against any
other party, merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that all of the parties
hereto and their respective counsel have contributed substantially and
materially to the preparation of this Agreement.
16. Choice of Law. This Agreement and the transactions contemplated
hereunder shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to the choice-of-law
provisions thereof.
17. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. EACH OF THE
SELLER AND THE PURCHASER WAIVES ITS RIGHT TO A JURY TRIAL IN THE EVENT OF ANY
DISPUTE OR LITIGATION ARISING HEREUNDER OR UNDER ANY RELATED DOCUMENT
EXECUTED IN CONNECTION HEREWITH. THE PARTIES HERETO COVENANT AND AGREE THAT
THE SOLE AND EXCLUSIVE JURISDICTION AND VENUE FOR ANY AND ALL MATTERS AND
DISPUTES ARISING HEREUNDER SHALL OCCUR AND TAKE PLACE IN THE U.S. DISTRICT
COURT FOR THE DISTRICT OF MASSACHUSETTS, WESTERN SECTION OR A MASSACHUSETTS
STATE COURT LOCATED IN BERKSHIRE COUNTY, MASSACHUSETTS.
18. Multiple Counterparts. This agreement may be executed in multiple
counterparts, each of which, when read collectively, shall constitute a
single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FIRST MASSACHUSETTS BANK
_______________
_______________By: /s/ Richard Henderson
_______________Title: Vice President
_______________LITCHFIELD FINANCIAL CORPORATION
_______________
_______________By: /s/ John Malloy
_______________Title: Senior Vice President
Exhibit 10.203
COLLATERAL AGENT AGREEMENT
COLLATERAL AGENT AGREEMENT dated as of June 30, 1999 among THE CHASE
MANHATTAN BANK, N.A. (the "Collateral Agent"), FIRST MASSACHUSETTS BANK, N.A.
("FMB") and LITCHFIELD FINANCIAL CORPORATION ("Litchfield").
PRELIMINARY STATEMENT
Pursuant to a Receivables Purchase Agreement dated June ___, 1999 (the
"Purchase Agreement") between FMB and Litchfield, FMB is purchasing from
Litchfield certain consumer loans, and all promissory notes, installment
sales contracts, mortgages, rights and documents related to such consumer
loans (identified on Exhibit A attached hereto (the "Custodial Receivables")
which Collateral Agent currently has in its custody
The parties anticipate that the Custodial Receivables shall be transferred to
the custody of FMB within 30 days after the date hereof. Until such
transfer, the Collateral Agent shall act as custodian for FMB on the terms
and conditions set forth herein.
AGREEMENT
IT IS THEREFORE AGREED AS FOLLOWS:
1. FMB hereby appoints the Collateral Agent and the Collateral Agent
accepts the appointment to act as custodian for the purpose of receiving and
holding physical custody and control over the Custodial Receivables. The
authority of the Collateral Agent to act on behalf of FMB shall be limited
solely to the specific authority granted hereunder. The Collateral Agent
shall take instructions from FMB only and not Litchfield with respect to the
Custodial Receivables, and the Collateral Agent shall not release any
Custodial Receivables without the consent of FMB.
2. The Collateral Agent represents and warrants that it has custody of the
Custodial Receivables. The Collateral Agent shall keep the Custodial
Receivables segregated from other documents at its filing facilities. The
Collateral Agent shall use the same degree of care in processing and storing
the Custodial Receivables that it uses in processing and storing similar
items for its own use. The Collateral Agent shall execute and deliver to FMB
such receipts and acknowledgements evidencing custody of the Custodial
Receivables as may be reasonably requested by FMB.
3. The Collateral Agent shall promptly deliver or cause to be delivered to
FMB or such custodian designated by FMB the Custodial Receivables from time
to time to such locations and in such manner as FMB shall determine.
Litchfield hereby instructs the Collateral Agent to indorse in blank the
promissory notes and any other documents containing endorsements to the
Collateral Agent. On and after the date of this Agreement, (a) the
Collateral Agent shall notify all servicers and lock box banks for the
Custodial Receivables that all payments related to the Custodial Receivables
should be credited to FMB c/o Litchfield as FMB's servicing agent or as
otherwise designated by FMB, and (b) the Collateral Agent shall pay to FMB
c/o Litchfield as servicing agent or as otherwise designated by FMB any
amount related to the Custodial Receivables received by the Collateral Agent,
and shall hold all such payments in trust for FMB pending payment as provided
herein.
4. The Collateral Agent shall not be liable or responsible in any way for
any loss or damage to the Custodial Receivables or any diminution in the
value thereof, except those losses resulting directly from Collateral Agent's
negligence or willful misconduct. The Collateral Agent shall not be liable
or responsible in any way for any act of any other custodian, carrier, or any
other person whatsoever. No loss of or damage to any Custodial Receivables
shall release Litchfield from its obligations to FMB.
5. In consideration for its custodial services hereunder, Litchfield shall
pay to the Collateral Agent fees and expenses as determined by the Collateral
Agent and Litchfield from time to time.
6. Litchfield hereby indemnifies and holds harmless FMB and the Collateral
Agent from and against any losses, damages, claims or liabilities in
connection with the performance of the Collateral Agent's duties under this
Agreement and the completion of the transfer of the Custodial Receivables to
FMB, except for any such losses resulting from the indemnified party's gross
negligence or willful misconduct. The provisions of this Section shall
survive the termination of this Agreement.
7. FMB shall be entitled to terminate this Agreement at any time, in which
event the Collateral Agent shall immediately deliver the Custodial
Receivables to FMB or its designee. The Collateral Agent may resign its
duties hereunder at any time for any reason upon 30 days' prior notice to
Litchfield and FMB, at the expiration of which time if no successor
Collateral Agent has been designated, the Collateral Agent shall deliver the
Custodial Receivables to FMB. The resignation of the Collateral Agent shall
not be effective until such time as the Custodial Receivables shall be
delivered by the Custodial Agent to FMB or its designee.
8. Each of the Collateral Agent, Litchfield and FMB represents and
warrants to the other parties that it has all requisite power and authority
to enter into this Agreement and carry out its obligations hereunder. The
Collateral Agent shall be
entitled to rely upon any communication properly delivered hereunder which
the Collateral Agent in good faith deems valid or genuine.
9. This Agreement shall not be deemed to constitute the parties as partners
or joint venturers.
10. This Agreement contains a complete statement of all representations,
warranties, covenants and agreements by and between the parties with respect
to its subject matter.
11. This Agreement shall be governed by and construed in accordance with the
substantive law of the Commonwealth of Massachusetts, without giving effect
to the conflicts or choice of law provisions of Massachusetts or any other
jurisdiction, and shall have the effect of a sealed instrument.
12. If any provision of this Agreement shall be deemed invalid or
unenforceable, the balance of this Agreement shall remain in effect, and if
any provision shall be deemed inapplicable to any person or circumstances it
shall nevertheless be construed to apply to all other persons and
circumstances.
13. Any notice, approval, consent or other communication under this
Agreement shall be in writing and shall be considered given when (1)
delivered personally, or (2) mailed by registered or certified mail, return
receipt requested or (3) transmitted by telecopy with a confirming copy sent
by overnight mail or courier service to the parties at the addresses
indicated below (or at such other address as a party may specify by notice to
the others pursuant hereto). Notice given by a party's counsel shall be
considered notice given by that party.
(a) If to Litchfield, to it at:
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: James Shippee
Telecopier No. 413-458-1015
(b) If to FMB, to it at:
99 West Street
Pittsfield, MA 01201
Attention: Richard Henderson
Telecopier: 413-442-6983
(c) If to the Collateral Agent, to it at:
_____________________
_____________________
(d) In each, with a copy to:
Cain, Hibbard, Myers & Cook, PC
66 West Street
Pittsfield, MA 01201
Attention: Michael E. MacDonald, Esquire
Telecopier No. 413-443-7694
and
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: John J. Malloy, Esquire
Telecopier 413-458-1015
Signed as of the date first above written.
__________ LITCHFIELD FINANCIAL CORPORATION
__________ By: /s/ John Malloy
__________ Its: Senior Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Cynthia Kerpen
Its: Vice President
Exhibit 11.1
<TABLE>
Litchfield Financial Corporation
Computation of Earnings Per Share
<CAPTION> Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Basic:
Weighted average number of
common shares outstanding.... 6,908,145 5,754,018 6,897,411 5,706,887
========== ========== ========== ==========
Net income....................$3,207,000 $2,309,000 $5,485,000 $3,859,000
========== ========== ========== ==========
Net income per common share...$ .46 $ .40 $ .80 $ .68
========== ========== ========== ==========
Diluted:
Weighted average number of
common shares outstanding.... 6,908,145 5,754,018 6,897,411 5,706,887
Weighted average number of
common stock equivalents
outstanding:
Stock options................ 278,326 363,814 292,077 362,277
---------- --------- ---------- ---------
Weighted average common and
common equivalent shares
outstanding................. 7,186,471 6,117,832 7,189,488 6,069,164
========== ========== ========== ==========
Net income....................$3,207,000 $2,309,000 $5,485,000 $3,859,000
========== ========== ========== ==========
Net income per common share...$ .45 $ .38 $ .76 $ .64
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 49,581 49,581
<SECURITIES> 32,603 32,603
<RECEIVABLES> 233,295 233,295
<ALLOWANCES> 7,545 7,545
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 340,589 340,589
<CURRENT-LIABILITIES> 0 0
<BONDS> 133,897 133,897
<COMMON> 70 70
0 0
26,200 26,200
<OTHER-SE> 91,218 91,218
<TOTAL-LIABILITY-AND-EQUITY> 340,589 340,589
<SALES> 0 0
<TOTAL-REVENUES> 13,272 24,347
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 500 1,000
<INTEREST-EXPENSE> 4,724 9,352
<INCOME-PRETAX> 5,549 9,252
<INCOME-TAX> 2,137 3,562
<INCOME-CONTINUING> 3,207 5,485
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,207 5,485
<EPS-BASIC> .46 .80
<EPS-DILUTED> .45 .76
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 23, 1999
Commission File Number: 0-19822
LITCHFIELD FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3023928
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
430 MAIN STREET, WILLIAMSTOWN, MA 01267
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 458-1000
(Former name, former address and former fiscal year,
if changed since last report)
Item 5: Other Events:
Attached is the press release issued by the company on June 23, 1999
WILLIAMSTOWN, Massachusetts, (June 23, 1999) - Litchfield Financial
Corporation (NASDAQ/LTCH) announced today that it has acquired Ironwood
Acceptance Company, LLC. Ironwood, located in Scottsdale, Arizona,
specializes in the purchasing, servicing and liquidation of municipal tax
lien certificates. Litchfield acquired 100% of the outstanding membership
interests of Ironwood for approximately $2.3 million, with one third paid in
cash, and the remaining two thirds paid in Litchfield stock over a two-year
period.
Randy Stratton, President and CEO of Litchfield commented, "This acquisition
is in keeping with our business strategy of identifying and lending money to
smaller finance companies in niche businesses with strong, experienced
management. After two solid years of experience with Ironwood, and
performance that has been consistent with our expectations, we decided that
it made good business sense to expand the relationship with them in a
mutually beneficial way. This acquisition will enable us to increase our
presence in the tax lien business, while providing Ironwood with sufficient
capital for expansion."
Mr. Stratton added, "It has been our strategy to view transactions of this
nature as an opportunity to further reduce the portion of our revenues
derived from the gain on sale of loans. So while this transaction would have
been modestly accretive in 1999, and more so in 2000, we'll take this
opportunity to further reduce our gain on sale as a percentage of our
revenues, instead."
Ironwood will become a subsidiary of Litchfield, and its nine employees will
continue to operate out of Scottsdale, Arizona. Peter Reardon will continue
to serve in his present position as President of Ironwood. The management of
Ironwood has been successfully purchasing and managing tax liens for over
eight years and is currently purchasing tax lien certificates, through
auctions and over the counter sales, in twelve states.
Mr. Stratton noted, "Tax liens will help us further diversify our half
billion dollar serviced portfolio. These investments have small balances,
high yields and are well collateralized and highly secure. These
characteristics make tax liens complimentary to our existing consumer land
and timeshare loans, hypothecation loans and acquisition and development
loans."
Litchfield is a diversified finance company that provides financing to
creditworthy borrowers for assets not typically financed by banks. The
company provides such financing by making loans to businesses secured by
consumer receivables or other assets and by purchasing consumer loans. To
learn more about Litchfield, visit our website at www.ltchfld.com.
Except for the historical information contained or incorporated by reference
in this press release, the matters discussed or incorporated by reference
herein are forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the risk factors set forth
under "Risk Factors", as listed in the 1998 Annual Report on Form 10-K, as
well as the following: general economic and business conditions; industry
trends; changes in business strategy or development plans; availability and
quality of management; and availability, terms and deployment of capital.
Special attention should be paid to such forward-looking statements
including, but not limited to, statements relating to (i) the company's
ability to execute its growth strategies and to realize its growth objectives
and (ii) the Company's ability to obtain sufficient resources to finance its
working capital needs and provide for its known obligations.
Contact: Ronald E. Rabidou, Chief Financial Officer
Telephone: 413-458-1000 x 160 Fax: 413-458-1020 E-Mail
[email protected]
