<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1996
REGISTRATION NO. 333-15445
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C> <C>
THE FINOVA GROUP INC. FINOVA FINANCE TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CERTIFICATE OF TRUST)
DELAWARE 86-0695381 DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.) OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION) ORGANIZATION)
</TABLE>
1850 NORTH CENTRAL AVENUE
P.O. BOX 2209
PHOENIX, ARIZONA 85002-2209
(602) 207-4900
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
SAMUEL L. EICHENFIELD
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE FINOVA GROUP INC.
1850 NORTH CENTRAL AVENUE
P.O. BOX 2209
PHOENIX, ARIZONA 85002-2209
(602) 207-4900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
With copies to:
<TABLE>
<S> <C> <C>
RICHARD LIEBERMAN GARY P. CULLEN PAUL C. PRINGLE
ASSISTANT GENERAL COUNSEL SKADDEN, ARPS, SLATE, BROWN & WOOD LLP
THE FINOVA GROUP INC. MEAGHER & FLOM (ILLINOIS) 555 CALIFORNIA STREET
1850 NORTH CENTRAL AVENUE 333 WEST WACKER DRIVE SAN FRANCISCO, CALIFORNIA
P.O. BOX 2209 CHICAGO, ILLINOIS 60606-1285 94104-1715
PHOENIX, ARIZONA 85002-2209
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 4, 1996
PROSPECTUS
LOGO(R)
2,000,000 PREFERRED SECURITIES
FINOVA FINANCE TRUST
% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES(SM) ("CONVERTIBLE TOPrS(SM)")
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
THE FINOVA GROUP INC.(R)
------------------------
The % Convertible Trust Originated Preferred Securities(SM) (the
"Convertible TOPrS(SM)" or "Preferred Securities") offered hereby represent
preferred undivided beneficial interests in the assets of FINOVA Finance Trust,
a statutory business trust formed under the laws of the State of Delaware (the
"Trust"). The FINOVA Group Inc., a Delaware corporation (the "Company"), will
directly or indirectly own all the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities")
representing undivided beneficial interests in the assets of the Trust. Upon an
event of a default under the Declaration (as defined herein), the holders of
Preferred Securities will have a preference over the holders of the Common
Securities with respect to distributions and payments upon redemption,
liquidation and otherwise. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in an equivalent amount of
% Convertible Subordinated Debentures due 2016 (the "Convertible Debentures")
of the Company. The Preferred Securities have no maturity date, although they
are subject to mandatory redemption upon the repayment at maturity of the
Convertible Debentures as described below.
Each Preferred Security is convertible in the manner described herein at the
option of the holder thereof, at any time prior to the earlier of (i) 5:00 p.m.
(New York City time) on the Business Day (as defined herein) immediately
preceding the date of repayment of such Preferred Security, whether at maturity
or upon redemption, and (ii) 5:00 p.m. (New York City time) on the Conversion
Termination Date (as defined herein), if any, into shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), at a conversion
rate of shares of Common Stock for each Preferred Security (equivalent to
a conversion price of $ per share of Common Stock), subject to adjustment in
certain circumstances. See "Description of the Preferred
Securities -- Conversion Rights." The Common Stock is listed on the New York
Stock Exchange (the "NYSE") under the symbol "FNV." On November 29, 1996, the
last reported sale price of the Common Stock on the NYSE was $66 per share. The
Preferred Securities have been approved for listing on the NYSE, subject to
official notice of issuance, under the symbol "FNVprA." See "Underwriting."
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSION(2) TRUST(3)(4)
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<S> <C> <C> <C>
Per Preferred Security............................. $50.00 (3) $50.00
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Total(5)........................................... $100,000,000 (3) $100,000,000
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</TABLE>
(1) Plus accrued distributions, if any, from , 1996.
(2) The Trust and the Company have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Convertible Debentures, the Company has
agreed to pay to the Underwriters as compensation (the "Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$ per Preferred Security (or $ in the aggregate). See
"Underwriting."
(4) Before deducting expenses of the offering payable by the Company, estimated
to be $500,000.
(5) The Trust and the Company have granted the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
300,000 additional Preferred Securities solely to cover over-allotments, if
any. If the option is exercised in full, the total Price to Public,
Underwriters' Compensation and Proceeds to Trust will be $115,000,000,
$ and $115,000,000, respectively. See "Underwriting."
------------------------
The Preferred Securities offered hereby are offered by the Underwriters, as
specified herein, subject to receipt and acceptance by the Underwriters and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about ,
1996.
------------------------
MERRILL LYNCH & CO.
MONTGOMERY SECURITIES
MORGAN STANLEY & CO.
INCORPORATED
------------------------
The date of this Prospectus is , 1996.
- ---------------
(SM) "Convertible Trust Originated Preferred Securities" and "Convertible TOPrS"
are service marks of Merrill Lynch & Co., Inc.
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE> 3
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $50 per
Preferred Security, accruing from , 1996 and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing December 31, 1996. See "Description of the Preferred
Securities -- Distributions." The payment of distributions out of moneys held by
the Trust and payments on liquidation of the Trust or the redemption of
Preferred Securities, as described below, are guaranteed by the Company (the
"Guarantee") to the extent described under "Description of the Guarantee." The
Guarantee covers payments of distributions and other payments on the Preferred
Securities only if and to the extent that assets of the Trust are available for
distribution to holders of Preferred Securities. The Guarantee, when taken
together with the Company's obligations under the Convertible Debentures and the
Indenture (as defined herein) and its obligations under the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of the
Trust (other than with respect to the Trust Securities), provide a full and
unconditional guarantee of amounts due on the Preferred Securities. See "Risk
Factors -- Rights Under the Guarantee." The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of the Company and pari passu with the most senior preferred or
preference stock issued, from time to time, if any, by the Company. The
obligations of the Company under the Convertible Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness (as
defined herein) of the Company and rank pari passu with the Company's other
general unsecured creditors. At September 30, 1996, the Company had no Senior
Indebtedness outstanding. The obligations of the Company under the Convertible
Debentures and the Guarantee are also effectively subordinated to all existing
and future indebtedness and other liabilities, including trade payables, of the
Company's subsidiaries. At September 30, 1996, the indebtedness and other
liabilities of such subsidiaries aggregated approximately $6.73 billion. The
Convertible Debentures purchased by the Trust may be subsequently distributed
pro rata to holders of the Preferred Securities and Common Securities in
connection with the dissolution of the Trust upon the occurrence of certain
events.
The distribution rate, distribution payment dates and other payment dates
for the Preferred Securities will correspond to the interest rate, interest
payment dates and other payment dates on the Convertible Debentures, which will
be the sole assets of the Trust. As a result, if principal or interest is not
paid on the Convertible Debentures, no amounts will be paid on the Preferred
Securities. If the Company does not make principal or interest payments on the
Convertible Debentures, the Trust will not have sufficient funds to make
distributions on the Preferred Securities, in which event the Guarantee will not
apply to such distributions until the Trust has sufficient funds available
therefor.
The Company has the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period on the Convertible
Debentures at any time for up to 20 consecutive quarters (each, an "Extension
Period") during which no interest shall be due and payable; provided, that no
such Extension Period may extend beyond the maturity date of the Convertible
Debentures. If interest payments are so deferred, distributions on the Preferred
Securities will also be deferred. During such Extension Period, distributions on
the Preferred Securities will continue to accrue (with interest thereon,
compounded quarterly at the distribution rate, to the extent permitted by
applicable law), and during any Extension Period, holders of Preferred
Securities will be required to include such deferred income in their gross
income for federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred payments. There could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures. See "Risk Factors -- Option to Extend Interest Payment Periods,"
"Description of the Convertible Debentures -- Option to Extend Interest Payment
Periods" and "Certain Federal Income Tax Considerations -- Interest Income and
Original Issue Discount."
If for at least 20 trading days within any period of 30 consecutive trading
days ending on or after , 1999, including the last trading day of
such period, the Closing Price (as defined herein) of the Common Stock exceeds
120% of the then applicable conversion price of the Preferred Securities, the
Company may, at its option, terminate the right to convert the Convertible
Debentures into Common Stock, in which case the right to convert the Preferred
Securities into Common Stock will likewise terminate. To exercise this
conversion termination option, the Company must cause the Trust to issue a press
release announcing the date upon which conversion rights will expire (the
"Conversion Termination Date"), prior to
2
<PAGE> 4
the opening of business on the second trading day after a period in which the
condition in the preceding sentence has been met, but in no event may such press
release be issued prior to , 1999. The Conversion Termination Date
shall be a Business Day not less than 30 and not more than 60 days following the
date of the press release described above. See "Description of the Preferred
Securities -- Conversion Rights."
In the event that, at any time after the Conversion Termination Date (if
any), the number of outstanding Preferred Securities is less than 10% of the
number of Preferred Securities originally issued (including any Preferred
Securities issued upon exercise of the Underwriters' over-allotment option), the
Company shall have the right, at its option, to redeem the Convertible
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
fixed for redemption. The Convertible Debentures are also redeemable by the
Company at its option, in whole but not in part, in certain circumstances upon
the occurrence of a Tax Event (as defined herein) at a redemption price equal to
100% of the principal amount thereof plus accrued and unpaid interest thereon to
the date fixed for redemption. If the Company redeems Convertible Debentures,
the Trust must redeem the Trust Securities at a redemption price of $50 per
Preferred Security plus accrued and unpaid distributions thereon (including, if
distributions shall have been deferred as the result of an Extension Period,
interest thereon to the extent permitted by applicable law) to the date fixed
for redemption. See "Description of the Preferred Securities -- Redemption." The
Convertible Debentures mature on , 2016 at which time the Trust must
redeem the Trust Securities in whole. In addition, upon the occurrence of a
Special Event (as defined herein), unless the Convertible Debentures are
redeemed in the limited circumstances described herein, the Trust shall be
dissolved, with the result that the Convertible Debentures will be distributed
to the holders of the Trust Securities, on a pro rata basis, in lieu of any cash
distribution. If the Convertible Debentures are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Convertible Debentures listed on the NYSE or on such other exchange as the
Preferred Securities are then listed. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution" and "Description of the
Convertible Debentures."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security, after satisfaction of
liabilities of the Trust to its creditors, a liquidation amount of $50 plus
accrued and unpaid distributions thereon (including interest, if any, thereon)
to the date of payment, unless, in connection with such dissolution, winding up
or termination of the Trust, the Convertible Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution."
3
<PAGE> 5
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED
SECURITIES AND OF THE COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
by this Prospectus. This Prospectus does not contain all the information set
forth in the Registration Statement and exhibits thereto. In addition, certain
documents filed by the Company with the Commission have been incorporated in
this Prospectus by reference. See "Incorporation of Certain Documents by
Reference." For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, and the documents incorporated herein by
reference. Statements contained in this Prospectus as to the contents of any
instrument, agreement or other document do not purport to be complete and in
each instance reference is made to the copy of such instrument, agreement or
other document, copies of which are available from the Company as described
below, each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information can be inspected and copied at Room 1024 at the public reference
facilities maintained by the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the Regional Offices of the Commission at Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511 and 7
World Trade Center, New York, New York 10048, and copies can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. The Common Stock of
the Company is listed on the NYSE. Reports and other information concerning the
Company can also be inspected at the office of the NYSE, 20 Broad Street, New
York, New York 10005.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting securities of
the Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Trust has no independent operations and
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in the Convertible Debentures issued by the Company and (iii) the
obligations of the Trust under the Trust Securities are fully and
unconditionally guaranteed by the Company to the extent that the Trust has funds
available to meet such obligations and such guarantee, when taken together with
the Company's obligations under the Convertible Debentures, the Indenture and
the Declaration, will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Trust Securities. See
"FINOVA Finance Trust," "Description of the Guarantee" and "Description of the
Convertible Debentures."
4
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference are the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (the "1995 Form 10-K"),
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996 and Current Reports on Form 8-K dated January 23,
1996, April 16, 1996, July 16, 1996, October 16, 1996 and October 21, 1996 filed
pursuant to Section 13 of the Exchange Act with the Commission.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the securities offered hereby shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge upon written or oral request by any
person to whom this Prospectus is delivered a copy of any or all of the
documents described above which have been incorporated by reference in this
Prospectus, other than exhibits to such documents. Such request should be
directed to the Company at its principal executive offices, to the attention of
Robert J. Fitzsimmons, Senior Vice President-Treasurer, The FINOVA Group Inc.,
1850 N. Central Avenue, P.O. Box 2209, Phoenix, Arizona 85002-2209, telephone
number (602) 207-4900.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in documents incorporated herein by
reference and under the captions "Prospectus Summary -- The Company," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus that are not
historical facts, including, without limitation, statements of future
expectations, projections of results of operations and financial condition,
statements of future economic performance and other forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to differ
materially from those contemplated in such forward-looking statements. In
addition to the specific matters referred to herein, including, without
limitation, those noted under the caption "Risk Factors," important factors
which may cause actual results to differ from those contemplated in such
forward-looking statements include: (i) the results of the Company's efforts to
implement its business strategy; (ii) the effect of economic conditions and the
performance of borrowers; (iii) actions of the Company's competitors and the
Company's ability to respond to such actions; (iv) the cost of the Company's
capital, which may depend in part on the Company's portfolio quality, ratings,
prospects and outlook; (v) changes in governmental regulation, tax rates and
similar matters; and (vi) other risks detailed in the Company's other filings
with the Commission.
5
<PAGE> 7
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in, or incorporated by reference into,
this Prospectus. See "Incorporation of Certain Documents by Reference." Unless
otherwise expressly stated, all information in this Prospectus assumes that the
over-allotment option granted to the Underwriters is not exercised. See
"Underwriting."
THE COMPANY
The FINOVA Group Inc., a Delaware corporation (the "Company"), is a
financial services company which, through its wholly-owned subsidiaries,
provides collateralized financing and leasing products to commercial enterprises
in focused market niches, principally in the United States. The Company extends
revolving credit facilities, term loans and equipment and real estate financing
to "middle-market" businesses with financing needs falling generally between
$500,000 to $35 million. The Company also offers sales financing programs to
manufacturers, distributors, vendors and franchisors which facilitate sales of
their products to customers. The Company currently operates primarily in 13
specific industry or market niches in which its expertise in evaluating the
creditworthiness of prospective customers and its ability to provide value-added
services enables it to differentiate itself from its competitors and to command
product pricing which provides a satisfactory spread over the Company's
borrowing costs.
The Company seeks to maintain a high quality portfolio and to minimize
nonearning assets and write-offs by using clearly defined underwriting criteria,
stringent portfolio management techniques and by diversifying its lending
activities geographically and among a range of industries, customers and loan
products. Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage competitive changes in its markets and to
withstand the impact of deteriorating economic conditions on a regional or
national basis, although there can be no assurance that competitive changes,
borrowers' performance or economic conditions will not result in an adverse
impact on the Company's results of operations or financial condition.
The Company is the successor to the former financial services business of
The Dial Corp ("Dial"). On March 18, 1992, Dial consummated the spin-off (the
"Spin-Off") of the Company (at that time known as GFC Financial Corporation) to
its stockholders. Following the Spin-Off, the Company decided to focus its
resources and capital on its domestic commercial finance activities. The Company
embarked on a program of selling or winding down those activities included in
the Spin-Off that were not associated with the Company's core businesses. The
Company concentrated on redeploying the capital previously invested in such
businesses and raised additional capital to support internal portfolio growth
and to make complementary acquisitions. This strategy has resulted in (i) the
managed liquidation and sale of FINOVA Capital Limited ("FCL"), Dial's former
European financial business, and the Latin American loan portfolios, (ii) an
increase (excluding acquisitions) in the Company's domestic loan portfolio each
year, (iii) the acquisition of the asset based lending activity of U.S. Bancorp,
(iv) the sale of Verex Corporation, Dial's discontinued mortgage insurance
subsidiary, (v) the acquisition of Ambassador Factors Corporation
("Ambassador"), the former factoring and asset based lending subsidiary of Fleet
Financial Group, Inc., (vi) the acquisition of TriCon Capital Corporation
("TriCon"), the former commercial finance and leasing subsidiary of Bell
Atlantic Corporation, (vii) portfolio purchases of $262 million in 1995, (viii)
the acquisition of LINC Financial Services, Inc. ("LINC"), a provider of
accounts receivable financing to health care providers, (ix) the acquisition of
Financing for Science International, Inc. ("FSI"), a specialty leasing company
servicing the high technology, life sciences, health care and environmental
technology industries and (x) the sale of the Company's Manufacturer & Dealer
Services business as described below under "-- Recent Developments."
The Company's strategy of focusing its efforts on its domestic core lending
activities through internal growth and acquisitions has resulted in increasing
the Company's total assets to approximately $7 billion at December 31, 1995
compared with total assets of $2.6 billion at December 31, 1992, representing a
compounded annual growth rate of 39%. During the same three year period
subsequent to the Spin-Off, income from continuing operations grew at a
compounded annual growth rate of 38% to $98 million in 1995 compared with $37
million in 1992. Management believes the Company now ranks among the largest
independent commercial finance companies in the United States based on total
assets.
6
<PAGE> 8
The principal executive offices of the Company are located at 1850 North
Central Avenue, P.O. Box 2209, Phoenix, Arizona 85002-2209, and its telephone
number is (602) 207-4900.
RECENT DEVELOPMENTS
As of November 30, 1996, the Company sold its Manufacturer & Dealer
Services business ("MDS") to Green Tree Financial Corporation for approximately
$620 million, including the assumption of certain liabilities. The purchase
price reflects a premium of approximately $58 million over the book value of
MDS's assets, prior to allocation and accrual of related costs and expenses. MDS
is a provider of vendor-oriented sales finance programs involving small-ticket
leasing and financing products for commercial end-user customers.
THE OFFERING
The Issuer................. FINOVA Finance Trust (the "Trust"), a Delaware
statutory business trust. The assets of the Trust
will consist solely of the Convertible Debentures
of the Company.
Securities Offered......... 2,000,000 % Convertible Trust Originated
Preferred Securities(SM) (the "Convertible
TOPrS(SM)" or the "Preferred Securities"). The
Trust and the Company have granted the Underwriters
an option, exercisable within 30 days after the
date of this Prospectus, to purchase up to an
additional 300,000 Preferred Securities at the
initial public offering price solely to cover
over-allotments, if any.
Distributions.............. Distributions on the Preferred Securities will
accrue from , 1996 (the "Original Issue
Date") and will be payable at the annual rate of
% (the "distribution rate") of the liquidation
amount of $50 per Preferred Security. Subject to
the extension of distribution payment periods
described below, distributions will be payable
quarterly in arrears on each March 31, June 30,
September 30 and December 31 (each, a "distribution
payment date"), commencing December 31, 1996.
Because distributions on the Preferred Securities
will constitute interest (or original issue
discount) for federal income tax purposes,
corporate holders thereof will not be entitled to a
dividends-received deduction. See "Certain Federal
Income Tax Considerations -- Interest Income and
Original Issue Discount."
Option to Extend
Distribution Payment
Periods.................. The ability of the Trust to pay distributions on
the Preferred Securities is solely dependent on its
receipt of interest payments from the Company on
the Convertible Debentures. The Company has the
right to defer interest payments from time to time
on the Convertible Debentures for successive
periods not exceeding 20 consecutive quarters for
each such Extension Period during which no interest
shall be due and payable; provided that no such
Extension Period may extend beyond the maturity
date of the Convertible Debentures. Prior to the
termination of any Extension Period of less than 20
consecutive quarters, the Company may further
extend such Extension Period; provided that no such
Extension Period, together with all previous and
further extensions thereof, may exceed 20
consecutive quarters or extend beyond the maturity
date of the Convertible Debentures. Upon the
termination of any Extension Period and the payment
of all amounts then due, the Company may select a
new Extension Period, subject to the conditions
described herein. As a consequence of any such
extension, quarterly distributions on the Pre-
7
<PAGE> 9
ferred Securities would be deferred by the Trust
but would continue to accrue (with interest
thereon, compounded quarterly at the distribution
rate, to the extent permitted by applicable law)
during any such Extension Period. See "Risk
Factors -- Option to Extend Interest Payment
Periods," "Description of the Preferred
Securities -- Distributions" and "Description of
the Convertible Debentures -- Option to Extend
Interest Payment Periods." If an extension of an
interest payment period occurs, the holders of the
Preferred Securities will continue to accrue income
for federal income tax purposes in advance of any
corresponding cash distribution. See "Risk
Factors -- Option to Extend Interest Payment
Periods" and "-- Trading Characteristics of
Preferred Securities" and "Certain Federal Income
Tax Considerations -- Interest Income and Original
Issue Discount."
Rights Upon Extension of
Distribution Payment
Periods.................. During any Extension Period, interest on the
Convertible Debentures will continue to accrue
(compounded quarterly at the interest rate borne by
the Convertible Debentures, to the extent permitted
by applicable law), and quarterly distributions on
the Preferred Securities will continue to accrue
(with interest thereon, compounded quarterly at the
distribution rate, to the extent permitted by
applicable law). As more fully described below
under "-- Convertible Debentures," the Company has
agreed that, during an Extension Period, it will
not, among other things, declare or pay dividends
on or repurchase or redeem any of its capital
stock, subject to certain exceptions. See
"Description of the Guarantee -- Certain Covenants
of the Company" and "Description of the Convertible
Debentures -- Option to Extend Interest Payment
Periods."
Conversion into Common
Stock.................... Each Preferred Security is convertible at the
option of the holder thereof, at any time prior to
the earlier of (i) 5:00 p.m. (New York City time)
on the Business Day (as defined herein) immediately
preceding the date of repayment of such Preferred
Security, whether at maturity or upon redemption,
and (ii) 5:00 p.m. (New York City time) on the
Conversion Termination Date (if any) into shares of
Common Stock at a conversion rate of shares of
Common Stock for each Preferred Security
(equivalent to a conversion price of $ per
share of Common Stock), subject to adjustment in
certain circumstances. On November 29, 1996, the
last reported sale price of the Common Stock on the
NYSE was $66 per share. In connection with any
conversion of a Preferred Security, the Conversion
Agent (as defined herein) will exchange such
Preferred Security for the appropriate principal
amount of Convertible Debentures held by the Trust
and immediately convert such Convertible Debentures
into shares of Common Stock. No fractional shares
of Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional
interest will be paid by the Company in cash. See
"Description of the Preferred
Securities -- Conversion Rights." Holders of
Preferred Securities at 5:00 p.m. (New York City
time) on a distribution record date will be
entitled to receive the distribution payable upon
such Preferred Securities on the corresponding
distribution payment date notwithstanding the
conversion of such Preferred Securities following
such distribution record date but on or prior to
such distribution payment date. Except as provided
in the immediately preceding sentence, neither the
Trust nor the Company will make, or be required to
make, any payment, allowance or adjustment for
accumulated and unpaid distributions, whether or
not
8
<PAGE> 10
in arrears, on converted Preferred Securities;
provided, however, that if notice of redemption of
Preferred Securities is mailed or otherwise given
to holders of Preferred Securities or the Trust
issues a press release announcing a Conversion
Termination Date, then, if any holder of Preferred
Securities converts any Preferred Securities into
Common Stock on any date on or after the date on
which such notice of redemption is mailed or
otherwise given or the date of such press release,
as the case may be, and if such date of conversion
falls on any day from and including the first day
of an Extension Period and on or prior to the
record date for the distribution payment date upon
which such Extension Period ends, such converting
holder shall be entitled to receive all accrued and
unpaid distributions on such Preferred Securities
(including interest thereon, if any, to the extent
permitted by applicable law) to the most recent
distribution payment date prior to the date of such
conversion (or, if the date of such conversion is
on or prior to the distribution payment date upon
which such Extension Period ends and after the
distribution record date for such distribution
payment date, the holder of such Preferred
Securities at 5:00 p.m. (New York City time) on
such distribution record date shall be entitled to
receive, on such distribution payment date, all
accrued and unpaid distributions on such Preferred
Securities (including interest thereon, if any, to
the extent permitted by applicable law) to such
distribution payment date). See "Description of the
Convertible Debentures -- Optional Redemption,"
"Description of the Preferred
Securities -- Conversion Rights" and
"-- Redemption."
Termination of Conversion
Rights................... If for at least 20 trading days within any period
of 30 consecutive trading days ending on or after
,1999, including the last trading day of
such period, the Closing Price (as defined herein)
of the Common Stock exceeds 120% of the then
applicable conversion price of the Preferred
Securities, the Company may, at its option,
terminate the right to convert the Convertible
Debentures into Common Stock, in which case the
right to convert the Preferred Securities into
Common Stock will likewise terminate. To exercise
this conversion termination option, the Company
must cause the Trust to issue a press release
announcing the date upon which conversion rights
will expire (the "Conversion Termination Date"),
prior to the opening of business on the second
trading day after a period in which the condition
in the preceding sentence has been met, but in no
event may such press release be issued prior to
, 1999. The Conversion Termination Date
shall be a Business Day not less than 30 and not
more than 60 days following the date of the press
release described above. See "Description of the
Preferred Securities -- Conversion Rights."
Liquidation Amount......... In the event of the liquidation of the Trust,
holders will be entitled to receive, after
satisfaction of liabilities of the Trust to its
creditors, $50 per Preferred Security plus an
amount equal to any accrued and unpaid
distributions thereon to the date of payment,
unless Convertible Debentures are distributed to
such holders. See "Description of the Preferred
Securities -- Liquidation Distribution Upon
Dissolution."
Redemption................. In the event that, at any time after the Conversion
Termination Date (if any), the number of
outstanding Preferred Securities is less than 10%
of the number of Preferred Securities originally
issued (including any Preferred Securities issued
upon exercise of the Underwriters' over-allotment
option), the Company shall have the right, at its
option, to redeem the Convertible Debentures, in
whole but not in part, at a
9
<PAGE> 11
redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest
thereon to the date fixed for redemption. The
Convertible Debentures are also redeemable by the
Company at its option, in whole but not in part, in
certain circumstances upon the occurrence of a Tax
Event, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest thereon to the date fixed for redemption.
If the Company redeems Convertible Debentures, the
Trust must redeem the Trust Securities at a
redemption price of $50 per Preferred Security plus
accrued and unpaid distributions thereon
(including, if distributions shall have been
deferred as the result of an Extension Period,
interest thereon to the extent permitted by
applicable law) to the date fixed for redemption
(the "Redemption Price"). See "Description of the
Preferred Securities -- Redemption" and
" -- Special Event Redemption or Distribution." The
Preferred Securities have no maturity date,
although they are subject to mandatory redemption
upon repayment of the Convertible Debentures at
their stated maturity (which is , 2016),
and upon acceleration or earlier redemption of the
Convertible Debentures. See "Description of the
Preferred Securities -- Redemption" and
"Description of the Convertible
Debentures -- Redemption."
Guarantee.................. The Company will irrevocably guarantee, on a
subordinated basis and to the extent set forth
herein, the payment in full of (i) any accrued and
unpaid distributions on the Preferred Securities to
the extent of funds of the Trust available
therefor, (ii) the Redemption Price to the extent
of funds of the Trust available therefor and (iii)
generally, the liquidation amount of the Preferred
Securities to the extent of the assets of the Trust
available for distribution to holders of Preferred
Securities. The Guarantee will be unsecured and
will rank (i) subordinate and junior in right of
payment to all other liabilities of the Company
except any liabilities that may be made pari passu
expressly by their terms, (ii) pari passu with the
most senior preferred or preference stock issued
from time to time by the Company and with any
guarantee now or hereafter entered into by the
Company in respect of any preferred or preference
stock or preferred securities of any affiliate of
the Company and (iii) senior to the Common Stock.
Upon the liquidation, dissolution or winding up of
the Company, its obligations under the Guarantee
will rank junior to all of its other liabilities,
except as aforesaid, and, as a result, funds may
not be available for payment under the Guarantee.
The Guarantee, when taken together with the
Company's obligations under the Convertible
Debentures, the Indenture and the Declaration, will
provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due
on the Trust Securities. See "Risk
Factors -- Ranking of Subordinate Obligations Under
the Guarantee and Convertible Debentures" and
"Description of the Guarantee."
Voting Rights.............. Holders of the Preferred Securities will have
limited voting rights. See "Description of the
Preferred Securities -- Voting Rights."
Tax Event or Investment
Company Event
Distribution;
Tax Event Redemption..... Upon the occurrence of a Tax Event or an Investment
Company Event (each as defined herein and each a
"Special Event"), except in certain limited
circumstances, the Company will cause the Issuer
Trustees (as defined herein) to liquidate the Trust
and cause Convertible Debentures to be distributed
to the holders of the Preferred Securities. In
certain
10
<PAGE> 12
circumstances involving a Tax Event, the Company
will have the right to redeem the Convertible
Debentures, in whole but not in part, at 100% of
the principal amount plus accrued and unpaid
interest, in lieu of a distribution of the
Convertible Debentures, in which event the Trust
Securities will be redeemed at the Redemption
Price. See "Description of the Preferred
Securities -- Special Event Redemption or
Distribution."
Convertible Debentures..... The Convertible Debentures will mature on
, 2016 and will bear interest at the
rate of % per annum, payable quarterly in
arrears. The Convertible Debentures will have
provisions with respect to interest, redemption,
conversion into Common Stock and certain other
terms substantially similar or analogous to those
of the Preferred Securities. See "Description of
the Convertible Debentures." Interest payment
periods may be extended from time to time by the
Company for successive periods not exceeding 20
consecutive quarters for each such period, during
which interest on the Convertible Debentures will
continue to accrue (compounded quarterly at the
interest rate borne by the Convertible Debentures,
to the extent permitted by applicable law);
provided that no such Extension Period may extend
beyond the maturity date of the Convertible
Debentures. Prior to the termination of any
Extension Period of less than 20 consecutive
quarters, the Company may further extend such
Extension Period; provided that such Extension
Period, together with all previous and further
extensions thereof, may not exceed 20 consecutive
quarters and may not extend beyond the maturity
date of the Convertible Debentures. Upon the
termination of any Extension Period and the payment
of all amounts then due, the Company may select a
new Extension Period, subject to the preceding
sentence. No interest shall be due and payable
during an Extension Period. During an Extension
Period, the Company has agreed (a) not to declare
or pay dividends on, or make a distribution with
respect to, or redeem or purchase or acquire, or
make a liquidation payment with respect to, any of
its capital stock (other than (i) purchases or
acquisitions of shares of Common Stock (or Common
Stock equivalents) in connection with the
satisfaction by the Company of its obligations
under any employee benefit plans or the
satisfaction by the Company of its obligations
pursuant to any contract or security requiring the
Company to purchase shares of Common Stock (or
Common Stock equivalents) (provided that such
contract is in effect or such security is
outstanding at least 60 days prior to the
commencement of such Extension Period), (ii)
purchases of shares of Common Stock (or Common
Stock equivalents) from officers or employees of
the Company or its subsidiaries upon termination of
employment or retirement not pursuant to any
obligation under any contract or security requiring
the Company to purchase shares of Common Stock (or
Common Stock equivalents) (provided that such
purchases by the Company upon termination of
employment or retirement shall be made at a price
not to exceed the market value on the date of any
such purchase and shall not exceed $7.5 million in
the aggregate for all officers and employees),
(iii) as a result of a reclassification of the
Company's capital stock or the exchange or
conversion of one class or series of the Company's
capital stock for another class or series of the
Company's capital stock, (iv) dividends or
distributions of shares of Common Stock on Common
Stock or (v) 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 make any guarantee payments with
11
<PAGE> 13
respect to the foregoing)), (b) not to make any
payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the
Company that rank pari passu with or junior to the
Convertible Debentures and (c) not to make any
guarantee payments with respect to the foregoing
(other than pursuant to the Guarantee). The
obligations of the Company under the Convertible
Debentures are subordinate and junior in right of
payment to all present and future Senior
Indebtedness (as defined herein) of the Company and
rank pari passu with the Company's other general
unsecured creditors. At September 30, 1996, the
Company had no Senior Indebtedness outstanding.
Holding Company
Structure.................. The Company is a holding company which conducts
substantially all of its operations through
subsidiaries. As a result, the ability of the
Company to pay the principal of and interest on the
Convertible Debentures, and therefore the ability
of the Trust to make distributions and other
payments on the Preferred Securities, will depend
in large part upon the Company's ability to obtain
funds from its subsidiaries. In addition, the
ability of certain subsidiaries to provide funds to
the Company is subject to contractual and other
limitations, is contingent upon results of
operations and financial condition of such
subsidiaries, and is subject to various other
business considerations. In particular, the
Company's principal subsidiary, FINOVA Capital
Corporation ("FINOVA Capital"), is limited in its
ability to pay dividends to the Company pursuant to
various restrictive covenants contained in certain
of its debt instruments. See "Risk
Factors -- Holding Company Structure" and "Price
Range of Common Stock and Dividends."
The obligations of the Company under the
Convertible Debentures and the Guarantee are
effectively subordinated to all existing and future
indebtedness and other liabilities, including trade
payables, of the Company's subsidiaries. At
September 30, 1996, the indebtedness and other
liabilities of such subsidiaries aggregated
approximately $6.73 billion. See "Risk
Factors -- Ranking of Subordinate Obligations under
the Guarantee and Convertible Debentures,"
"-- Holding Company Structure," "Capitalization"
and "Description of the Convertible Debentures."
Form of Preferred
Securities................. The Preferred Securities will be represented by a
global certificate or certificates (each a "Global
Preferred Security") registered in the name of Cede
& Co., as nominee for The Depository Trust Company
("DTC"). Beneficial interests in the Preferred
Securities will be evidenced by, and transfers
thereof will be effected only through, records
maintained by the participants in DTC. Except under
the limited circumstances described herein,
Preferred Securities in certificated form (each a
"Certificated Preferred Security") will not be
issued in exchange for Global Preferred Securities.
See "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The
Depository Trust Company."
Use of Proceeds............ All of the proceeds from the sale of the Preferred
Securities will be invested by the Trust in the
Convertible Debentures. The Company intends to
contribute the net proceeds from the sale of the
Convertible Debentures to FINOVA Capital, which
intends to use such net proceeds to repay
commercial paper or other indebtedness. See "Use of
Proceeds."
12
<PAGE> 14
Listing.................... The Preferred Securities have been approved for
listing on the NYSE, subject to official notice of
issuance, under the symbol "FNVprA." See
"Underwriting."
Risk Factors............... See "Risk Factors" for a discussion of certain
risks involved in the purchase of Preferred
Securities.
13
<PAGE> 15
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following summary selected consolidated financial data as of and for
the five years ended December 31, 1995 have been derived from the audited
consolidated financial statements of the Company and its subsidiaries.
References to the Company contained in the footnotes below mean the Company and
its consolidated subsidiaries. The following summary selected consolidated
financial data as of and for the nine months ended September 30, 1995 and 1996
have been derived from the unaudited consolidated financial statements of the
Company which, in the opinion of management, include all normal recurring
adjustments necessary to present fairly the information required to be set forth
therein. Results of operations and financial condition as of and for the nine
months ended September 30, 1996 do not purport to be indicative of results of
operations or financial condition to be expected for the year ending December
31, 1996. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and the notes thereto
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference." Per share data for income and dividends and average outstanding
common and equivalent shares has not been presented in 1991, as the Company was
not a publicly held company prior to the Spin-Off from Dial in 1992.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Interest and income earned
from financing
transactions.............. $ 640,462 $ 551,737 $ 761,855 $ 503,351 $ 255,216 $ 243,337 $ 251,472
Interest margins earned..... 295,154 244,989 339,815 244,414 124,847 104,699 93,912
Provision for possible
credit losses(1).......... 38,800 28,800 47,300 16,670 5,706 6,740 77,687
Gains on sale of assets..... 10,253 11,699 19,726 9,045 5,439 3,362 6,684
Income (loss) from
continuing operations..... 85,005 71,147 97,629 74,313 37,846 36,750 (38,742)
Income from continuing
operations per common and
equivalent share.......... $ 3.04 $ 2.56 $ 3.51 $ 2.94 $ 1.80 $ 1.71
Dividends declared per
common share.............. $ .68 $ .62 $ 0.84 $ 0.74 $ 0.68 $ 0.42
Average outstanding common
and equivalent shares..... 27,971,000 27,845,000 27,832,000 25,307,000 20,332,000 20,464,000
FINANCIAL POSITION:
Funds employed.............. $ 7,635,276 $ 6,609,220 $ 6,819,057 $ 5,667,644 $ 2,846,571 $ 2,428,523 $2,281,872
Nonaccruing assets.......... 172,766 169,180 167,872 168,761 102,607 100,422 111,296
Reserve for possible credit
losses(1)................. 156,339 131,564 140,333 122,233 64,280 69,291 87,600
Total assets................ 7,875,848 6,773,647 7,036,514 5,821,343 2,834,322 2,641,668 2,414,484
Deferred income taxes....... 247,574 202,561 209,512 188,887 178,972 172,727 198,366
Total debt.................. 6,350,043 5,403,323 5,649,368 4,573,354 2,079,286 1,883,709 1,750,178
Stockholders' equity........ 896,581 805,313 825,184 770,252 503,300 488,396 371,576
Managed assets(2)........... 7,970,193 6,742,271 7,122,361 5,921,030 2,846,571 2,428,523 2,281,872
RATIOS:
Ratio of earnings to fixed
charges(3)................ 1.46x 1.43x 1.43x 1.55x 1.53x 1.37x (3)
Reserve for possible credit
losses/ending managed
assets.................... 2.0% 2.0% 2.0% 2.1% 2.3% 2.9% 3.8%
Nonaccruing assets/ending
managed assets............ 2.2% 2.5% 2.4% 2.9% 3.6% 4.1% 4.9%
Total debt to stockholders'
equity.................... 7.1x 6.7x 6.8x 5.9x 4.1x 3.9x 4.7x
Return on average equity
(annualized).............. 13.2% 12.0% 12.2% 11.1% 7.5% 11.4% (12.9)%
</TABLE>
- ---------------
(1) In 1991, the Company recorded a special provision for possible credit losses
of $65 million and recorded write-offs of $15 million related to nonearning
assets in the FCL portfolio and a $47.8 million write-down to reduce Latin
American assets to current market value.
(2) Managed assets consist of funds employed and assets sold under
securitization agreements that are managed by the Company.
(3) For purposes of the computation of these ratios, earnings consist of income
before income taxes and fixed charges; and fixed charges include interest
and related debt expense and a portion of rental expense determined to be
representative of interest. For the year ended December 31, 1991, earnings
were inadequate to cover combined fixed charges by $37.0 million.
14
<PAGE> 16
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should, in particular,
consider the following risk factors.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE
DEBENTURES
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company (except any liabilities that
may be made pari passu expressly by their terms) and pari passu with the most
senior preferred or preference stock issued, from time to time, if any, by the
Company. The obligations of the Company under the Convertible Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and pari passu with obligations to or rights of the
Company's other general unsecured creditors. No payment of principal of
(including redemption payments, if any) or interest on the Convertible
Debentures may be made if (i) any Senior Indebtedness of the Company is not paid
when due and any applicable grace period with respect to such default has ended
with such default not having been cured or waived or ceasing to exist, or (ii)
the maturity of any Senior Indebtedness has been accelerated because of a
default. At September 30, 1996, the Company had no Senior Indebtedness
outstanding, but it continues to have access to a $25 million line of credit
which, if drawn upon, would constitute Senior Indebtedness. In addition, because
the Company's operations are conducted through its subsidiaries and the
subsidiaries have not guaranteed the payment of the Convertible Debentures, all
liabilities of such subsidiaries, including trade payables, are effectively
senior to the Convertible Debentures and the Guarantee. See "-- Holding Company
Structure" below. There are no terms in the Preferred Securities, the
Convertible Debentures or the Guarantee that limit the Company's or any
subsidiary's ability to incur additional indebtedness, including indebtedness
that ranks senior to the Convertible Debentures and the Guarantee. See
"Description of the Guarantee -- Status of the Guarantee; Subordination" and
"Description of the Convertible Debentures -- Subordination."
HOLDING COMPANY STRUCTURE
The Company is a holding company which conducts substantially all of its
operations through subsidiaries. As a result, the ability of the Company to pay
the principal of and interest on its indebtedness (including the Convertible
Debentures) and to pay amounts due in respect of its other obligations
(including the Guarantee), and therefore the ability of the Trust to make
distributions and other payments on the Preferred Securities, will depend in
large part on the results of operations of the Company's subsidiaries and the
distribution of funds by such subsidiaries to the Company. The ability of
certain subsidiaries to provide funds to the Company is subject to contractual
and other limitations, is contingent upon results of operations and financial
condition of such subsidiaries, and is subject to various other business
considerations. In particular, the Company's principal subsidiary, FINOVA
Capital, is limited in its ability to pay dividends to the Company pursuant to
various restrictive covenants contained in certain of its debt instruments. See
"Price Range of Common Stock and Dividends."
The obligations of the Company under the Convertible Debentures and the
Guarantee are effectively subordinated to all existing and future indebtedness
and other liabilities, including trade payables, of the Company's subsidiaries.
At September 30, 1996, the indebtedness and other liabilities of such
subsidiaries aggregated approximately $6.73 billion. See "-- Ranking of
Subordinate Obligations under the Guarantee and Convertible Debentures."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). Fleet National Bank will
act as indenture trustee under the Guarantee (the "Guarantee Trustee") for the
purposes of compliance with the provisions of the Trust Indenture Act. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Trust has funds
15
<PAGE> 17
available therefor, (ii) the Redemption Price, including all accrued and unpaid
distributions with respect to Preferred Securities called for redemption by the
Trust, to the extent the Trust has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Convertible Debentures to the
holders of Preferred Securities or a redemption of all the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of the
payment, to the extent the Trust has funds available therefor, or (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Preferred Securities in liquidation of the Trust. The holders of 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 or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Guarantee. Notwithstanding the foregoing,
if the Company has failed to make a payment under the Guarantee, any holder of
Preferred Securities may directly institute a legal proceeding directly against
the Company to enforce the obligations of the Company under the Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. If the Company were to default on its
obligation to pay amounts payable on the Convertible Debentures, the Trust would
lack available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and, in such event holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, holders of the Preferred Securities would rely
on the enforcement by (i) the Property Trustee of its rights as registered
holder of the Convertible Debentures against the Company pursuant to the terms
of the Convertible Debentures or (ii) such holder of its right against the
Company under certain circumstances to enforce payments on Convertible
Debentures. See "-- Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Guarantee" and "Description of the Convertible
Debentures." The Declaration provides that each holder of Preferred Securities,
by acceptance thereof, agrees to the provisions of the Guarantee, including the
subordination provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the Convertible
Debentures against the Company. In addition, 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
Convertible Debentures. If the Property Trustee fails to enforce its rights
under the Convertible Debentures, after a holder of Preferred Securities has
made a written request, such holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Property
Trustee's rights under the Convertible Debentures without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible 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 Convertible Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder (a
"Direct Action") on or after the respective due date specified in the
Convertible Debentures. In connection with such Direct Action, the Company will
be subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the holders
of the Convertible Debentures. The Indenture provides that the Indenture Trustee
(as defined herein) shall give holders of the Convertible Debentures notice of
all uncured defaults or events of default within 30 days after occurrence.
However, except in the case of a default or an event of default in payment on
the Convertible Debentures, the Indenture Trustee is
16
<PAGE> 18
protected in withholding such notice if its officers or directors in good faith
determine that withholding of such notice is in the interest of the holders. See
"Description of the Convertible Debentures -- Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIODS; CERTAIN TAX CONSEQUENCES
The Company has the right under the Indenture to defer payments of interest
on the Convertible Debentures by extending the interest payment period at any
time, and from time to time, on the Convertible Debentures. As a consequence of
such an extension, quarterly distributions on the Preferred Securities would be
deferred by the Trust (but despite such deferral would continue to accrue, with
interest thereon, compounded quarterly at the distribution rate, to the extent
permitted by applicable law) during any such extended interest payment period.
Such right to extend the interest payment period for the Convertible Debentures
is limited to a period not exceeding 20 consecutive quarters, during which no
interest shall be due and payable, provided, that no such Extension Period may
extend beyond the maturity date of the Convertible Debentures. In the event that
the Company exercises this right to defer interest payments, the Company has
agreed (a) not to declare or pay dividends on, or make a distribution with
respect to, or redeem or purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock (or Common Stock equivalents) in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security requiring the Company to purchase shares of Common Stock (or Common
Stock equivalents) (provided that such contract is in effect or such security is
outstanding at least 60 days prior to the commencement of such Extension
Period), (ii) purchases of shares of Common Stock (or Common Stock equivalents)
from officers or employees of the Company or its subsidiaries upon termination
of employment or retirement not pursuant to any obligation under any contract or
security requiring the Company to purchase shares of Common Stock (or Common
Stock equivalents) (provided that such purchases by the Company upon termination
of employment or retirement shall be made at a price not to exceed the market
value on the date of any such purchase and shall not exceed $7.5 million in the
aggregate for all officers and employees), (iii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iv) dividends or distributions of shares of
Common Stock on Common Stock or (v) 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 make any guarantee payments with respect to the foregoing)), (b) not to make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Convertible Debentures and (c) not to make
any guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period, provided that such Extension
Period, together with all previous and further extensions thereof, may not
exceed 20 consecutive quarters or extend beyond the maturity date of the
Convertible Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may select a new Extension Period,
subject to the above requirements. See "Description of the Preferred
Securities -- Distributions" and "Description of the Convertible
Debentures -- Option to Extend Interest Payment Periods."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period or should the Convertible Debentures be
deemed to have originally been issued with original issue discount ("OID"),
under recently issued Treasury regulations, each holder of Preferred Securities
would be required to accrue in income (as OID) the amount of the deferred stated
interest allocable to its Preferred Securities for federal income tax purposes,
which will be allocated but not distributed, to holders of record of Preferred
Securities. As a result, each such holder of Preferred Securities will recognize
income for federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Preferred Securities prior to the record date for the date on
which distributions of such amounts are made. Similarly, all payments of stated
interest made thereafter will be treated as OID. The Company has no current
intention of exercising its right to defer payments of interest by extending the
interest payment period on the Convertible Debentures. However, should the
Company
17
<PAGE> 19
determine to exercise such right in the future, the market price of the
Preferred Securities is likely to be affected. A holder that disposes of its
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Preferred Securities. In addition, as a result of the existence of the Company's
right to defer interest payments, the market price of the Preferred Securities
(which represent an undivided beneficial interest in the Convertible Debentures)
may be more volatile than other securities on which OID accrues that do not have
such rights. See "Certain Federal Income Tax Considerations -- Interest Income
and Original Issue Discount."
SPECIAL EVENT DISTRIBUTION; TAX EVENT REDEMPTION
Upon the occurrence of a Special Event, the Trust shall be dissolved,
except in the limited circumstances described below, with the result that
Convertible Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In the case of a
Special Event which is a Tax Event, the Company shall have the right in certain
circumstances to redeem the Convertible Debentures, in whole but not in part, in
lieu of a distribution of the Convertible Debentures by the Trust, in which
event the Trust will redeem the Trust Securities. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution."
Under current federal income tax law, a distribution of Convertible
Debentures upon the dissolution of the Trust would not be a taxable event to
holders of the Preferred Securities. A dissolution of the Trust in which holders
of the Preferred Securities receive cash would be a taxable event to such
holders. See "Certain Federal Income Tax Considerations -- Receipt of
Convertible Debentures or Cash Upon Liquidation of the Trust." If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Convertible Debentures may constitute a taxable event to
holders of Preferred Securities.
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Preferred Securities or the Convertible Debentures may trade at
a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Convertible Debentures upon the occurrence of a Special Event, prospective
purchasers of Preferred Securities are also making an investment decision with
regard to the Convertible Debentures and should carefully review all the
information regarding the Convertible Debentures contained in this Prospectus.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution" and "Description of the Convertible Debentures -- General."
TERMINATION OF CONVERSION RIGHTS
On and after , 1999, the Company may, subject to certain
conditions, at its option, cause the conversion rights of holders of Convertible
Debentures to terminate, provided that the Closing Price of the Common Stock
exceeds 120% of the then applicable conversion price of the Preferred Securities
for a specified period, in which case the right to convert the Preferred
Securities into Common Stock will likewise terminate. See "Description of the
Preferred Securities -- Termination of Conversion Rights."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain legislation (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer and that are issued on or after
December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman William
V. Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a
joint statement (the "Joint Statement") indicating their intent that the
Proposed Legislation, if adopted by either of the tax-writing committees of
Congress, would have an effective date that is no earlier than the date of
"appropriate Congressional action." In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons
18
<PAGE> 20
and Charles B. Rangel wrote letters to Treasury officials concurring with the
views expressed in the Joint Statement (the "Democrat Letters"). Based upon the
Joint Statement and the Democrat Letters, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." Furthermore, even if the Proposed
Legislation were enacted in its current form with effective date provisions
making it applicable to the Convertible Debentures, it would not affect the
Company's ability to deduct the interest payable on the Convertible Debentures
because their maximum term will not exceed 20 years. There can be no assurance,
however, that any proposed legislation enacted after the date hereof will not
adversely affect the ability of the Company to deduct the interest payable on
the Convertible Debentures. Accordingly, there can be no assurance that a Tax
Event will not occur. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, trustees of the Trust (the "Issuer Trustees"), which
voting rights are vested exclusively in the holder of the Common Securities. See
"Description of the Preferred Securities -- Voting Rights."
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. In addition, as a result of the Company's right to defer
interest payments, the market price of the Preferred Securities (which represent
an undivided interest in the Convertible Debentures) may be more volatile than
other similar securities where the issuer does not have such right to defer
interest payments. To the extent that a holder sells Preferred Securities at a
price that is less than the holder's adjusted tax basis, and assuming that the
Preferred Securities are held as capital assets by such holder, such holder will
generally recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for federal income
tax purposes. See "Certain Federal Income Tax Considerations -- Interest Income
and Original Issue Discount" and "-- Sales of Preferred Securities."
19
<PAGE> 21
FINOVA FINANCE TRUST
FINOVA Finance Trust is a statutory business trust formed under the laws of
the State of Delaware pursuant to (i) a declaration of trust executed by The
FINOVA Group Inc., as sponsor of the Trust, and the Issuer Trustees and (ii) a
certificate of trust filed with the Secretary of State of the State of Delaware.
Prior to the issuance of the Preferred Securities, such declaration will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Company will directly or
indirectly acquire Common Securities in an aggregate liquidation amount equal to
at least 3% of the total capital of the Trust. The Common Securities will rank
pari passu, and payment will be made thereon pro rata, with the Preferred
Securities, except that, upon the occurrence and during the continuance of an
event of default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The assets of the Trust will consist solely of the
Convertible Debentures. The Trust exists for the exclusive purpose of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Convertible Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees will initially
be four. Two of the Issuer Trustees (the "Regular Trustees") will be individuals
who are employees or officers of or who are affiliated with the Company. The
third trustee will be a financial institution that is unaffiliated with the
Company (the "Property Trustee"). The fourth trustee will be an entity that
maintains its principal place of business in the State of Delaware (the
"Delaware Trustee"). Initially, Fleet National Bank, a national banking
association, will act as Property Trustee and First Union Bank of Delaware, a
Delaware banking corporation, will act as Delaware Trustee, until, in each case,
removed or replaced by the holder of the Common Securities. Fleet National Bank
will also act as indenture trustee under the Guarantee (the "Guarantee Trustee")
and under the Indenture (the "Indenture Trustee"). See "Description of the
Preferred Securities" and "Description of the Guarantee."
The Property Trustee will hold title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture as the holder of
the Convertible Debentures. In addition, the Property Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, will have
the right to appoint, remove or replace any of the Issuer Trustees and to
increase or decrease the number of trustees, provided, that the number of
trustees shall be at least two. The Company will pay all fees and expenses
related to the Trust and the offering of the Preferred Securities. See
"Description of the Convertible Debentures."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration and the Delaware Business Trust Act, as amended (the "Trust Act").
See "Description of the Preferred Securities." The Declaration, the Indenture
and the Guarantee also incorporate by reference the terms of the Trust Indenture
Act.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as
Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of
Subsidiary Trust Holding Solely Convertible Debentures of the Company. A
footnote to such consolidated financial statements will indicate that the sole
assets of the Trust are % Convertible Subordinated Debentures due 2016 of the
Company with an original principal amount of $103,092,800 ($118,556,750 if the
Underwriters' over-allotment option is exercised in full). See "Capitalization."
20
<PAGE> 22
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities offered hereby will
be invested by the Trust in the Convertible Debentures. The Company intends to
contribute the net proceeds from the sale of the Convertible Debentures,
estimated to be approximately $97 million ($111.6 million if the Underwriters'
over-allotment option is exercised in full) to FINOVA Capital, which intends to
use such net proceeds to repay commercial paper or other indebtedness. As of
September 30, 1996, the weighted average interest rate on such borrowings was
6.69% per annum.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock of the Company is traded on the NYSE. The following tables
summarize the high and low sale prices per share of Common Stock as reported on
the NYSE Composite Tape and the cash dividends declared per share of Common
Stock for the periods indicated.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW DECLARED
---- --- ---------
<S> <C> <C> <C>
1994:
First Quarter................................................. $33 3/4 $28 1/4 $ .18
Second Quarter................................................ 34 3/8 29 1/8 .18
Third Quarter................................................. 39 33 1/8 .18
Fourth Quarter................................................ 35 7/8 29 1/8 .20
1995:
First Quarter................................................. $34 $30 5/8 $ .20
Second Quarter................................................ 38 1/2 31 3/4 .20
Third Quarter................................................. 45 3/4 34 7/8 .22
Fourth Quarter................................................ 49 1/2 44 5/8 .22
1996:
First Quarter................................................. $56 $46 1/4 $ .22
Second Quarter................................................ 56 3/8 48 .22
Third Quarter................................................. 60 1/2 48 1/4 .24
Fourth Quarter (through November 29, 1996).................... 67 1/4 59 5/8 .24
</TABLE>
As of November 1, 1996, there were approximately 25,000 holders of record
of the Common Stock. The last reported sale price of the Common Stock on the
NYSE as of a recent date is set forth on the cover pages of this Prospectus.
Following the Spin-Off, the Company has paid quarterly dividends on the
first business day of each calendar quarter. It is anticipated that the Company
will continue to pay regular quarterly dividends on the first business day of
January, April, July and October. The declaration of dividends and their amounts
will be at the discretion of the Board of Directors of the Company, and there
can be no assurance that additional dividends will be declared.
FINOVA Capital, the Company's principal subsidiary, is limited in its
ability to pay dividends to its sole stockholder, the Company. The agreements
pertaining to long-term debt of FINOVA Capital include various restrictive
covenants and require the maintenance of certain defined financial ratios with
which FINOVA Capital has complied. Under one of these covenants, dividend
payments are generally limited to 50% of the sum of accumulated earnings and
proceeds from equity issued after December 31, 1991.
21
<PAGE> 23
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization,
including deferred income taxes, of the Company and its consolidated
subsidiaries at September 30, 1996, and as adjusted to give effect to the sale
of the Preferred Securities offered hereby and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds." The table should be
read in conjunction with the historical consolidated financial statements of the
Company and related notes included in the 1995 Form 10-K and the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
---------------------------
AS
ACTUAL ADJUSTED
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Senior debt....................................................... $6,350,043 $6,253,043
Deferred income taxes............................................. 247,574 247,574
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of Subsidiary Trust(1)............................... -- 100,000
Stockholders' equity:
Preferred stock-- $.01 par value; authorized 5,000,000 shares;
none outstanding............................................. -- --
Common stock -- $.01 par value; authorized 100,000,000 shares;
28,422,000 shares issued(2).................................. 284 284
Additional capital.............................................. 684,493 684,493
Retained income................................................. 250,758 250,758
Cumulative translation adjustments.............................. (5,228) (5,228)
Common stock in treasury (951,000 shares)....................... (33,726) (33,726)
---------- ----------
Total stockholders' equity................................... 896,581 896,581
---------- ----------
Total capitalization....................................... $7,494,198 $7,497,198
========== ==========
</TABLE>
- ---------------
(1) As described herein, the sole assets of the Trust will be % Convertible
Subordinated Debentures due 2016 of the Company with an original principal
amount of $103,092,800 ($118,556,750 if the Underwriters' over-allotment
option is exercised in full) and, upon redemption thereof, an equal amount
of the Preferred Securities will be mandatorily redeemable.
(2) Does not include approximately 1,767,000 shares of Common Stock reserved for
issuance under the Company's 1992 Stock Incentive Plan and the shares of
Common Stock reserved for issuance upon conversion of the Preferred
Securities.
22
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the five
years ended December 31, 1995 have been derived from the audited consolidated
financial statements of the Company and its subsidiaries. References to the
Company contained in the footnotes below mean the Company and its consolidated
subsidiaries. The following selected consolidated financial data as of and for
the nine months ended September 30, 1995 and 1996 have been derived from the
unaudited consolidated financial statements of the Company which, in the opinion
of management, include all normal recurring adjustments necessary to present
fairly the information required to be set forth therein. Results of operations
and financial condition as of and for the nine months ended September 30, 1996
do not purport to be indicative of results of operations or financial condition
to be expected for the year ending December 31, 1996. The following data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and the notes thereto. See "Incorporation of Certain Documents by
Reference." Per share data for income and dividends and average outstanding
common and equivalent shares has not been presented for 1991, as the Company was
not a publicly held company prior to the Spin-Off from Dial in 1992.
<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Interest and income earned from
financing transactions......... $ 640,462 $ 551,737 $ 761,855 $ 503,351 $ 255,216 $ 243,337 $ 251,472
Interest expense................. 298,158 267,857 366,822 222,200 123,853 136,107 157,560
Depreciation..................... 47,150 38,891 55,218 36,737 6,516 2,531 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest margins earned.......... 295,154 244,989 339,815 244,414 124,847 104,699 93,912
Provision for possible credit
losses(1)...................... 38,800 28,800 47,300 16,670 5,706 6,740 77,687
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest margins earned...... 256,354 216,189 292,515 227,744 119,141 97,959 16,225
Gains on sale of assets.......... 10,253 11,699 19,726 9,045 5,439 3,362 6,684
Selling, administrative and other
operating expenses............. 129,992 112,578 155,001 113,018 58,158 50,728 59,923
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes....... 136,615 115,310 157,240 123,771 66,422 50,593 (37,014)
Income taxes..................... 51,610 44,163 59,611 49,458 28,576 13,843 1,728
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations..................... $ 85,005 $ 71,147 $ 97,629 $ 74,313 $ 37,846 $ 36,750 $ (38,742)
=========== =========== =========== =========== =========== =========== ===========
Income per common and equivalent
share:
Income from continuing
operations before preferred
dividends.................... $ 3.04 $ 2.56 $ 3.51 $ 2.94 $ 1.86 $ 1.80
Preferred dividends............ -- -- -- -- .06 .09
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations................... $ 3.04 $ 2.56 $ 3.51 $ 2.94 $ 1.80 $ 1.71
=========== =========== =========== =========== =========== ===========
Dividends declared per common
share........................ $ .68 $ .62 $ .84 $ .74 $ .68 $ .42
Average outstanding common and
equivalent shares............ 27,971,000 27,845,000 27,832,000 25,307,000 20,332,000 20,464,000
Ratio of earnings to fixed
charges (2).................... 1.46x 1.43x 1.43x 1.55x 1.53x 1.37x (2)
FINANCIAL POSITION:
ASSETS
Cash and cash equivalents........ $ 56,852 $ 20,293 $ 90,280 $ 49,875 $ 929 $ 18,203 $ 37,903
Investment in financing
transactions:
Loans and other financing
contracts, net............... 5,041,061 4,707,898 4,794,181 4,034,648 2,343,755 1,919,371 1,739,978
Direct finance leases.......... 1,016,546 758,763 828,713 774,834 71,812 138,871 201,327
Operating leases............... 506,399 431,297 460,798 412,782 147,222 100,911 75,204
Leveraged leases............... 456,898 323,760 366,196 287,518 283,782 269,370 265,363
Factored receivables........... 614,372 387,502 369,169 157,862
----------- ----------- ----------- ----------- ----------- ----------- -----------
7,635,276 6,609,220 6,819,057 5,667,644 2,846,571 2,428,523 2,281,872
Less reserve for possible credit
losses(1)...................... (156,339) (131,564) (140,333) (122,233) (64,280) (69,291) (87,600)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Investment in financing
transactions - net............. 7,478,937 6,477,656 6,678,724 5,545,411 2,782,291 2,359,232 2,194,272
Investment in and advances to
Verex Corporation.............. 221,312 152,171
Other assets and deferred
charges........................ 340,059 275,698 267,510 226,057 51,102 42,921 30,138
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets..................... $ 7,875,848 $ 6,773,647 $ 7,036,514 $ 5,821,343 $ 2,834,322 $ 2,641,668 $2,414,484
=========== =========== =========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable and accrued
expenses....................... $ 94,057 $ 120,987 $ 125,349 $ 134,501 $ 49,131 $ 42,774 $ 58,151
Due to clients................... 255,827 208,614 181,548 116,639 -- -- --
Due to The Dial Corp............. 10,727
Interest payable................. 31,766 32,849 45,553 37,710 23,633 29,062 25,486
Senior and subordinated debt..... 6,350,043 5,403,323 5,649,368 4,573,354 2,079,286 1,883,709 1,750,178
Deferred income taxes............ 247,574 202,561 209,512 188,887 178,972 172,727 198,366
----------- ----------- ----------- ----------- ----------- ----------- -----------
6,979,267 5,968,334 6,211,330 5,051,091 2,331,022 2,128,272 2,042,908
Redeemable preferred stock....... -- -- -- -- -- 25,000 --
Stockholders' equity............. 896,581 805,313 825,184 770,252 503,300 488,396 371,576
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity........... $ 7,875,848 $ 6,773,647 $ 7,036,514 $ 5,821,343 $ 2,834,322 $ 2,641,668 $2,414,484
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) In 1991, the Company recorded a special provision for possible credit losses
of $65 million and recorded write-offs of $15 million related to nonearning
assets in its FCL portfolio and a $47.8 million write-down to reduce Latin
American assets to current market value.
(2) For purposes of the computation of these ratios, earnings consist of income
before income taxes and fixed charges; and fixed charges include interest
and related debt expense and a portion of rental expense determined to be
representative of interest. For the year ended December 31, 1991, earnings
were inadequate to cover combined fixed charges by $37.0 million.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FINOVA GROUP INC.
For purposes of Management's Discussion and Analysis of Financial Condition
and Results of Operations only, references to "FINOVA" or the "Company" mean,
collectively, The FINOVA Group Inc. and its subsidiaries, including FINOVA
Capital Corporation and its subsidiaries (collectively, "FINOVA Capital").
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995
Net income for the nine months ended September 30, 1996 was $85.0 million
($3.04 per common and equivalent share), compared to $71.1 million ($2.56 per
common and equivalent share) for the first nine months of 1995, representing a
19% increase in net income and earnings per share. The increase in earnings was
primarily due to portfolio growth, higher interest margins earned, lower
nonearnings and improved operating efficiencies (operating expenses as a
percentage of interest margins earned), as detailed below.
Interest Margins Earned. Interest margins earned, which represent the
difference between (a) interest and income earned from financing transactions
and operating leases and (b) interest expense and depreciation, were $295.2
million for the nine months ended September 30, 1996, compared with $245.0
million during the same period in 1995, an increase of 20%. The increase in
interest margins earned was primarily due to a 19% growth in average managed
assets (funds employed and assets sold under securitization agreements that are
managed by the Company) and an increase in the interest margin as a percentage
of average earning assets, which increased to 5.9% for the nine months ended
September 30, 1996 from 5.8% for the same period in 1995.
Non-Interest Expense. The provision for possible credit losses, which
increases the reserve for possible credit losses, increased to $38.8 million for
the first nine months of 1996 from $28.8 million in 1995, primarily due to the
increase in managed assets. The reserve for possible credit losses as a
percentage of nonaccruing assets increased to 90.5% at September 30, 1996 from
77.8% at September 30, 1995.
Selling, administrative and other operating expenses were higher during the
first nine months of 1996 than in 1995, due primarily to the growth in managed
assets and higher incentive compensation expenses related to the Company's
improved results and stock performance. As a percentage of interest margins
earned, these expenses decreased to 44.0% in the first nine months of 1996, from
46.0% during the same period in 1995.
Gains on Sale of Assets. Gains on sale of assets were lower in 1996
compared to 1995, primarily due to the amount and type of assets coming off
lease during the respective periods. The timing of such gains is sporadic in
nature.
Income Taxes. Income taxes increased during the nine months ended
September 30, 1996, primarily due to the increase in pre-tax income, partially
offset by a lower effective tax rate. The lower effective tax rate, which
decreased from 38.3% in 1995 to 37.8% in the first nine months of 1996, was
primarily related to lower foreign tax effects and increased tax exempt
municipal income.
1995 Compared to 1994
Net income increased 31% during 1995 to $97.6 million ($3.51 per common and
equivalent share) from $74.3 million ($2.94 per common and equivalent share) in
1994. The 1994 results include income from Ambassador and Tri-Con from the
acquisition dates.
Interest Margins Earned. Interest margins earned increased by 39% in 1995
to $339.8 million from $244.4 million in 1994. This increase was driven by a 20%
growth in managed assets which included Ambassador (which the Company acquired
on February 14, 1994) and TriCon (which the Company acquired on April 30, 1994)
for the entire year. The primary source of the growth in managed assets was new
business,
24
<PAGE> 26
which totaled $2.6 billion for 1995 compared to $1.8 billion for 1994, an
increase of 43%. Also contributing to the improved margins were the fees
associated with the factoring business, which recorded factoring volume of $1.1
billion in 1995 compared to $847 million in 1994 and the inventory finance
business, which recorded floor planning volume of $898 million in 1995 compared
to $283 million in 1994.
Interest margins earned as a percentage of average earning assets were 5.8%
in 1995, compared to 6.0% in 1994. This reduction in the interest margin
percentage was expected in 1995 primarily due to the cost of hedges that the
Company entered into to lock in the spread between its lending and borrowing
rates on $1.5 billion of its floating-rate debt and to the diminishing ratio of
the higher yielding business relative to the total portfolio. Growth in interest
margins earned more than offset the higher provisions for possible credit losses
and the higher selling, administrative and other operating expenses in the 1995
period.
Non-Interest Expense. Loss provisions, which increase the reserve for
possible credit losses, were greater by $30.6 million during 1995 compared to
1994 primarily due to the growth in managed assets. See Note D of Notes to
Consolidated Financial Statements in the Company's 1995 Form 10-K incorporated
herein by reference.
Selling, administrative and other operating expenses increased by $42
million in 1995 due to the growth of the Company, the large volume of new
business added and the inclusion of TriCon and Ambassador for the full year. As
a percentage of interest margins earned, these costs decreased to 45.6% in 1995
from 46.2% in the previous year. See Note M of Notes to Consolidated Financial
Statements in the Company's 1995 Form 10-K incorporated herein by reference.
Gains on Sale of Assets. Gains on sale of assets were $10.7 million higher
in 1995 compared to 1994 primarily due to the inclusion of TriCon for the full
year and the amount and type of assets coming off lease. The 1994 gains of $9.0
million included $4.0 million (pre-tax) from the securitization of assets in
June 1994.
Income Taxes. Income taxes for 1995 increased to $59.6 million from $49.5
million in 1994. This increase was caused by the increase in pre-tax income,
partially offset by certain tax credits recognized during 1995. The 1995 overall
effective income tax rate for the Company approximated 37.9% compared to 40.0%
in 1994. The decrease in the effective rate is primarily related to lower
foreign tax effects and an increase in tax exempt municipal income. See Note I
of Notes to Consolidated Financial Statements in the Company's 1995 Form 10-K
incorporated herein by reference.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Managed assets grew by $847.8 million during the first nine months of 1996
and totaled $7.97 billion at September 30, 1996. The increase was attributable
primarily to new business of $2.10 billion during the period, compared to $1.69
billion for the nine months ended September 30, 1995 and the addition of $318
million of acquired portfolios through the acquisition of LINC and FSI,
partially offset by portfolio prepayments and amortization.
The reserve for possible credit losses increased to $156.3 million at
September 30, 1996 from $140.3 million at December 31, 1995, primarily due to
the increase in managed assets. Write-offs during the nine months ended
September 30, 1996 were $31.0 million compared to $22.9 million during 1995,
while recoveries increased to $2.1 million for the first nine months of 1996
from $1.7 million in 1995. Nonaccruing assets increased to $172.8 million at
September 30, 1996, compared to $167.9 million at the end of 1995; however,
nonaccruing assets as a percentage of managed assets decreased to 2.2% from 2.4%
at December 31, 1995.
Growth in funds employed is generally financed by the Company's internally
generated cash flow and new borrowings. During the nine months ended September
30, 1996, FINOVA Capital issued $565 million in new long-term borrowings and
recognized a net increase in commercial paper borrowings of approximately $467
million. Repayments of long-term debt totaled $586 million during the first nine
months of 1996. The Company had total debt of $6.35 billion at September 30,
1996 compared to year-end 1995 debt of $5.65 billion. At September 30, 1996, the
Company also had deferred income taxes of $247.6 million, generally used to
reduce debt and, therefore, help finance lending activities.
25
<PAGE> 27
FINOVA satisfies a significant portion of its cash requirements from a
diversified group of worldwide funding sources and is not dependent upon any one
lender. Additionally, FINOVA relies on the issuance of commercial paper as a
major funding source. During the first nine months of 1996, FINOVA Capital
issued $16.4 billion of commercial paper (with an average of $2.5 billion
outstanding during the nine-month period) and raised $565 million, as noted
above, through new long-term financings of one to 10 year durations. At
September 30, 1996 and December 31, 1995, commercial paper and short-term bank
borrowings totaling $2.9 billion and $2.4 billion, respectively, were supported
by available unused revolving credit lines which, if not renewed, are
convertible to long-term debt at FINOVA's option.
In 1995, FINOVA Capital filed a shelf-registration statement with the
Commission that allowed for the issuance of $1.5 billion of senior debt
securities, $815 million of which remained available as of September 30, 1996.
Also in 1995, the Company, under a securitization agreement, sold a $200 million
undivided proportionate interest in a loan portfolio totaling approximately
$610.5 million; and in the first quarter of 1996, the Company sold an additional
$100 million under the same securitization agreement. See Note C of Notes to
Consolidated Financial Statements in the Company's 1995 Form 10-K incorporated
herein by reference.
FINOVA Capital currently maintains three five-year revolving credit
facilities with numerous lenders, in the aggregate principal amount of $2.4
billion. Separately, FINOVA Capital also has a 364-day revolving credit facility
with the same lenders in the aggregate principal amount of $1.0 billion. These
facilities support FINOVA's outstanding commercial paper and short-term
borrowings. The Company intends to borrow under the revolving credit agreements
to refinance commercial paper and short-term bank loans to the extent that it
experiences significant difficulties in rolling over its outstanding commercial
paper and short-term bank loans. The Company has rarely borrowed under these
facilities. The 364-day $1.0 billion revolving credit facility will be subject
to renewal in 1997, while the five-year credit facilities are subject to renewal
in 2001.
The agreements pertaining to long-term debt of FINOVA Capital include
various restrictive covenants and require the maintenance of certain defined
financial ratios with which FINOVA Capital has complied. Under one such
covenant, dividend payments are limited to 50 percent of accumulated earnings
after December 31, 1991.
FINOVA Capital's aggregate cost of funds decreased to 6.8% for the first
nine months of 1996 from 7.2% for 1995 partially as a result of maturing of
higher coupon debt, a ratings upgrade and the expiration of certain hedges. The
Company's cost of and access to capital is dependent, in a large part, on its
credit ratings. FINOVA Capital has maintained investment grade ratings since
1976, and received an upgrade in those ratings from Standard & Poor's Ratings
Group in 1995 and 1996 and Moody's Investor Service, Inc. in 1995. FINOVA
Capital currently has investment-grade ratings from the following agencies:
<TABLE>
<CAPTION>
COMMERCIAL SENIOR
PAPER DEBT
---------- ------
<S> <C> <C>
Duff & Phelps Credit Rating Co..................................... D1- A-
Fitch Investors Service, L.P....................................... F1 A
Moody's Investors Service, Inc..................................... P2 Baa1
Standard & Poor's Ratings Group.................................... A2 A-
</TABLE>
At September 30, 1996, FINOVA Capital had outstanding 55 interest rate
conversion agreements with notional principal amounts totaling $3.2 billion.
Twenty-one agreements with notional principal amounts of $954 million were
arranged to effectively convert certain floating interest rate obligations into
fixed interest rate obligations and require interest payments on the stated
principal amount at rates ranging from 4.21% to 9.10% (remaining terms of one
month to five years) in return for receipts calculated on the same notional
amounts at floating interest rates. In addition, 27 agreements with notional
principal amounts of $1.35 billion were arranged to effectively convert certain
fixed interest rate obligations into floating interest rate obligations and
require interest payments on the stated principal amount at the three month or
six month London interbank offered rates ("LIBOR") (remaining terms of six
months to 10 years) in return for receipts calculated on the same notional
amounts at fixed interest rates of 5.51% to 7.59%. FINOVA Capital has also
entered into seven basis swap agreements with notional principal amounts of $878
million and remaining terms of three months to two years.
26
<PAGE> 28
In 1995, FINOVA Capital hedged $750 million of floating-rate debt through
five basis swap agreements expiring through 1998, to lock in a spread between
its lending and borrowing rates. FINOVA's assets are primarily prime based while
a significant portion of its liabilities are tied to the 30-day commercial paper
composite rate. The agreements enable FINOVA to hedge against a narrowing of the
spread between the prime rate (lending rate) and its borrowing rate (30-day
commercial paper). See Note F of Notes to Consolidated Financial Statements in
the Company's 1995 Form 10-K incorporated herein by reference.
The Company announced in 1992 that it intended to repurchase its securities
on the open market, from time to time, to fund its obligations pursuant to
employee stock options, benefit plans and similar obligations. Under this
program, 611,600, 602,800 and 349,909 shares were acquired during the years
ended December 31, 1995, 1994 and 1993, respectively, and no shares were
acquired during the nine months ended September 30, 1996. The program may be
discontinued at any time.
27
<PAGE> 29
BUSINESS
GENERAL
The Company is a financial services holding company incorporated in
Delaware in December 1991, which through its direct and indirect subsidiaries is
primarily engaged in providing collateralized financing and leasing products to
commercial enterprises in focused market niches, principally in the United
States. Through its principal subsidiary, FINOVA Capital, the Company has been
engaged in collateralized lending and equipment leasing and financing for over
42 years.
The Company extends revolving credit facilities, term loans and equipment
and real estate financing to "middle-market" businesses with financing needs
falling generally between $500,000 to $35 million. The Company also offers sales
financing programs to manufacturers, distributors, vendors and franchisors which
facilitate sales of their products to customers. The Company currently operates
primarily in 13 specific industry or market niches in which its expertise in
evaluating the creditworthiness of prospective customers and its ability to
provide value-added services enables it to differentiate itself from its
competitors and to command product pricing which provides a satisfactory spread
over the Company's borrowing costs.
The Company seeks to maintain a high quality portfolio and to minimize
nonearning assets and write-offs by using clearly defined underwriting criteria,
stringent portfolio management techniques and by diversifying its lending
activities geographically and among a range of industries, customers and loan
products. Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage competitive changes in its markets and to
withstand the impact of deteriorating economic conditions on a regional or
national basis, although there can be no assurance that competitive changes,
borrowers' performance or economic conditions will not result in an adverse
impact on the Company's results of operations or financial condition.
The Company generates interest income, other income and gains through
charges assessed on outstanding loans, loan servicing, leasing and other fees
and disposition of equipment upon termination of leases or in other
circumstances. The Company's primary expenses are the costs of funding its loan
and lease business (including interest paid on debt), provisions for possible
credit losses, marketing expenses, salaries and employee benefits, servicing and
other operating expenses and income taxes.
LINES OF BUSINESS
The Company's activities currently include the following principal lines of
business:
- Commercial Equipment Finance offers equipment leases, loans and "turnkey"
financing to the supermarket, manufacturing, packaging and general
aviation industries. Through its acquisition of FSI (now known as FINOVA
Technology Finance), the Company offers equipment leasing and other
financing products to the high technology, life sciences, health care and
environmental technology industries. Typical transaction sizes are
$500,000 to $15 million.
- Commercial Finance offers collateral-oriented revolving credit facilities
and term loans for manufacturers, distributors, wholesalers and service
companies. Typical transaction sizes range from $500,000 to $3 million.
- Commercial Real Estate Finance provides cash-flow-based financing
primarily for acquisitions and refinancings to experienced real estate
developers and owner/occupants of income-producing properties in the
United States. The Company concentrates on secured financing
opportunities, generally between $5 million and $25 million, involving
senior mortgage term loans on owner occupied commercial real estate. The
Company's portfolio of real estate leveraged leases is also managed as
part of the commercial real estate portfolio.
- Communications Finance specializes in radio and television financing.
Other markets include cable television, print and outdoor media services
in the United States. The Company extends secured loans to communications
businesses requiring funds for recapitalizations, refinancings or
acquisitions. Loan sizes generally are from $1 million to $40 million.
28
<PAGE> 30
- Corporate Finance provides financing, generally in the range of $2
million to $40 million, focusing on middle market businesses nationally,
including distribution, wholesale, specialty retail, manufacturing and
services industries. The group's lending is primarily in the form of
revolving credit facilities and term loans secured by the assets of the
borrower, with significant emphasis on the borrower's cash flow as the
source of repayment of the secured loan.
- Factoring Services provides full service factoring and accounts
receivable management services for entrepreneurial and larger firms,
operating primarily in the textile and apparel industries. The annual
factored volume of these companies is generally between $5 million and
$25 million.
- Franchise Finance offers equipment, real estate and acquisition financing
programs for operators of established franchise concepts. The equipment
leased to the ultimate end-user is typically purchased by the Company
from the equipment manufacturer, vendor or dealer selected by the
end-user. Typical transaction sizes range from $500,000 to $15 million.
- Government Finance provides primarily tax-exempt financing to state and
local governments and non-profit corporations. Typical transaction sizes
range from $100,000 to $5 million.
- Inventory Finance provides inventory financing, combined
inventory/accounts receivable lines of credit and purchase order
financing for equipment distributors, value-added resellers and dealers.
Transaction sizes generally range from $500,000 to $30 million.
- Medical Finance offers a full range of equipment and real estate
financing and asset management services for the U.S. health care
industry, targeting middle market health care providers in the United
States. Through the acquisition of LINC, the Company now finances medical
accounts receivable. Transaction sizes typically range from $500,000 to
$25 million.
- Rediscount Finance offers $1 million to $35 million revolving credit
lines to regional consumer finance companies, which in turn extend credit
to consumers. The Company's customers provide credit to consumers to
finance home improvements, automobile purchases, insurance premiums and a
variety of other financial needs.
- Resort Finance focuses on successful, experienced resort developers,
primarily of timeshare resorts, second home resort communities, golf
resorts and resort hotels. Extending funds through a variety of lending
options, Resort Finance provides loans and lines of credit ranging from
$5 million to $30 million for construction, acquisitions, receivables
financing and purchases and other uses. Through FINOVA Portfolio
Services, Inc., Resort Finance offers expanded convenience and service to
its customers. Professional receivables collections and cash management
give developers the ability of having loan-related administrative
functions performed for them by the Company.
- Transportation Finance/Capital Services structures secured financings for
specialized areas of the transportation industry, principally involving
domestic and foreign used aircraft, some new aircraft, as well as
domestic short-line railroads including new and used rail equipment.
Typical transactions range from $5 million to $30 million and involve
financing up to 80% of the fair market value of used equipment and as
equity participants in leveraged lease transactions. Traditionally
focused on the domestic marketplace, FINOVA Transportation Finance has
been active in international aircraft lending and leasing since 1992
through an office in London, England. Through its Capital Services
activity, FINOVA also provides leveraged lease financing on
transportation equipment.
29
<PAGE> 31
PORTFOLIO COMPOSITION
The total assets under management of the Company consist of the Company's
net investment in financing contracts plus certain assets that are owned by
others but managed by the Company which are not reflected on the Company's
balance sheet. A breakdown of the Company's investment in financing transactions
by line of business as of September 30, 1996 (before giving effect to the sale
of its Manufacturer & Dealer Services business, as described under "Prospectus
Summary -- Recent Developments") was as follows:
<TABLE>
<CAPTION>
TOTAL
CARRYING AMOUNT
LINE OF BUSINESS (DOLLARS IN THOUSANDS)
-------------------------------------------------- ----------------------
<S> <C>
Transportation Finance............................ $1,222,595
Resort Finance.................................... 1,096,100
Commercial Real Estate Finance.................... 765,932
Corporate Finance................................. 705,820
Manufacturer & Dealer Services.................... 576,970
Medical Finance................................... 557,960
Commercial Equipment Finance...................... 517,520
Communications Finance............................ 505,994
Rediscount Finance................................ 412,868
Franchise Finance................................. 365,080
Inventory Finance................................. 275,920
Factoring Services................................ 240,247
Commercial Finance................................ 202,051
Government Finance................................ 139,481
Other............................................. 50,738
----------
Total........................................... $7,635,276
==========
</TABLE>
The Company's geographic portfolio diversification at September 30, 1996
was as follows:
<TABLE>
<S> <C>
West.............................................. 24.1%
Southeast......................................... 23.6%
Northeast......................................... 22.9%
Midwest........................................... 15.6%
Southwest......................................... 13.8%
------
Total........................................... 100.0%
================
</TABLE>
BUSINESS STRATEGY
Following the Spin-Off, the Company decided to focus its resources and
capital on its core domestic commercial finance activities. The Company embarked
on a program of selling or winding down those businesses included in the
Spin-Off not associated with the Company's core businesses. The Company has
concentrated on redeploying the capital previously invested in such businesses
and raised additional capital to support internal portfolio growth and to make
complimentary acquisitions. This strategy has resulted in (i) the managed
liquidation and sale of FCL and Latin American loan portfolios, (ii) an increase
(excluding acquisitions) in the Company's domestic loan portfolio, (iii) the
acquisition of the asset based lending activity of U.S. Bancorp, (iv) the sale
of Verex Corporation, Dial's discontinued mortgage insurance subsidiary, (v) the
acquisition of Ambassador, the former factoring and asset based lending
subsidiary of Fleet Financial Group, Inc., (vi) the acquisition of TriCon, the
former commercial finance and leasing subsidiary of Bell Atlantic Corporation,
(vii) portfolio purchases of $262 million in 1995, (viii) the acquisition of
LINC, a provider of accounts receivable financing to healthcare providers, (ix)
the acquisition of FSI, a specialty leasing company servicing the high
technology, life sciences, health care and environmental technology
30
<PAGE> 32
industries and (x) the sale of the Company's Manufacturer & Dealer Services
business as described under "Prospectus Summary -- Recent Developments."
The Company seeks to achieve superior financial performance on a consistent
basis by adhering to certain fundamental principles in managing its commercial
finance business:
- Niche Focus. The Company seeks to compete in industry or market niches
in which its expertise in evaluating the creditworthiness of prospective
customers and its ability to provide value-added services enables the
Company to differentiate itself from its competitors and command loan
pricing which provides a satisfactory spread over the Company's borrowing
costs. The Company generally avoids competing solely on the basis of the
interest rate or fees charged to the customer for the Company's loan
products and services. The Company makes a determination of return on
equity for each new financing transaction which it funds. The
determination of the expected return on equity on any one transaction
takes into account loan origination and administration costs, historical
write-off experience in each of the Company's business segments, overhead
allocations, the size and expected term of the financing and the
effective tax rate.
- Maintenance of Asset Quality. The Company seeks to maintain a high
quality loan portfolio and to minimize nonearning assets and write-offs
by using clearly defined underwriting criteria for each of the Company's
business segments, a stringent underwriting process and limited
delegation of credit authority. In addition, the Company actively manages
its portfolio by diversifying its financing activities geographically and
among a range of industries, customers and loan products. Because of the
diversity of the Company's portfolio, the Company believes it is better
able to manage competitive changes in its markets and to withstand the
impact of deteriorating economic conditions on a regional or national
basis.
- Asset/Liability Management. The Company seeks to maintain a match-funded
position in its financing transactions and borrowings so as to minimize
exposure to changing interest rates. The Company generally follows a
policy of funding floating rate assets with floating rate borrowings and
funding fixed rate assets with fixed rate debt, deferred tax liabilities
and with its equity capital. Substantially all of the Company's floating
rate assets are priced using the prime rate, which is set by major U.S.
banks, while its floating rate debt is generally priced using LIBOR,
which is dictated by market conditions. From time to time, the Company
hedges against a contraction in favorable spreads between prime and
LIBOR. Management believes that the Company's results of operations
should not be materially affected by changing interest rates because of
its asset/liability management policies.
- Cost Controls. The Company actively attempts to maximize employee
productivity and to manage selling, administrative and other operating
expenses actively so as to optimize earnings and to enhance its
competitive position. Management believes its operating costs are lower
than many of its competitors when viewed either as a percentage of total
assets or as a percentage of net interest margins earned. As a result,
while certain of the Company's larger competitors may enjoy a lower cost
of funds, management believes that advantage is often offset, at least in
part, by the Company's lower operating costs.
- Acquisitions. Management considers selective acquisitions which
complement the Company's core commercial finance businesses to be an
element in its overall business strategy. Acquisitions permit the Company
to secure a presence in a particular industry or market niche quickly
while simultaneously giving the Company a seasoned loan portfolio,
experienced management and an existing loan origination, underwriting and
administrative infrastructure. The Company does not anticipate making any
significant acquisitions during the balance of 1996. However, management
will consider appropriate opportunities as they arise, and acquisitions
are expected to continue to represent one component of the Company's
longer-term growth strategy.
31
<PAGE> 33
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, Fleet National Bank, will act as Indenture
Trustee for the Preferred Securities under the Declaration for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Preferred Securities will include those stated in the Declaration and those made
part of the Declaration by the Trust Indenture Act. The following summary of
certain terms and provisions of the Preferred Securities does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Declaration, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Preferred Securities will be issued in fully registered form without
interest coupons. Bearer Preferred Securities will not be issued.
The Declaration authorizes the Regular Trustees to issue the Trust
Securities on behalf of the Trust. The Preferred Securities represent undivided
beneficial ownership interests in the assets of the Trust and entitle the
holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Declaration.
All of the Common Securities will be owned, directly or indirectly, by the
Company. The Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon the
occurrence of a Declaration Event of Default, the rights of the holders of the
Common Securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of Preferred Securities. See "-- Subordination of Common Securities."
Title to the Convertible Debentures will be held by the Property Trustee for the
benefit of the holders of the Trust Securities. The Declaration does not permit
the issuance by the Trust of any securities other than the Trust Securities or
the incurrence of any indebtedness by the Trust. The payment of distributions
out of money held by the Trust, and payments upon redemption of the Preferred
Securities or liquidation of the Trust, are guaranteed by the Company to the
extent described under "Description of the Guarantee." The Guarantee will be
held by Fleet National Bank, the Guarantee Trustee, for the benefit of the
holders of the Preferred Securities. The Guarantee does not cover payment of
distributions when the Trust does not have sufficient available funds to pay
such distributions. In such event, the Indenture provides that the remedy of a
holder of Preferred Securities is to (i) vote to direct the Property Trustee to
enforce the Property Trustee's rights under the Convertible Debentures or (ii)
if the failure of the Trust to pay distributions is attributable to the failure
of the Company to pay interest or principal on the Convertible Debentures, to
institute a proceeding directly against the Company for enforcement of payment
to such holder of the principal of or interest on the Convertible Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures. See "-- Voting Rights."
DISTRIBUTIONS
Distributions on Preferred Securities will be fixed at a rate per annum of
% of the stated liquidation amount of $50 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
a rate per annum of % thereof compounded quarterly. The term "distribution"
as used herein includes any such interest payable unless otherwise stated or the
context shall otherwise require. The amount of distributions payable for any
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 distribution period, will be
computed on the basis of the actual number of days elapsed in such a 30-day
month.
Distributions on the Preferred Securities will be cumulative, will accrue
from the Original Issue Date and will be payable quarterly in arrears on each
March 31, June 30, September 30 and December 31, commencing December 31, 1996,
when, as and if available for payment, by the Property Trustee, except as
otherwise
32
<PAGE> 34
described below. The Company has the right under the Indenture to defer interest
payments from time to time on the Convertible Debentures for successive periods
not exceeding 20 consecutive quarters during which no interest shall be due and
payable; provided, that no such Extension Period may extend beyond the maturity
date of the Convertible Debentures. Each Extension Period, if any, will end on
an Interest Payment Date. As a consequence of such extension, quarterly
distributions on the Preferred Securities would be deferred, although such
distributions on the Preferred Securities would continue to accrue (with
interest thereon, compounded quarterly at the distribution rate, to the extent
permitted by applicable law). In the event that the Company exercises this
right, then, during such Extension Period the Company has agreed (a) not to
declare or pay dividends on, or make a distribution with respect to, or redeem
or purchase or acquire, or make a liquidation payment with respect to, any of
its capital stock (other than (i) purchases or acquisitions of shares of Common
Stock (or Common Stock equivalents) in connection with the satisfaction by the
Company of its obligations under any employee benefit plans or the satisfaction
by the Company of its obligations pursuant to any contract or security requiring
the Company to purchase shares of Common Stock (or Common Stock equivalents)
(provided that such contract is in effect or such security is outstanding at
least 60 days prior to the commencement of such Extension Period), (ii)
purchases of shares of Common Stock (or Common Stock equivalents) from officers
or employees of the Company or its subsidiaries upon termination of employment
or retirement not pursuant to any obligation under any contract or security
requiring the Company to purchase shares of Common Stock (or Common Stock
equivalents) (provided that such purchases by the Company upon termination of
employment or retirement shall be made at a price not to exceed the market value
on the date of any such purchase and shall not exceed $7.5 million in the
aggregate for all officers and employees), (iii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iv) dividends or distributions of shares of
Common Stock on Common Stock or (v) 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 make any guarantee payments with respect to the foregoing)), (b) not to make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Convertible Debentures and (c) not to make
any guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided that such Extension Period,
together with all previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity date of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period, subject to the
above requirements. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Convertible Debentures. See
"Description of the Convertible Debentures -- Interest" and "Description of the
Convertible Debentures -- Option to Extend Interest Payment Periods." If
distributions are deferred, the deferred distributions and, to the extent
permitted by applicable law, accrued interest thereon shall be paid to the
holders of record of Preferred Securities as they appear on the books and
records of the Trust at 5:00 p.m. (New York City time) on the record date for
the distribution payment date upon which such Extension Period terminates.
Distributions on the Preferred Securities will be made to the extent that
the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Preferred Securities will be limited to payments received by the Trust
from the Company on the Convertible Debentures. See "Description of the
Convertible Debentures." The payment of distributions out of funds held by the
Trust is guaranteed by the Company to the extent set forth under "Description of
the Guarantee."
Because the Company is a holding company substantially all of whose
operations are conducted through its subsidiaries, the ability of the Company to
pay the principal of and interest on the Convertible Debentures, and therefore
the ability of the Trust to pay distributions on the Preferred Securities, will
depend in large part upon the ability of such subsidiaries to provide funds to
the Company. The ability of certain subsidiaries to provide funds to the Company
is subject to contractual and other limitations, is contingent upon the results
of operations and financial condition of such subsidiaries, and is subject to
various other business considerations.
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See "Risk Factors -- Holding Company Structure" and "-- Ranking of Subordinate
Obligations Under the Guarantee and Convertible Debentures."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust at 5:00 p.m. (New
York City time) on the relevant record dates, which, so long as the Preferred
Securities remain solely in book-entry form, will be one Business Day prior to
the relevant payment dates. In the event that the Preferred Securities do not
continue to remain solely in book-entry form, the record date for each
distribution shall be the day 15 calendar days prior to the relevant payment
date; provided that, if such record date does not conform to the rules of any
securities exchange on which the Preferred Securities are then listed, such
record date shall be changed by the Trust to conform to the rules of such
securities exchange. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment will be made as described under
"-- Book-Entry Only Issuance -- The Depository Trust Company" below. In the
event that any date on which distributions are payable on the Preferred
Securities is not a Business Day, payment of the distribution payable on such
date will be made on the next succeeding day which is a Business Day (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 such date. A "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which banking institutions in The City of
New York or in Wilmington, Delaware are authorized or required by law to close.
CONVERSION RIGHTS
General. Preferred Securities will be convertible at any time prior to the
earlier of (i) 5:00 p.m. (New York City time) on the Business Day immediately
preceding the date of repayment of such Preferred Securities, whether at
maturity or upon redemption, and (ii) 5:00 p.m. (New York City time) on the
Conversion Termination Date (if any), at the option of the holders thereof and
in the manner described below, into shares of Common Stock at the conversion
rate set forth on the cover page of this Prospectus, subject to adjustment as
described under "-- Conversion Price Adjustments" below. The Trust will covenant
in the Declaration not to convert Convertible Debentures held by it except
pursuant to a notice of conversion delivered to the Property Trustee, as initial
conversion agent (the "Conversion Agent") by a holder of Preferred Securities.
A holder of a Preferred Security wishing to exercise its conversion right
shall deliver an irrevocable conversion notice, together, if the Preferred
Security is a Certificated Preferred Security, with such Certificated Preferred
Security, to the Conversion Agent which shall, on behalf of such holder,
exchange such Preferred Security for an equivalent amount of the Convertible
Debentures (based on an exchange ratio of $50 principal amount of Convertible
Debentures for each $50 liquidation amount of Preferred Securities) and
immediately convert such Convertible Debentures into Common Stock. Holders may
obtain copies of the required form of the conversion notice from the Conversion
Agent. So long as a book-entry system for the Preferred Securities is in effect,
however, procedures for converting book-entry Preferred Securities into shares
of Common Stock will differ, as described under "-- Book-Entry Only
Issuance -- The Depository Trust Company."
Holders of Preferred Securities at 5:00 p.m. (New York City time) on a
distribution record date will be entitled to receive the distribution payable on
such Preferred Securities on the corresponding distribution payment date
notwithstanding the conversion of such Preferred Securities following such
distribution record date but on or prior to such distribution payment date.
Except as provided in the immediately preceding sentence, neither the Trust nor
the Company will make, or be required to make, any payment, allowance or
adjustment for accumulated and unpaid distributions, whether or not in arrears,
on converted Preferred Securities; provided, however, that if notice of
redemption of Preferred Securities is mailed or otherwise given to holders of
Preferred Securities or the Trust issues a press release announcing a Conversion
Termination Date, then, if any holder of Preferred Securities converts any
Preferred Securities into Common Stock on any date on or after the date on which
such notice of redemption is mailed or otherwise given or the date of such press
release, as the case may be, and if such date of conversion falls on any day
from and including the first day of an Extension Period and on or prior to the
record date for the distribution payment date upon which such Extension Period
ends, such converting holder shall be entitled to receive all accrued and unpaid
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<PAGE> 36
distributions on such Preferred Securities (including interest thereon, if any,
to the extent permitted by applicable law) to the most recent distribution
payment date prior to the date of such conversion (or, if the date of such
conversion is on or prior to the distribution payment date upon which such
Extension Period ends and after the distribution record date for such
distribution payment date, the holder of such Preferred Securities at 5:00 p.m.
(New York City time) on such distribution record date shall be entitled to
receive, on such distribution payment date, all accrued and unpaid distributions
on such Preferred Securities (including interest thereon, if any, to the extent
permitted by applicable law) to such distribution payment date). See
"Description of the Convertible Debentures -- Redemption," and "Description of
Preferred Securities -- Conversion Rights." The Company will make no payment or
allowance for distributions on the shares of Common Stock issued upon such
conversion, except to the extent that such shares of Common Stock are held of
record on the record date for any such distributions. Each conversion will be
deemed to have been effected immediately prior to 5:00 p.m. (New York City time)
on the day on which the related conversion notice was received by the Conversion
Agent.
No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the Closing Price of Common Stock on the date such
Preferred Securities are converted.
Until the Rights Distribution Date (as defined below under "Description of
Capital Stock -- Shareholder Rights Plan") or the earlier expiration, exchange
or redemption of the Rights (as defined under such caption), one Right will be
issued with each share of Common Stock issued upon conversion of the Preferred
Securities. See "Description of Capital Stock -- Shareholder Rights Plan."
Conversion Price Adjustments -- General. The conversion price is subject
to adjustment in certain events, including (a) the issuance of shares of Common
Stock as a dividend or a distribution with respect to Common Stock, (b)
subdivisions, combinations and reclassification of Common Stock, (c) the
issuance to all holders of Common Stock of rights or warrants entitling them
(for a period not exceeding 45 days) to subscribe for or purchase shares of
Common Stock at less than the then Current Market Price (as defined below) of
the Common Stock, (d) the distribution to all holders of Common Stock of
evidences of indebtedness, capital stock, cash or assets (including securities,
but excluding those rights, warrants, dividends and distributions referred to
above and dividends and distributions paid exclusively in cash), (e) the payment
of dividends (and other distributions) on Common Stock paid exclusively in cash,
excluding cash dividends if the annualized per share amount thereof does not
exceed 15% of the Current Market Price of Common Stock as of the trading day
immediately preceding the date of declaration of such dividend, and (f) payment
to holders of Common Stock in respect of a tender or exchange offer (other than
an odd-lot offer) by the Company for Common Stock at a price in excess of 110%
of the then Current Market Price of Common Stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to such
tender or exchange offer.
"Current Market Price" means, in general, the average of the daily Closing
Prices (as defined below) for the five consecutive trading days selected by the
Company commencing not more than 20 trading days before, and ending not later
than, the earlier of the day in question or, if applicable, the day before the
"ex" date (as defined) with respect to the issuance or distribution in question.
The Company from time to time may reduce the conversion price of the
Convertible Debentures (and thus the conversion price of the Preferred
Securities) by any amount selected by the Company for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Company deems
advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "Certain
Federal Income Tax Considerations -- Adjustment of Conversion Price."
No adjustment of the conversion price will be made upon the issuance of any
shares of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan, or upon the issuance of any shares of Common Stock or options or
rights pursuant to any
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<PAGE> 37
employee benefit plan or program, or pursuant to any option, warrant, right or
any exercisable, exchangeable or convertible security outstanding as of the date
on which the Convertible Debentures are first issued. No adjustment of the
conversion price will be made upon the issuance of Rights pursuant to the Rights
Agreement (as defined herein) or upon the issuance of similar rights issued
under any analogous successor shareholder rights plan. No adjustment in the
conversion price will be required unless adjustment would require a change of at
least one percent (1%) in the price then in effect; provided, however, that any
adjustment that would not be required to be made shall be carried forward and
taken into account in any subsequent adjustment. If any action would require
adjustment of the conversion price pursuant to more than one of the provisions
described above, only one adjustment shall be made with respect to that action
and such adjustment shall be the amount of adjustment that has the highest
absolute value to the holder of the Preferred Securities.
Conversion Price Adjustment -- Merger, Consolidation or Sale of Assets of
the Company. In the event that the Company shall be a party to any transaction
(including, without limitation, and with certain exceptions, (a) a
recapitalization or reclassification of the Common Stock, (b) consolidation of
the Company with, or merger of the Company into, any other person, or any merger
of another person into the Company, (c) any sale, transfer or lease of all or
substantially all of the assets of the Company or (d) any compulsory share
exchange) pursuant to which the Common Stock is converted into the right to
receive other securities, cash or other property (each of the foregoing being
referred to as a "Transaction"), then the holders of Preferred Securities then
outstanding shall have the right to convert the Preferred Securities into the
kind and amount of securities, cash or other property receivable upon the
consummation of such Transaction by a holder of the number of shares of Common
Stock issuable upon conversion of such Preferred Securities immediately prior to
such Transaction.
In the case of a Transaction, each Preferred Security would become
convertible into the securities, cash or property receivable by a holder of the
number of shares of the Common Stock into which such Preferred Security was
convertible immediately prior to such Transaction. This change could
substantially lessen or eliminate the value of the conversion privilege
associated with the Preferred Securities in the future. For example, if the
Company were acquired in a cash merger, each Preferred Security would become
convertible solely into cash and would no longer be convertible into securities
whose value would vary depending on the future prospects of the Company and
other factors.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends to holders of Preferred Securities or to the holders of Common
Stock. See "Certain Federal Income Tax Considerations."
Termination of Conversion Rights. On and after , 1999, and
provided the Trust is current in the payment of distributions on the Preferred
Securities (except to the extent that the payment of distributions may have been
duly deferred as the result of an Extension Period), the Company may, at its
option, terminate the right to convert the Convertible Debentures into Common
Stock, in which case the right to convert the Preferred Securities into Common
Stock will likewise terminate. The Company may exercise this option only if for
at least 20 trading days within any period of 30 consecutive trading days ending
on or after , 1999, including the last trading day of such period,
the Closing Price of the Common Stock exceeds 120% of the then applicable
conversion price of the Preferred Securities. To exercise this conversion
termination option, the Company must cause the Trust to issue a press release
for publication on the Dow Jones News Service or on a comparable news service
announcing the Conversion Termination Date prior to the opening of business on
the second trading day after a period in which the condition in the preceding
sentence has been met, but in no event may such press release be issued prior to
, 1999. The press release shall announce the Conversion Termination
Date and provide the conversion price and the Closing Price of the Preferred
Securities and the Common Stock, in each case as of the close of business on the
trading day next preceding the date of the press release.
Notice of the termination of conversion rights will be given by first-class
mail to the holders of the Preferred Securities not more than four Business Days
after the Trust issues the press release. The "Conversion Termination Date" will
be a Business Day selected by the Company not less than 30 nor more than 60 days
after the date on which the Trust issues the press release announcing its
intention to terminate
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conversion rights of Preferred Security holders. In the event that the Company
exercises its conversion termination option, conversion rights will expire at
5:00 p.m. (New York City time) on the Conversion Termination Date. In the event
the Company has not exercised its conversion termination option and the
Preferred Securities are otherwise called for redemption, the Preferred
Securities will be convertible at any time prior to 5:00 p.m. (New York City
time) on the Business Day immediately preceding the date of such redemption.
"Closing Price" of any security on any day means the last reported sale
price, regular way, on such day or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the NYSE Composite Tape, or, if such security is
not listed or admitted to trading on the NYSE, on the principal national
securities exchange on which such security is listed or admitted to trading, or
if such security is not listed or admitted to trading on a national securities
exchange, on the National Market System of the National Association of
Securities Dealers, Inc. or, if such security is not quoted or admitted to
trading on such quotation system, on the principal quotation system on which
such security is listed or admitted to trading or quoted, or, if not listed or
admitted to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available in such manner, as furnished by any NYSE member
firm selected from time to time by the Board of Directors of the Company for
that purpose or, if not so available in such manner, as otherwise determined in
good faith by the Board of Directors of the Company.
REDEMPTION
The Preferred Securities have no stated maturity date but will be redeemed
upon the repayment of the Convertible Debentures at their maturity or to the
extent that the Convertible Debentures are redeemed or repaid upon acceleration.
The Convertible Debentures will mature on , 2016. In addition, in the
event that, at any time after the Conversion Termination Date (if any), the
number of outstanding Preferred Securities is less than 10% of the number of
Preferred Securities originally issued (including any Preferred Securities
issued upon exercise of the Underwriters' over-allotment option), the Company
shall have the right, at its option, to redeem the Convertible Debentures, in
whole but not in part, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest thereon (including, if interest
payments shall have been deferred as a result of an Extension Period, compounded
interest to the extent permitted by law) to the date fixed for redemption. The
Convertible Debentures are also redeemable by the Company at its option, in
whole but not in part, under certain circumstances upon the occurrence of a Tax
Event at a redemption price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest thereon (including, if interest payments shall have
been deferred as a result of an Extension Period, compounded interest to the
extent permitted by law) to the date fixed for redemption. Upon the repayment of
Convertible Debentures, whether at maturity or upon redemption or acceleration,
the Trust must redeem the Trust Securities at the Redemption Price; provided
that holders of Trust Securities shall be given not less than 30 nor more than
60 days notice of such redemption. See "Description of the Convertible
Debentures -- Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event shall occur and
be continuing, the Trust shall, unless the Convertible Debentures are redeemed
in the limited circumstances described below, be dissolved with the result that,
after satisfaction of creditors, if any, of the Trust, Convertible Debentures
with an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, and
having the same record dates for payment as, the Preferred Securities and the
Common Securities outstanding at such time would be distributed on a pro rata
basis to the holders of the Preferred Securities and the Common Securities in
liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"),
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which opinion may rely on published revenue rulings of the Internal Revenue
Service, to the effect that the holders of the Preferred Securities will not
recognize any income, gain or loss for Federal income tax purposes as a result
of such dissolution and distribution of Convertible Debentures; and, provided,
further, that if at the time there is available to the Trust the opportunity to
eliminate, within such 90-day period, the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which in the sole judgment of the Company
has or will cause no adverse effect on the Trust, the Company or the holders of
the Trust Securities and will involve no material cost, the Trust will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Regular Trustees have received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more than
an insubstantial risk that the Company would be precluded from deducting the
interest on the Convertible Debentures for Federal income tax purposes even if
the Convertible Debentures were distributed to the holders of Preferred
Securities and Common Securities in liquidation of such holders' interests in
the Trust as described above or (ii) the Regular Trustees shall have been
informed by such tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, the Company shall have the right, upon not less than 30 nor more
than 60 days' notice, to redeem the Convertible Debentures, in whole but not in
part for cash, within 90 days following the occurrence of such Tax Event, and
promptly following such redemption, the Preferred Securities and Common
Securities will be redeemed by the Trust at the Redemption Price; provided,
however, that if at the time there is available to the Company or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure which in the sole judgment of the
Company has or will cause no adverse effect on the Trust, the Company or the
holders of the Trust Securities and will involve no material costs, the Company
or the Trust will pursue such measure in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that 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 the date of this Prospectus (collectively, a "Change in Tax Law"),
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date thereof, subject to federal income tax with respect
to interest accrued or received on the Convertible Debentures, (ii) the Trust
is, or will be within 90 days of the date thereof, subject to more than a de
minimis amount of other taxes, duties or other governmental charges or (iii)
interest payable by the Company to the Trust on the Convertible Debentures 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 Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 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 1940 Act,
which Change in 1940 Act Law becomes effective on or after the date of this
Prospectus.
On the date fixed for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) DTC or its nominee, as the record holder of the
Preferred Securities held in book-entry form, will receive a registered global
certificate or certificates representing the Convertible Debentures to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by DTC or its nominee will be deemed to represent
beneficial
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interests in Convertible Debentures having an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the distribution rate of, with accrued and unpaid interest equal to accrued
and unpaid distributions on, and having the same record dates for payment as,
such Preferred Securities until such certificates are presented to the Company
or its agent for transfer or reissuance.
There can be no assurance as to the market price for either the Preferred
Securities or the Convertible Debentures which may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Convertible Debentures, which an investor may subsequently receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby. If
the Convertible Debentures are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to cause the Convertible
Debentures to be listed on the NYSE or on any such other national securities
exchange or similar organization as the Preferred Securities are then listed or
quoted.
REDEMPTION PROCEDURES
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), and if the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Convertible Debentures, then, by 12:00 noon, New
York time, on the redemption date, the Trust will irrevocably deposit with DTC
funds sufficient to pay the Redemption Price of all Global Preferred Securities
and will give DTC irrevocable instructions and authority to pay the Redemption
Price in respect of the Global Preferred Securities (see "Book-Entry Only
Issuance -- The Depository Trust Company"), and, in the event that the Preferred
Securities are not solely in book-entry form, the Trust will irrevocably deposit
with the paying agent for the Preferred Securities funds sufficient to pay the
Redemption Price in respect of any Certificated Preferred Securities and will
give such paying agent irrevocable instructions and authority to pay the
Redemption Price to the holders of Certificated Preferred Securities upon
surrender of their certificates. If notice of redemption shall have been given
and funds are deposited as required, then upon the date of such deposit 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. In the
event that any 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 which is a Business Day (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 the event that payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee described under
"Description of the Guarantee," distributions on such Preferred Securities will
continue to accrue at the then applicable rate, 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.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may, at
any time and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Trust Securities; provided, however, that, if on any distribution
date or redemption date a Declaration Event of Default shall have occurred and
be continuing, no payment of any distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of any Common Security shall be
made unless payment in full in cash of all accumulated and unpaid distributions
on all outstanding Preferred Securities for all distribution periods terminating
on or prior thereto, or in the case of payment of the amount payable upon
redemption of the Preferred Securities, the full Redemption Price in respect of
all outstanding Preferred Securities shall have been made or provided for, and
all funds available to the Property
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<PAGE> 41
Trustee shall first be applied to the payment in full in cash of all
distributions on, or the amount payable upon redemption of, Preferred Securities
then due and payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Preferred Securities and not the holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act in accordance with the terms of
the Preferred Securities and the Common Securities.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid distributions thereon (including, if
distributions shall have been deferred as the result of an Extension Period,
interest thereon to the extent permitted by applicable law) to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate principal amount equal to
the aggregate stated liquidation amount of, with an interest rate identical to
the distribution rate of, with accrued and unpaid interest equal to accrued and
unpaid distributions on, and having the same record dates for payment as, the
Preferred Securities have been distributed on a pro rata basis to the holders of
the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on November 1,
2021, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or the equivalent with respect to the Company or the
holder of the Common Securities, the filing of a certificate of cancellation
with respect to the Trust after having obtained the consent of at least a
majority in liquidation amount of the Trust Securities, voting together as a
single class, to file such certificate of cancellation, or the revocation of the
charter of the Company or the holder of the Common Securities and the expiration
of 90 days after the date of revocation without a reinstatement thereof, (iv)
upon the distribution of all of the Convertible Debentures upon the occurrence
of a Special Event, (v) upon the entry of a decree of a judicial dissolution of
the Company or the Trust or the holder of the Common Securities, (vi) upon
conversion of all of the outstanding Preferred Securities into Common Stock in
accordance with the provisions of the Declaration, or (vii) upon the redemption
of all the Trust Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety, to any corporation or other entity,
except as described below. The Trust may, 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 of the Trust Securities, the Property Trustee
or the Delaware Trustee consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State of the United
States; provided, that (i) if the Trust is not the survivor, such successor
entity either (x) expressly assumes all of the obligations of the Trust under
the Trust Securities or (y) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Preferred Securities rank with respect to distributions, assets and payments
upon liquidation,
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redemption and otherwise, (ii) the Company expressly acknowledges a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Convertible Debentures, (iii) the Preferred
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which the Preferred Securities are then
listed or quoted, (iv) such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any Successor Securities) to
be downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose substantially identical to that of the
Trust, (vii) the Company guarantees the obligations of such successor entity
under the Successor Securities at least to the extent provided by the Guarantee,
and (viii) prior to such merger, consolidation, amalgamation or replacement, the
Company has received an opinion of a nationally recognized counsel to the Trust
reasonably acceptable to the Property Trustee experienced in such matters to the
effect that: (A) such merger, consolidation, amalgamation or replacement will
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in the
new entity), (B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor such successor entity will be required to
register as an investment company under the 1940 Act and (C) following such
merger, consolidation, amalgamation or replacement, the Trust (or such successor
trust) will be treated as a grantor trust for United States Federal income tax
purposes. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or the successor entity to be classified as other than a grantor
trust for federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities 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 with respect to
certain matters under the Declaration and, therefore, the Indenture.
If the Property Trustee fails to enforce its rights under the Convertible
Debentures after a holder of Preferred Securities has made a written request,
such holder of record of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Convertible Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible 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 directly of the principal of or interest
on the Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
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Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Convertible Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Debentures
to be immediately due and payable. The Company and the Trust are each required
to file annually with the Property Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Guarantee -- Amendments and Assignment," and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities, voting separately as a class, have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Property Trustee, and direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee, as holder of the Convertible Debentures, to (i) exercise the
remedies available to it under the Indenture as holder of the Convertible
Debentures, (ii) waive any past Indenture Event of Default and its consequences
that is waiveable under the Indenture and (iii) exercise any right to rescind or
annul a declaration that the principal of all the Convertible Debentures shall
be due and payable; provided, however, that where a consent or action under the
Indenture would require the consent or act of the holders of more than a
majority of the aggregate principal amount of Convertible Debentures affected
thereby, only the holders of the percentage of the aggregate stated liquidation
amount of the Preferred Securities which is at least equal to the percentage
required under the Indenture may direct the Property Trustee to give such
consent or take such action. If the Property Trustee fails to enforce its rights
under the Convertible Debentures after a holder of record of Preferred
Securities has made a written request, such holder of record of Preferred
Securities may directly institute a legal proceeding directly against the
Company to enforce the Property Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the Property
Trustee or any other person or entity. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Convertible 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 Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Debentures. Such notice shall
state that such Indenture Event of Default also constitutes a Declaration Event
of Default. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy available to the Property Trustee or the
Indenture Trustee, the Property Trustee shall be under no obligation to take any
of the actions described in clause (i), (ii) or (iii) above unless the Property
Trustee has obtained an opinion of independent tax counsel to the effect that as
a result of such action, the Trust will not fail to be classified as a grantor
trust for United States federal income tax purposes and each holder will be
treated as owning an undivided beneficial interest in the Convertible
Debentures.
In the event the consent of the Property Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Convertible
Debentures, the Property Trustee shall request the direction of the holders of
the Trust Securities with respect to such amendment, modification or termination
and shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where a consent under the
Indenture would require the consent of the holders of more than a majority of
the aggregate principal amount of the Convertible Debentures, the Property
Trustee may only give such consent at the direction of the holders of at least
the
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same proportion in aggregate stated liquidation amount of the Trust Securities.
The Property Trustee shall be under no obligation to take any such action in
accordance with the direction of the holders of the Trust Securities unless the
Property Trustee has obtained an opinion of tax counsel to the effect that for
the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
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 Trust 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, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Convertible 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 that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Global Preferred Securities may exercise
their voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company."
Holders of the Preferred Securities will have no right to appoint or remove
the Issuer Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees or, if there are more than two Regular Trustees, a majority of the
Regular Trustees (and in certain circumstances the Property Trustee and the
Delaware Trustee), provided, that if any proposed amendment 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 Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding-up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class 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 the Trust Securities
affected thereby, voting together as a single class; provided, that 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 will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States Federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
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BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee), except under the limited circumstances described below. One or more
fully-registered Global Preferred Securities certificates, representing the
total aggregate number of Preferred Securities, will be issued and will be
deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the Global Preferred
Securities.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of Preferred
Securities ("Beneficial Owner") is in turn to be recorded on the Participants'
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written conformations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Preferred Securities are credited, which may or may not be the
Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Preferred Security, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Preferred Securities represented
thereby for all purposes under the Declaration and the Preferred Securities. No
beneficial owner of an interest in a Global Preferred Security will be able to
transfer that interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Preferred Securities are credited and only in respect of such portion of the
aggregate liquidation amount of Preferred Securities as to which such
Participant or Participants has or have given such direction. However, if there
is a Declaration Event of Default under the Preferred Securities, DTC will
exchange the Global Preferred Securities for Certificated Preferred Securities
which it will distribute to its Participants.
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Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Global Preferred Securities will be
sent to Cede & Co.
Although voting rights with respect to the Preferred Securities are
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to the Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the
Preferred Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Distributions on the Global Preferred Securities will be made to DTC in
immediately available funds. DTC's practice is to credit Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants and Indirect Participants
to Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participants and Indirect
Participants and not of DTC, the Trust or the Company, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trust, disbursement of such
payments to Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Participants and
Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Preferred Security will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interest in the Global Preferred Securities among Participants, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company, the Trust
nor the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving notice to the Trust.
In the event that (i) DTC notifies the Trust that it is unwilling or unable to
continue as a depositary for the Global Preferred Securities or if at any time
DTC ceases to be a clearing agency registered as such under the Securities
Exchange Act of 1934, and no successor depositary shall have been appointed
within 90 days of such notification or of the Trust becoming aware of DTC's
ceasing to be so registered, as the case may be, (ii) the Trust (with the
consent of the Company) in its sole discretion determines that the Global
Preferred Securities shall be exchanged for Certificated Preferred Securities or
(iii) there shall have occurred and be continuing a Declaration Event of
Default, certificates for the Preferred Securities will be printed and delivered
in exchange for interests in the Global Preferred Security and the Company will
appoint a Paying Agent, Registrar or co-registrar and Conversion Agent in the
Borough of Manhattan, The City of New York (if the Company does not at the time
have a Paying Agent, Registrar or co-registrar and Conversion Agent in such
location) with respect to the Preferred Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Preferred Securities shall be made to
DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of Certificated Preferred Securities (if
any), such payments shall be made by check mailed to the address of the holders
entitled thereto as such address shall appear on the Security Register or, at
the option of the Trust, by wire transfer to an account appropriately designated
by the holder entitled thereto (except that payments due upon redemption of
Certificated Preferred Securities shall be made against surrender of such
Certificated Preferred Securities at the office of the Paying Agent). The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Issuer Trustees. In the event that Fleet National Bank shall no longer be
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the Paying Agent, the Regular Trustees shall appoint a successor to act as
Paying Agent (which shall be a bank or trust company).
REGISTRAR, PAYING AGENT AND CONVERSION AGENT
The Property Trustee will initially act as Registrar, Paying Agent and
Conversion Agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
Fleet National Bank, the Property Trustee, is a participant in FINOVA
Capital's credit facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, certain of the
Company's subsidiaries maintain deposit accounts and conduct other banking
transactions with Fleet National Bank or its affiliates in the ordinary course
of their business. The Property Trustee, prior to the occurrence of a default
with respect to the Trust Securities, undertakes to perform only such duties as
are specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. Subject to such provisions, the Property Trustee is
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising their
voting rights, direct the Property Trustee to take any action following a
Declaration Event of Default.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for Federal income tax purposes so
that the Convertible Debentures will be treated as indebtedness of the Company
for Federal income tax purposes. In this connection, the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust or the Declaration that the Regular Trustees determine in
their discretion to be necessary or desirable for such purposes as long as such
action does not adversely affect the interests of the holders of the Preferred
Securities.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of certain terms of the Guarantee which will
be executed and delivered by the Company for the benefit of the holders from
time to time of Preferred Securities. The following summary of certain terms of
the Guarantee does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Guarantee, a form of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. The Guarantee incorporates by reference the terms of the Trust
Indenture Act. The Guarantee will be qualified under the Trust Indenture Act.
Fleet National Bank, as the Guarantee Trustee, will hold the Guarantee for the
benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company will
irrevocably agree to pay in full to the holders of the Preferred Securities
(except to the extent paid by the Trust), as and when due, regardless of any
defense, right of set off or counterclaim which the Trust may have or assert,
the following payments (the "Guarantee Payments"), without duplication: (i) any
accrued and unpaid distributions that are required to be paid on the Preferred
Securities to the extent the Trust has funds available therefor, (ii) the
Redemption Price, with respect to any Preferred Securities called for redemption
by the Trust, to the extent the Trust has funds available therefor and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Trust (other than in connection with the distribution of Convertible Debentures
to the holders of Preferred Securities or the redemption of all the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of
payment to the extent the Trust has funds available therefor and (b) the amount
of assets of the Trust remaining available for distribution to holders of
Preferred Securities upon the liquidation of the Trust. The holders of 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 or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. Any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the obligations of the Company under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. If the Company were to default on its obligation to
pay amounts payable on the Convertible Debentures, the Trust would lack
available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and in such event holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, a holder of the Preferred Securities would be
required to rely on the enforcement (1) by the Property Trustee of its rights,
as registered holder of the Convertible Debentures, against the Company pursuant
to the terms of the Convertible Debentures or (2) by such holder of Preferred
Securities of its right against the Company to enforce payments on Convertible
Debentures. See "Description of the Convertible Debentures." The Declaration
provides that each holder of Preferred Securities, by acceptance thereof, agrees
to the provisions of the Guarantee, including the subordination provisions
thereof, and the Indenture.
The Guarantee will be a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of issuance of such Preferred Securities
but will not apply to any payment of distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of the Trust, except to
the extent the Trust shall have funds available therefor. If the Company does
not make interest payments on the Convertible Debentures, the Trust will not pay
distributions on the Preferred Securities and will not have funds available
therefor. See "Description of the Convertible Debentures." The Guarantee, when
taken together with the Company's obligations under the Convertible Debentures,
the Indenture and the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Preferred Securities
issued by the Trust.
The Company has also agreed separately to irrevocably guarantee the
obligations of the Trust with respect to the Common Securities (the "Common
Securities Guarantee") to the same extent as the Guarantee, except that upon the
occurrence and during the continuation of an Indenture Event of Default,
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holders of Preferred Securities shall have priority over holders of Common
Securities with respect to Guarantee Payments.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that, so long as any Preferred
Securities remain outstanding, if (x) there shall have occurred and be
continuing any event that constitutes or, with the giving of notice or the lapse
of time or both, would constitute an Indenture Event of Default or an event of
default (as defined) under the Guarantee or (y) the Company has exercised its
option to defer interest payments on the Convertible Debentures by extending the
interest payment period and such period, or any extension thereof, shall be
continuing, then the Company (a) shall not declare or pay dividends on, or make
a distribution with respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock (or Common Stock
equivalents) in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents) (provided that
such contract is in effect or such security is outstanding at least 60 days
prior to the commencement of such Extension Period), (ii) purchases of shares of
Common Stock (or Common Stock equivalents) from officers or employees of the
Company or its subsidiaries upon termination of employment or retirement not
pursuant to any obligation under any contract or security requiring the Company
to purchase shares of Common Stock (or Common Stock equivalents) (provided that
such purchases by the Company upon termination of employment or retirement shall
be made at a price not to exceed the market value on the date of any such
purchase and shall not exceed $7.5 million in the aggregate for all officers and
employees), (iii) as a result of a reclassification of the Company's capital
stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock, (iv)
dividends or distributions of shares of Common Stock on Common Stock or (v) 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 make any guarantee payments with
respect to the foregoing)), (b) shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank pari passu
with or junior to the Convertible Debentures and (c) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee).
As part of the Guarantee, the Company will agree that it will honor all
obligations described therein relating to the conversion of the Preferred
Securities into Common Stock as described in "Description of the Preferred
Securities -- Conversion Rights."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of all the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities will be as set forth under "Description of the
Preferred Securities -- Voting Rights." All guarantees and agreements contained
in the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Company with or into another entity or
any permitted sale, transfer or lease of the Company's assets to another entity
as described under "Description of the Convertible Debentures -- Consolidation,
Merger and Sale of Assets," the Company may not assign its rights or delegate
its obligations under the Guarantee without the prior approval of the holders of
at least a majority of the aggregate stated liquidation amount of the Preferred
Securities then outstanding.
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TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Preferred Securities (i)
upon full payment of the Redemption Price of all Preferred Securities; or (ii)
upon distribution of the Convertible Debentures held by the Trust to the holders
of the Preferred Securities; or (iii) upon liquidation of the Trust; or (iv)
upon the distribution of Common Stock to such holder in respect of conversion of
such holder's Preferred Securities into Common Stock, and will terminate
completely upon full payment of the amounts payable in accordance with the
Declaration. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of Preferred Securities must
restore payment of any sum paid under such Preferred Securities or such
Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except any liabilities that may be pari passu
expressly by their terms, (ii) pari passu with the most senior preferred or
preference stock issued from time to time by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the Company and
(iii) senior to the Common Stock. The terms of the Preferred Securities provide
that each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee. See, also, "Risk
Factors -- Holding Company Structure" and "-- Ranking of Subordinate Obligations
Under the Guarantee and Convertible Debentures."
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may directly institute a legal proceeding against
the Company to enforce its rights under the Guarantee without instituting a
legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent person would exercise in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
See "Description of the Preferred Securities -- Information Concerning the
Property Trustee" for information as to the relationship between the Guarantee
Trustee and the Company.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a summary of certain terms of the Convertible Debentures
in which the Trust will invest the proceeds from the issuance and sale of the
Trust Securities. The following summary of certain terms of the Convertible
Debentures does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Indenture (the "Indenture") between the
Company and Fleet National Bank, as trustee (the "Indenture Trustee"), a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Certain capitalized terms used herein are defined in the
Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Convertible Debentures may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution."
If the Convertible Debentures are distributed to the holders of Preferred
Securities, the Company will use its best efforts to have the Convertible
Debentures listed on the NYSE or on such other national securities exchange or
similar organization on which the Preferred Securities are then listed or
quoted.
GENERAL
The Convertible Debentures will be issued as unsecured debt under the
Indenture. The Convertible Debentures will be limited in aggregate principal
amount to $103,092,800 million ($118,556,750 million if the Underwriters'
over-allotment option is exercised in full), such amount being the sum of the
aggregate stated liquidation amount of the Preferred Securities and the Common
Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will become due and
payable, together with any accrued and unpaid interest thereon, including
Compounded Interest (as defined herein), if any, and Additional Interest (as
defined herein), if any, on , 2016.
The Convertible Debentures, if distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, will
initially be issued in the same form as the Preferred Securities that such
Convertible Debentures replace. See "-- Book-Entry and Settlement." Under
certain limited circumstances, Convertible Debentures may be issued in
certificated form ("Certificated Convertible Debentures") in exchange for
Convertible Debentures in book-entry form ("Global Convertible Debentures"). In
the event that Convertible Debentures are issued in certificated form, such
Convertible Debentures will be in denominations of $50 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Global Convertible Debentures will be made to DTC, a successor
depositary or, in the event that no depositary is used, to a Paying Agent for
the Convertible Debentures. In the event Convertible Debentures are issued in
certificated form, principal and interest will be payable, the transfer of the
Convertible Debentures will be registrable, Convertible Debentures will be
exchangeable for Convertible Debentures of other denominations of a like
aggregate principal amount, and the Convertible Debentures may be surrendered
for conversion into Common Stock, at an office or agency of the Company
maintained for such purpose in the Borough of Manhattan, The City of New York;
provided, that payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto or by wire transfer
to an account appropriately designated by the holder entitled thereto.
There are no covenants or provisions in the Indenture that afford holders
of Convertible Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
INTEREST
Each Convertible Debenture will bear interest at the rate of %
per annum from the Original Issue Date, payable quarterly in arrears on each
March 31, June 30, September 30 and December 31 (each, an "Interest Payment
Date"), commencing December 31, 1996, to the person in whose name such
Convertible Debenture is registered, subject to certain exceptions, at the close
of business on the Business Day
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next preceding such Interest Payment Date. In the event that the Convertible
Debentures do not continue to remain solely in book-entry form, the record date
for each payment of interest thereon shall be the day 15 calendar days prior to
the relevant interest payment date; provided that, if such record date does not
conform to the rules of any securities exchange on which the Convertible
Debentures are then listed, if any, such record date shall be changed to conform
to the rules of such securities exchange.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed in such a
30-day month. In the event that any Interest Payment Date, Redemption Date,
Conversion Termination Date or stated maturity date of the Convertible
Debentures is not a Business Day, then payment of the interest or principal or
conversion of the Convertible Debentures need not be made on such date, but may
be made on the next succeeding Day that is a Business Day (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 such date.
OPTION TO EXTEND INTEREST PAYMENT PERIODS
The Company shall have the right at any time during the term of the
Convertible Debentures to defer interest payments from time to time by extending
the interest payment period for successive periods not exceeding 20 consecutive
quarters for each such period; provided, no Extension Period may extend beyond
the maturity date of the Convertible Debentures. Each Extension Period, if any,
will end on an Interest Payment Date. At the end of each Extension Period, the
Company shall pay all interest then accrued and unpaid (including Additional
Interest, if any) together with interest thereon, compounded quarterly at the
interest rate borne by the Convertible Debentures, to the extent permitted by
applicable law ("Compounded Interest"); provided, that during any Extension
Period, the Company (a) shall not declare or pay dividends on, or make a
distribution with respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock (or Common Stock
equivalents) in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents) (provided that
such contract is in effect or such security is outstanding at least 60 days
prior to the commencement of such Extension Period), (ii) purchases of shares of
Common Stock (or Common Stock equivalents) from officers or employees of the
Company or its subsidiaries upon termination of employment or retirement not
pursuant to any obligation under any contract or security requiring the Company
to purchase shares of Common Stock (or Common Stock equivalents) (provided that
such purchases by the Company upon termination of employment or retirement shall
be made at a price not to exceed the market value on the date of any such
purchase and shall not exceed $7.5 million in the aggregate for all officers and
employees), (iii) as a result of a reclassification of the Company's capital
stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock, (iv)
dividends or distributions of shares of Common Stock on Common Stock or (v) 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 make any guarantee payments with
respect to the foregoing)), (b) shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank pari passu
with or junior to the Convertible Debentures and (c) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided that such Extension Period,
together with all previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity date of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period. The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Convertible
Debentures. If the Property Trustee shall be the sole holder of the Convertible
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Debentures, the Company shall give the Regular Trustees, the Indenture Trustee
and the Property Trustee notice of its selection of such Extension Period at
least one Business Day prior to the earlier of (i) the date the distributions on
the Preferred Securities are payable or (ii) the date the Trust is required to
give notice to the NYSE (or any applicable self-regulatory organization) or to
holders of the Preferred Securities of the record date or the date such
distribution is payable, but in any event not less than ten Business Days prior
to such record date. The Company shall cause the Trust to give notice of the
Company's selection of such Extension Period to the holders of the Preferred
Securities. If the Property Trustee shall not be the sole holder of the
Convertible Debentures, the Company shall give the Indenture Trustee, the
Property Trustee and the holders of the Convertible Debentures notice of its
selection of such Extension Period at least ten 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 to the NYSE (or any applicable
self-regulatory organization) or to holders of the Convertible Debentures of the
record or payment date of such related interest payment, but in any event not
less than two Business Days prior to such record date.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain legislation (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer and that are issued on or after
December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman William
V. Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a
joint statement (the "Joint Statement") indicating their intent that the
Proposed Legislation, if adopted by either of the tax-writing committees of
Congress, would have an effective date that is no earlier than the date of
"appropriate Congressional action." In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote letters to Treasury officials concurring
with the views expressed in the Joint Statement (the "Democrat Letters"). Based
upon the Joint Statement and the Democrat letters, it is expected that if the
Proposed Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." Furthermore, even if the Proposed
Legislation were enacted in its current form with effective date provisions
making it applicable to the Convertible Debentures, it would not affect the
Company's ability to deduct the interest payable on the Convertible Debentures
because their maximum term will not exceed 20 years. There can be no assurance,
however, that any proposed legislation enacted after the date hereof will not
adversely affect the ability of the Company to deduct the interest payable on
the Convertible Debentures. Accordingly, there can be no assurance that a Tax
Event will not occur. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
ADDITIONAL INTEREST
If at any time while the Property Trustee is the sole holder of the
Convertible Debentures, the Trust would be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Convertible Debentures such additional amounts as shall be required so
that the net amounts received and retained by the Trust after paying any such
taxes, duties, assessments or governmental charges will be not less than the
amounts the Trust would have received had no such taxes, duties, assessments or
governmental charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
Convertible Debentures will be convertible at any time prior to the earlier
of (i) 5:00 p.m. (New York City time) on the Business Day immediately preceding
the date of repayment of such Convertible Debentures, whether at maturity or
upon redemption, and (ii) 5:00 p.m. (New York City time) on the Conversion
Termination Date (if any), into Common Stock at the option of the holders of the
Convertible Debentures at the conversion price set forth on the cover page of
this Prospectus, subject to the conversion
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price adjustments described under "Description of the Preferred
Securities -- Conversion Rights." The Trust will covenant not to convert
Convertible Debentures held by it except pursuant to a notice of conversion
delivered to the Conversion Agent by a holder of Preferred Securities. Upon
surrender of a Preferred Security to the Conversion Agent for conversion, the
Trust will distribute $50 principal amount of the Convertible Debentures to the
Conversion Agent on behalf of the holder of the Preferred Security so converted,
whereupon the Conversion Agent will convert such Convertible Debentures into
Common Stock on behalf of such holder. The Company's delivery to the holders of
the Convertible Debentures (through the Conversion Agent) of the fixed number of
shares of Common Stock into which the Convertible Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) will be
deemed to satisfy the Company's obligation to pay the principal amount of the
Convertible Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid or
duly provided for; provided, however, that if any Convertible Debenture is
converted after a record date for payment of interest, the interest payable on
the related Interest Payment Date with respect to such Convertible Debenture
shall be paid to the Trust (which will distribute such interest to the holder of
such Convertible Debentures on the record date) or other holder of such
Convertible Debenture on the record date, as the case may be, despite such
conversion; provided, further, that if notice of redemption of Convertible
Debentures is mailed or otherwise given to holders of Convertible Debentures or
the Trust issues a press release announcing a Conversion Termination Date, then,
if any holder of Convertible Debentures converts any Convertible Debentures into
Common Stock on any date on or after the date on which such notice of redemption
is mailed or otherwise given or the date of such press release, as the case may
be, and if such date of conversion falls on any day from and including the first
day of an Extension Period and on or prior to the record date for the Interest
Payment Date on which such Extension Period ends, such converting holder shall
be entitled to receive all accrued and unpaid interest on such Convertible
Debentures (including Additional Interest, if any, and Compounded Interest, if
any, to the extent permitted by applicable law) to the most recent Interest
Payment Date prior to the date of such conversion (or, if the date of such
conversion is on or prior to the Interest Payment Date upon which such Extension
Period ends and after the record date for such Interest Payment Date, the holder
of such Convertible Debentures at 5:00 p.m. (New York City time) on such record
date shall be entitled to receive, on such Interest Payment Date, all accrued
and unpaid interest on such Convertible Debentures (including Additional
Interest, if any, and Compounded Interest, if any, to the extent permitted by
applicable law) to such Interest Payment Date), which amount shall be
simultaneously distributed to the holders of the Preferred Securities so that
any holder of Preferred Securities who delivers such Preferred Securities for
conversion under the circumstances and during the periods described above will
be entitled to receive accumulated and unpaid distributions in a corresponding
amount. See "Description of the Preferred Securities -- Conversion Rights" and
"-- Redemption."
On and after , 1999, the Company may, at its option, terminate
the conversion rights of holders of the Convertible Debentures if (i) the
Company is then current in the payment of interest on the Convertible Debentures
(including Additional Interest and Compounded Interest, if any) (except to the
extent that the payment of interest has been duly deferred as the result of an
Extension Period) and (ii) for at least 20 trading days within any period of 30
consecutive trading days ending on or after , 1999, including the
last trading day of such period, the Closing Price of the Common Stock shall
have exceeded 120% of the then applicable conversion price of the Convertible
Debentures. In order to exercise this conversion termination option, the Company
must cause the Trust to issue (or, if the Convertible Debentures shall have been
distributed to holders of the Preferred Securities following a Special Event,
the Company must issue) a press release for publication on the Dow Jones News
Service or on a comparable news service announcing the Conversion Termination
Date prior to the opening of business on the second trading day after a period
in which the condition in the preceding sentence has been met, but in no event
prior to , 1999. The press release shall announce the Conversion
Termination Date and provide the conversion price and the Closing Price of the
Preferred Securities and the Common Stock, in each case as of the close of
business on the trading day next preceding the date of the press release. The
Company is also required to give notice by first-class mail to holders of the
Convertible Debentures in the manner provided for holders of Preferred
Securities under "Description of the Preferred Securities -- Conversion
Rights -- Termination of Conversion Rights." The Conversion Termination Date
will be a Business Day selected by the Company which is not less
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than 30 nor more than 60 calendar days after the date on which such press
release is issued. In the event that the Company exercises its conversion
termination option, conversion rights will expire at 5:00 p.m. (New York City
time) on the Conversion Termination Date. In the event that the Company has not
exercised its conversion termination option and the Convertible Debentures are
otherwise called for redemption, the Convertible Debentures will be convertible
at any time prior to 5:00 p.m. (New York City time) on the Business Day
immediately preceding the date of such redemption and in any other case at any
time prior to 5:00 p.m. (New York City time) on the Business Day immediately
preceding the stated maturity date of the Convertible Debentures.
REDEMPTION
In the event that, at any time after any Conversion Termination Date (if
any), the number of outstanding Preferred Securities is less than 10% of the
number of Preferred Securities originally issued (including any Preferred
Securities issued upon exercise of the Underwriters' over-allotment option) (or,
if the Convertible Debentures have been distributed to holders of Preferred
Securities following the occurrence of a Special Event, the aggregate principal
amount of the outstanding Convertible Debentures is less than 10% of the
aggregate principal amount of Convertible Debentures purchased by the Trust with
the proceeds from the sale of the Preferred Securities, including any Preferred
Securities issued upon exercise of such over-allotment option), the Company may,
at its option, redeem the Convertible Debentures, in whole but not in part, at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest (including Additional Interest, if any, and Compounded Interest,
if any) to the date fixed for redemption. The Convertible Debentures also may be
redeemed, at the option of the Company, in whole but not in part, in certain
circumstances upon the occurrence of a Tax Event as described under "Description
of the Preferred Securities -- Special Event Redemption or Distribution," at a
redemption price equal to 100% of the principal amount thereof plus accrued and
unpaid interest (including Additional Interest, if any and Compounded Interest,
if any) to the date fixed for redemption. Any redemption of Convertible
Debentures shall be made on not less than 30 nor more than 60 days' notice to
the holders of the Convertible Debentures. Upon the repayment of the Convertible
Debentures, whether at maturity or upon redemption, the proceeds from such
repayment shall simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Convertible Debentures so repaid or redeemed at the Redemption Price.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. No payment of principal of (including redemption payments, if any) or
interest on the Convertible Debentures may be made if (i) any Senior
Indebtedness of the Company is not paid when due and any applicable grace period
with respect to such default has ended and such default has not been cured or
waived or ceased to exist or (ii) the maturity of any Senior Indebtedness of the
Company has been accelerated because of a default. Upon any distribution of
assets of the Company to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all principal of, and premium, if
any, and interest due or to become due on all Senior Indebtedness of the Company
must be paid in full before the holders of the Convertible Debentures are
entitled to receive or retain any payment. Upon satisfaction of all claims
related to all Senior Indebtedness of the Company then outstanding, the rights
of the holders of the Convertible Debentures will be subrogated to the rights of
the holders of Senior Indebtedness of the Company to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Convertible Debentures are paid in full.
The Indenture does not limit the amount of indebtedness, including Senior
Indebtedness, which may be incurred by the Company. At September 30, 1996, the
Company had no Senior Indebtedness outstanding.
The term "Senior Indebtedness" shall mean, with respect to the Company: (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
such obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor
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under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business), (iv) all obligations of such
obligor for the reimbursement on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction, (v) all obligations of
the type referred to in clauses (i) through (iv) above of other persons for the
payment of which such obligor is responsible or liable as obligor, guarantor or
otherwise, and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other persons secured by any lien on any property or asset
of such obligor (whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness that is by its terms subordinated to or
pari passu with the Convertible Debentures and (2) any indebtedness between or
among such obligor or its affiliates, including all other debt securities and
guarantees in respect of those debt securities, issued to any other trust, or a
trustee of such trust, partnership, limited liability company or other entity
affiliated with the Company that is a financing vehicle of the Company (a
"financing entity") in connection with the issuance by such financing entity of
preferred securities or other securities that rank, or the Company's guarantee
of which ranks, pari passu with, or junior to, the Preferred Securities or the
Guarantee, respectively. Such Senior Indebtedness shall continue to be Senior
Indebtedness and shall be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
In addition, the Company is a holding company which conducts substantially
all of its operations through subsidiaries. As a result, the obligations of the
Company under the Convertible Debentures are effectively subordinated to all
existing and future indebtedness and other liabilities, including trade
payables, of the Company's subsidiaries. At September 30, 1996, the indebtedness
and other liabilities of such subsidiaries aggregated approximately $6.73
billion. See "Risk Factors -- Holding Company Structure."
CERTAIN COVENANTS
In the Indenture, the Company has covenanted that, so long as any
Convertible Debentures are outstanding, if (x) there shall have occurred and be
continuing any event that constitutes or, with the giving of notice or the lapse
of time or both, would constitute an Indenture Event of Default, (y) the Company
shall be in default with respect to its payment of any obligations under the
Guarantee, or (z) the Company has exercised its option to defer interest
payments on the Convertible Debentures by extending the interest payment period
and such period, or any extension thereof, shall be continuing, then the Company
(a) shall not declare or pay dividends on, or make a distribution with respect
to, or redeem or purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock (other than (i) purchases or acquisitions of shares
of Common Stock (or Common Stock equivalents) in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security requiring the Company to purchase shares of Common Stock (or Common
Stock equivalents) (provided that such contract is in effect or such security is
outstanding at least 60 days prior to the commencement of such Extension
Period), (ii) purchases of shares of Common Stock (or Common Stock equivalents)
from officers or employees of the Company or its subsidiaries upon termination
of employment or retirement not pursuant to any obligation under any contract or
security requiring the Company to purchase shares of Common Stock (or Common
Stock equivalents) (provided that such purchases by the Company upon termination
of employment or retirement shall be made at a price not to exceed the market
value on the date of any such purchase and shall not exceed $7.5 million in the
aggregate for all officers and employees), (iii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iv) dividends or distributions of shares of
Common Stock on Common Stock or (v) 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 make any guarantee payments with respect to the foregoing)), (b) shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with or junior to the Convertible Debentures and
(c) shall not make any guarantee payments with respect to the foregoing (other
than pursuant to the Guarantee).
The Company will covenant (i) to maintain 100% ownership, directly or
indirectly, of the Common Securities of the Trust; provided however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) to use its reasonable
efforts to
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cause the Trust (x) to remain a statutory business trust, except in connection
with the distribution of Convertible Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes and
(iii) to use its reasonable efforts to cause each holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Convertible
Debentures.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other person or entity or convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis to any
person unless (a)(i) the Company is the surviving corporation in any such merger
or (ii) if the Company is not the survivor, the successor is a corporation
organized in the United States and expressly assumes the due and punctual
payment of the principal of and interest (including Additional Interest and
Compounded Interest, if any) on all Convertible Debentures issued thereunder and
the performance of every other covenant of the Indenture on the part of the
Company, (b) immediately thereafter no Indenture Event of Default and no event
which, after notice or lapse of time, or both, would become an Indenture Event
of Default, shall have happened and be continuing and (c) the Company has
delivered to the Trustee the officers' certificate and opinion of counsel
required by the Indenture. Upon any such consolidation, merger, conveyance,
transfer or lease, the successor corporation shall succeed to and be substituted
for the Company under the Indenture and thereafter (except in the case of a
lease) the predecessor corporation shall be relieved of all obligations and
covenants under the Indenture and the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of the Preferred Securities in connection with
the involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Special Event, the Convertible Debentures
will be issued in the same form as the Preferred Securities which such
Convertible Debentures replace. Any Global Preferred Security will be replaced
by one or more Global Convertible Debentures registered in the name of the
depositary or its nominee. Except under the limited circumstances described
below, the Global Convertible Debentures will not be exchangeable for, and will
not otherwise be issuable as, Certificated Convertible Debentures. The Global
Convertible Debentures described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Convertible Debenture.
Except as provided below, owners of beneficial interests in such a Global
Convertible Debenture will not be entitled to receive physical delivery of
Convertible Debentures in definitive form and will not be considered the holders
thereof for any purpose under the Indenture, and no Global Convertible Debenture
shall be exchangeable, except for another Global Convertible Debenture of like
denomination and tenor to be registered in the name of the depositary or its
nominee or a successor depositary or its nominee. Accordingly, each Beneficial
Owner must rely on the procedures of DTC or, if such person is not a
Participant, on the procedures of the Participant and, if applicable, Indirect
Participant through which such person owns its interest to exercise any rights
of a holder under the Indenture.
THE DEPOSITARY
If Convertible Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust and a Global
Convertible Debenture is issued, DTC will act as securities depositary for such
Global Convertible Debenture. For a description of DTC and the specific terms of
the depositary arrangements, see "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company." As of
the date of this Prospectus, the description therein of DTC's book-entry system
and
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DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Preferred Securities apply in all material respects to any
debt obligations represented by one or more Global Convertible Debentures held
by DTC. The Company may appoint a successor to DTC or any successor depositary
in the event DTC or such successor depositary is unable or unwilling to continue
as a depositary for the Global Convertible Debentures.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Convertible Debenture or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Convertible Debenture shall be exchanged for Certificated
Convertible Debentures registered in the names of persons other than DTC or any
successor depositary (each, a "Depositary") or its nominee only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
depositary for the Global Convertible Debentures or if at any time the
Depositary ceases to be a clearing agency registered as such under the
Securities Exchange Act of 1934, and no successor Depositary shall have been
appointed within 90 days of such notification or of the Company becoming aware
of the Depositary's ceasing to be so registered, as the case may be, (ii) the
Company in its sole discretion determines that the Global Convertible Debentures
shall be exchanged for Certificated Convertible Debentures or (iii) there shall
have occurred and be continuing an Indenture Event of Default. Any Global
Convertible Debenture that is exchanged pursuant to the preceding sentence shall
be exchanged for Certificated Convertible Debentures registered in such names as
the Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Convertible Debenture.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to the Convertible Debentures: (i) failure for 30 days to
pay interest on any Convertible Debentures, including any Additional Interest
and Compounded Interest in respect thereof, when due, provided that a valid
extension of an interest payment period will not constitute a default in the
payment of interest (including any Additional Interest and Compounded Interest,
if any,) for this purpose; or (ii) failure to pay principal of any Convertible
Debentures when due, whether at maturity, upon redemption, by declaration or
otherwise; or (iii) failure to observe or perform any other covenant contained
in the Indenture for 90 days after notice to the Company by the Indenture
Trustee or by the holders of not less than 25% in aggregate outstanding
principal amount of the Convertible Debentures; or (iv) failure by the Company
to deliver shares of Common Stock upon an election by a holder of Preferred
Securities to convert such Preferred Securities; or (v) the dissolution, winding
up or termination of the Trust, except in connection with the distribution of
Convertible Debentures to the holders of Preferred Securities in liquidation of
the Trust upon the redemption of all outstanding Preferred Securities or in
connection with certain mergers, consolidations or amalgamations permitted by
the Declaration; or (vi) certain events in bankruptcy, insolvency or
reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in aggregate
principal amount of the outstanding Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Indenture Event of Default; provided,
however, that, after such acceleration, but before a judgment or decree based on
acceleration is obtained, the holders of a majority in aggregate principal
amount of outstanding Convertible Debentures may, under certain circumstances,
rescind and annul such acceleration if all Indenture Events of Default, other
than the nonpayment of accelerated principal and interest, have been cured or
waived as provided in the Indenture.
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures
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on the date such interest or principal is otherwise payable, the Company
acknowledges that, in such event, a holder of Preferred Securities may institute
a Direct Action for payment on or after the respective due date specified in the
Convertible Debentures. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
all the holders of Preferred Securities. Notwithstanding any payment made to
such holder of Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of and interest
on the Convertible Debentures held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Convertible Debentures may, on behalf of the holders of all the
Convertible Debentures, waive any past defaults except (a) a default in payment
of the principal of or interest on any Convertible Debentures and (b) a default
in respect of a covenant or provision of the Indenture which cannot be amended
or modified without the consent of the holder of each Convertible Debenture
affected; provided, however, that if the Convertible Debentures are held by the
Trust or a trustee of such Trust, such waiver shall not be effective until the
holders of a majority in aggregate liquidation amount of Trust Securities shall
have consented to such waiver; provided, further, that if the consent of the
holder of each outstanding Convertible Debenture is required, such waiver shall
not be effective until each holder of the Trust Securities shall have consented
to such waiver.
A default under any other indebtedness of the Company or the Trust would
not constitute an Indenture Event of Default.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Indenture Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any
holders of Convertible Debentures, unless such holders shall have offered to the
Indenture Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Indenture Trustee, the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or power
conferred on the Indenture Trustee.
No holder of any Convertible Debenture will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to the Indenture Trustee written
notice of a continuing Indenture Event of Default, (ii) if the Trust is not the
sole holder of Convertible Debentures, the holders of at least 25% in aggregate
principal amount of the Convertible Debentures then outstanding shall have made
written request to the Indenture Trustee to institute proceedings, (iii) such
holder has offered reasonable indemnity to the Indenture Trustee to institute
such proceeding as Indenture Trustee, (iv) the Indenture Trustee shall have
failed to institute such proceeding within 60 days of such notice and offer of
indemnity, and (v) the Indenture Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding
Convertible Debentures a direction inconsistent with such request. However, such
limitations do not apply to a suit instituted by a holder of a Convertible
Debenture for enforcement of payment of the principal of or interest on such
Convertible Debenture on or after the respective due dates expressed in such
Convertible Debenture.
The Company is required to file annually with the Indenture Trustee and the
Property Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to modify
the Indenture or the rights of the holders of Convertible Debentures; provided,
however, that no such modification may, without the consent of the holder of
each outstanding Convertible
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Debenture affected thereby, (i) extend the stated maturity of the Convertible
Debentures or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or (ii) adversely affect the right to
convert Convertible Debentures or modify the provisions of the Indenture with
respect to subordination of the Convertible Debentures in any manner adverse to
the holders or (iii) reduce the percentage in aggregate principal amount of
outstanding Convertible Debentures, the holders of which are required to consent
to any such supplemental indenture.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, comply with the Trust Indenture Act and for certain other
customary purposes.
GOVERNING LAW
The Indenture and the Convertible Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
See "Description of the Preferred Securities -- Information Concerning the
Property Trustee" for information as to the relationship between the Indenture
Trustee and the Company.
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EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE DEBENTURES
AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures will match the distribution rate and distribution and other payment
dates for the Preferred Securities; (iii) pursuant to the Indenture, the Company
shall pay all, and the Trust shall not be obligated to pay, directly or
indirectly, any, costs, expenses, debt and obligations of the Trust other than
with respect to the Trust Securities; and (iv) the Declaration further provides
that the Issuer Trustees will not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Convertible Debentures purchased by the Trust, it is expected that the
Trust will not have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of its issuance but does not apply to any
payment of distributions unless and until the Trust has sufficient funds for the
payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), will provide a full and unconditional guarantee of amounts on
the Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities -- Book-Entry
Only Issuance -- The Depository Trust Company" and "Description of the Preferred
Securities -- Voting Rights," may direct the Property Trustee to enforce its
rights under the Convertible Debentures. If the Property Trustee fails to
enforce its rights under the Convertible Debentures, any holder of Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the Property Trustee's rights under the Convertible Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
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 institute a Direct Action for payment on or after the respective
due date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Preferred Securities. If
the Company fails to make payments under the Guarantee, the Guarantee provides a
mechanism whereby the holders of the Preferred Securities may direct the
Guarantee Trustee to enforce its rights thereunder. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee, or any other person or
entity.
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DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Common Stock, the
Preferred Stock, the Junior Participating Preferred Stock and the Rights does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Company's Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the certificate of designation for the
Junior Participating Preferred Stock and the Rights Agreement dated as of
February 15, 1992, as amended and restated as of September 14, 1995 (the "Rights
Agreement"), between the Company and Bank One, Arizona, N.A., as Rights Agent,
copies of which have been filed or incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part, and are available
from the Company as described under "Available Information," and which are
incorporated herein by reference.
The Company is authorized by the Certificate of Incorporation to issue an
aggregate of 105,000,000 shares of stock, consisting of 5,000,000 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"), and 100,000,000
shares of Common Stock. As of September 30, 1996, there were 27,471,000 shares
of Common Stock outstanding (excluding 951,000 treasury shares held by the
Company) and no shares of Preferred Stock outstanding. However, the Company has
authorized 600,000 shares of Junior Participating Preferred Stock which have
been reserved for issuance upon the exercise of the Rights.
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share. The
Certificate of Incorporation does not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
shares of Preferred Stock, the holders of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors (the
"Board") from funds legally available therefor, and upon liquidation are
entitled to receive pro rata all assets of the Company remaining after payment
or provision for liabilities and amounts owing in respect of any outstanding
Preferred Stock. The holders of shares of Common Stock do not have preemptive
rights to subscribe for or purchase any shares of capital stock or other
securities of the Company.
PREFERRED STOCK
Under the Certificate of Incorporation, the Board is authorized, without
stockholder action, to cause the issuance of Preferred Stock in one or more
series, with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as shall be determined by the Board. Thus, the
Board, without stockholder approval, could authorize the issuance of Preferred
Stock with voting, conversion and other rights that could adversely affect the
voting power and other rights of the holders of the Common Stock or that could
make it more difficult for another company to effect certain business
combinations with the Company. See "-- Certain Other Provisions of the
Certificate of Incorporation, the Bylaws and Delaware Law -- Preferred Stock"
below.
SHAREHOLDER RIGHTS PLAN
In 1992, a dividend of one junior participating preferred share purchase
right (a "Right") was paid in respect of each then outstanding share of Common
Stock. Likewise, until the Rights Distribution Date (as defined below) or the
expiration, exchange or redemption of the Rights as described below, one Right
has been and will be issued with each newly issued share of Common Stock
(including Common Stock issuable upon conversion of the Preferred Securities).
Each Right entitles the registered holder to purchase from the Company 1/100th
of a share of Junior Participating Preferred Stock, par value $.01 per share
(the "Junior Participating Preferred Stock"), of the Company at a price of $135
per 1/100th of a share (the "Junior Participating Preferred Stock Purchase
Price"), subject to adjustment under certain circumstances. The terms of the
Rights are set forth in the Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
(the "Shares Acquisition Date") that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership of
20% or more of the then outstanding shares of the Common Stock or (ii) 10
business
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days (or such later date as may be determined by action of the Board prior to
such time as any person or group becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of the outstanding shares of the
Common Stock (the earlier of such dates being called the "Rights Distribution
Date"), the Rights will be evidenced by the certificates representing shares of
Common Stock. The Rights Agreement provides that, until the Rights Distribution
Date (or earlier redemption, exchange or expiration of the Rights), the Rights
will be transferred with and only with the shares of Common Stock.
The Rights will not be exercisable until the Rights Distribution Date. The
Rights will expire on February 28, 2002 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case, as described below.
Because of the nature of the dividend, liquidation and voting rights of
Junior Participating Preferred Stock, the value of the 1/100th interest in a
share of Junior Participating Preferred Stock purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person (unless the event causing such person to become an
Acquiring Person is an acquisition of Common Stock pursuant to a tender or
exchange offer for all outstanding Common Stock at a price and on terms
determined to be fair and otherwise in the best interests of the Company and its
shareholders by the independent directors), proper provision will be made so
that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise thereof at the then current exercise price that number
of shares of Common Stock having a market value of two times the exercise price
of the Right (such right being referred to as a "Flip-in Right"). In the event
that, at any time on or after the date that any person has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction (unless (i) the acquisition of Common Stock was pursuant to a tender
or exchange offer for all outstanding Common Stock at a price determined to be
fair and otherwise in the best interests of the Company and its shareholders by
the independent directors, (ii) the price per share of Common Stock offered is
not less than the price per share of Common Stock paid to all holders of Common
Stock whose shares were purchased pursuant to such tender or exchange offer and
(iii) the form of consideration being offered to the remaining holders of Common
Stock pursuant to such transaction is the same as the form paid pursuant to such
tender or exchange offer, in which case all Rights shall expire) or 50% or more
of its consolidated assets or earning power are sold, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two times the exercise price of the
Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50% or more of the outstanding shares of Common Stock, the Board may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock, or 1/100th of a share of Junior Participating Preferred Stock, per Right
(subject to adjustment).
At any time prior to the earlier of (i) the close of business on the
fifteenth day following the Shares Acquisition Date or (ii) the Final Expiration
Date, the Board may redeem the Rights in whole, but not in part, at a price of
$.01 per Right (the "Junior Preferred Stock Redemption Price"). The redemption
of the Rights may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. The Board may at
its option, pay the Redemption Price in cash, Common Stock or any other form of
consideration it deems appropriate. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Junior Preferred Stock Redemption
Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
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The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
and thereby effect a change in the composition of the Board on terms not
approved by the Board, including by means of a tender offer at a premium to the
market price, other than an offer conditioned on a substantial number of Rights
being acquired. The Rights should not interfere with any merger or business
combination approved by the Board since the Rights may be redeemed by the
Company at the Junior Preferred Stock Redemption Price prior to the time that a
person or group has become an Acquiring Person.
In the event that the Rights become exercisable, the Company intends to
register the shares of Junior Preferred Stock for which the Rights may be
exercised, in accordance with applicable law.
CERTAIN OTHER PROVISIONS OF THE CERTIFICATE OF INCORPORATION, THE BYLAWS AND
DELAWARE LAW
The Certificate of Incorporation and Bylaws contain certain provisions that
could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise. The description set forth below is intended
as a summary only, does not purport to be complete, and is subject to, and is
qualified in its entirety by reference to, the Certificate of Incorporation and
the Bylaws of the Company, which are incorporated by reference as exhibits to
the Registration Statement of which this Prospectus forms a part.
Delaware law permits a corporation to eliminate or limit the personal
liability of its directors to the corporation or to any of its stockholders for
monetary damages for a breach of fiduciary duty as a director, except (i) for
breach of the director's duty of loyalty, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for certain unlawful dividends and stock purchases and redemptions or (iv)
for any transaction from which the director derived an improper personal
benefit. The Company's Certificate of Incorporation provides that no director
will be personally liable to the Company or its stockholders for monetary
damages for any breach of his fiduciary duty as a director, except as provided
by Delaware law.
Classified Board of Directors. The Certificate of Incorporation and Bylaws
of the Company provide that the Board will be divided into three classes of
directors, with the classes to be as nearly equal in number as possible. The
Certificate of Incorporation and the Bylaws provide that one class of directors
will be elected each year for a three-year term.
The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Board. At least two
annual meetings of stockholders, instead of one, will generally be required to
effect a change in a majority of the Board. Such a delay may help ensure that
the Company's directors, if confronted by a holder attempting to force a proxy
contest, a tender or exchange offer, or an extraordinary corporate transaction,
would have sufficient time to review the proposal as well as any available
alternatives to the proposal and to act in what they believe to be the best
interest of the stockholders. The classification provisions will apply to every
election of directors, however, regardless of whether a change in the
composition of the Board would be beneficial to the Company and its stockholders
and whether or not a majority of the Company's stockholders believe that such a
change would be desirable.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. The classification of the
Board could thus increase the likelihood that incumbent directors will retain
their positions. In addition, because the classification provisions may
discourage accumulations of large blocks of the Company's stock by purchasers
whose objective is to take control of the Company and remove a majority of the
Board, the classification of the Board could tend to reduce the likelihood of
fluctuations in the market price of the Common Stock that might result from
accumulations of large blocks. Accordingly, stockholders could be deprived of
certain opportunities to sell their shares of Common Stock at a higher market
price than might otherwise be the case.
Number of Directors; Removal; Filling Vacancies. The Certificate of
Incorporation provides that, subject to any rights of holders of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors will be fixed in the manner provided in the Bylaws. The Bylaws provide
that, subject to
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any rights of holders of Preferred Stock to elect directors under specified
circumstances, the number of directors will be fixed from time to time
exclusively pursuant to a resolution adopted by directors constituting a
majority of the total number of directors that the Company would have if there
were no vacancies on the Board (the "Whole Board"), but must consist of not more
than seventeen nor less than three directors. In addition, the Bylaws provide
that, subject to any rights of holders of Preferred Stock, and unless the Board
otherwise determines, any vacancies will be filled only by the affirmative vote
of a majority of the remaining directors, though less than a quorum.
Accordingly, absent an amendment to the Bylaws, the Board could prevent any
stockholder from enlarging the Board and filling the new directorships with such
stockholder's own nominees.
Under the Delaware General Corporation Law (the "Delaware Law"), unless
otherwise provided in the Certificate of Incorporation, directors serving on a
classified board may only be removed by the stockholders for cause. In addition,
the Certificate of Incorporation and the Bylaws of the Company provide that
directors may be removed only for cause and only upon the affirmative vote of
holders of at least 80% of the voting power of all the then outstanding shares
of stock entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class.
No Stockholder Action by Written Consent; Special Meetings. The
Certificate of Incorporation and the Bylaws provide that, subject to the rights
of any holders of Preferred Stock to elect additional directors under specified
circumstances, stockholder action can be taken only at an annual or special
meeting of stockholders and prohibit stockholder action by written consent in
lieu of a meeting. The Bylaws provide that, subject to the rights of holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, special meetings of stockholders can be called only by the
Chairman of the Board or by the Board pursuant to a resolution adopted by a
majority of the Whole Board. Stockholders are not permitted to call a special
meeting or to require that the Board call a special meeting of stockholders.
Moreover, the business permitted to be conducted at any special meeting of
stockholders is limited to the business brought before the meeting pursuant to
the notice of meeting given by the Company.
The provisions of the Certificate of Incorporation and the Bylaws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by the Chairman or at the request of a
majority of the Whole Board. These provisions would also prevent the holders of
a majority of the voting power of the Voting Stock from unilaterally using the
written consent procedure to take stockholder action and from taking action by
consent. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the Chairman and the Board by calling a special
meeting of stockholders prior to the time the Chairman or a majority of the
Whole Board believes such consideration to be appropriate.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The Bylaws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors, or bring other
business before an annual meeting of stockholders of the Company (the
"Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Board, or by a stockholder who has
given timely written notice to the Secretary of the Company prior to the meeting
at which directors are to be elected, will be eligible for election as directors
of the Company. The Stockholder Notice Procedure provides that at an annual
meeting only such business may be conducted as has been brought before the
meeting by, or at the direction of, the Chairman or the Board or by a
stockholder who has given timely written notice to the Secretary of the Company
of such stockholder's intention to bring such business before such meeting.
Under the Stockholder Notice Procedure, for notice of stockholder nominations to
be made at an annual meeting to be timely, such notice must be received by the
Company not less than 70 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting (or, if the date of the annual
meeting is advanced by more than 20 days, or delayed by more than 70 days, from
such anniversary date, not earlier than the 90th day prior to such meeting and
not later than the later of (x) the 70th day prior to such meeting and (y) the
10th day after public announcement of the date of such meeting is first made).
Notwithstanding the foregoing, in the event that the number of directors to be
elected is increased
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and there is no public announcement naming all of the nominees for directors or
specifying the size of the increased Board made by the Company at least 80 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice will be timely, but only with respect to nominees for any
new positions created by such increase, if it is received by the Company not
later than the 10th day after such public announcement is first made by the
Company. Under the Stockholder Notice Procedure, for notice of a stockholder
nomination to be made at a special meeting at which directors are to be elected
to be timely, such notice must be received by the Company not earlier than the
90th day before such meeting and not later than the later of (x) the 70th day
prior to such meeting and (y) the 10th day after public announcement of the date
of such meeting is first made.
Under the Stockholder Notice Procedure, a stockholder's notice to the
Company proposing to nominate a person for election as a director must contain
certain information, including, without limitation, the identity and address of
the nominating stockholder, the class and number of shares of stock of the
Company which are owned by such stockholder, and all information regarding the
proposed nominee that would be required to be included in a proxy statement
soliciting proxies for the proposed nominee. Under the Stockholder Notice
Procedure, a stockholder's notice relating to the conduct of business other than
the nomination of directors must contain certain information about such business
and about the proposing stockholder, including, without limitation, a brief
description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at such meeting, the name and
address of such stockholder, the class and number of shares of stock of the
Company beneficially owned by such stockholder, and any material interest of
such stockholder in the business so proposed. If the Chairman of the Board or
other officer presiding at a meeting determines that a person was not nominated,
or other business was not brought before the meeting, in accordance with the
Stockholder Notice Procedure, such person will not be eligible for election as a
director, or such business will not be conducted at such meeting, as the case
may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform stockholders about such qualifications. By
requiring advance notice of other proposed business, the Stockholder Notice
Procedure will also provide a more orderly procedure for conducting annual
meetings of stockholders and, to the extent deemed necessary or desirable by the
Board, will provide the Board with an opportunity to inform stockholders, prior
to such meetings, of any business proposed to be conducted at such meetings,
together with any recommendations as to the Board's position regarding action to
be taken with respect to such business, so that stockholders can better decide
whether to attend such a meeting or to grant a proxy regarding the disposition
of any such business.
Although the Bylaws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
Preferred Stock. The Certificate of Incorporation authorizes the Board to
establish one or more series of Preferred Stock and to determine, with respect
to any series of Preferred Stock, the terms and rights of such series, including
(i) the designation of the series, (ii) the number of shares of the series,
which number the Board may thereafter (except where otherwise provided by the
terms of such series) increase or decrease (but not below the number of shares
thereof then outstanding), (iii) whether dividends, if any, will be cumulative
or noncumulative and the dividend rate of the series, if any, (iv) the dates at
which dividends, if any, will be payable, (v) the redemption rights and price or
prices, if any, for shares of the series, (vi) the terms and amounts of any
sinking fund provided for the purchase or redemption of shares of the series,
(vii) the amounts payable on shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Company, (viii) whether the shares of the series will be convertible into shares
of any other class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or such
other security, the conversion price or prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible and all
other terms and
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conditions upon which such conversion may be made, (ix) restrictions on the
issuance of shares of the same series or of any other class or series, and (x)
the voting rights, if any, of the holders of such series.
The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. The NYSE currently
requires stockholder approval as a prerequisite to listing shares in several
instances, including where the present or potential issuance of shares could
result in an increase in the number of shares of common stock, or in the amount
of voting securities, outstanding of at least 20%, subject to certain
exceptions. If the approval of the Company's stockholders is not required for
the issuance of shares of Preferred Stock or Common Stock, the Board may
determine not to seek stockholder approval.
Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The Board will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its stockholders. The
Board, in so acting, could issue Preferred Stock having terms that could
discourage an acquisition attempt through which an acquiror may be able to
change the composition of the Board, including a tender offer or other
transaction that some, or a majority, of the Company's stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then current market price of such stock.
Merger/Sale of Assets. The Certificate of Incorporation provides that
certain "business combinations" (as defined) must be approved by the holders of
at least 66 2/3% of the voting power of the shares not owned by an "interested
shareholder" (as defined), unless the business combinations are approved by the
"Continuing Directors" (as defined) or meet certain requirements regarding price
and procedure.
Amendment of Certain Provisions of the Certificate of Incorporation and
Bylaws. Under the Delaware Law, the stockholders have the right to adopt, amend
or repeal the bylaws and, with the approval of the board of directors, the
certificate of incorporation of a corporation. In addition, if the certificate
of incorporation so provides, the bylaws may be adopted, amended or repealed by
the board of directors. The Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of Voting Stock, voting together as a single class, is
required to amend provisions of the Certificate of Incorporation relating to the
prohibition of stockholder action without a meeting; the number, election and
term of the Company's directors; the removal of directors; with the vote of the
holders of a majority of the voting power of the outstanding shares of Voting
Stock required to amend all other provisions of the Certificate of
Incorporation. The Certificate of Incorporation further provides that the Bylaws
may be amended by the Board or by the affirmative vote of the holders of at
least 80% of the voting power of the outstanding shares of Voting Stock, voting
together as a single class. These 80% voting requirements will have the effect
of making more difficult any amendment by stockholders of the Bylaws or of any
of the provisions of the Certificate of Incorporation described above, even if a
majority of the Company's stockholders believe that such amendment would be in
their best interests.
Antitakeover Legislation. Section 203 of the Delaware Law provides that,
subject to certain exceptions specified therein, a corporation shall not engage
in any business combination with any "interested stockholder" for a three-year
period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. Except as
specified in Section 203
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of the Delaware Law, an interested stockholder is defined to include (x) any
person that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation, at any
time within three years immediately prior to the relevant date and (y) the
affiliates and associates of any such person.
Under certain circumstances, Section 203 of the Delaware Law makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to adopt an amendment to a corporation's
certificate of incorporation or bylaws excluding the corporation from the
restrictions imposed thereunder. However, the Certificate of Incorporation and
Bylaws do not exclude the Company from the restrictions imposed under Section
203 of the Delaware Law. It is anticipated that the provisions of Section 203 of
the Delaware Law may encourage companies interested in acquiring the Company to
negotiate in advance with the Board, since the stockholder approval requirement
would be avoided if a majority of the directors then in office approve either
the business combination or the transaction which results in the stockholder
becoming an interested stockholder.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership, disposition and conversion
of Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance. This summary addresses the United
States Federal income tax considerations to holders of Preferred Securities who
are citizens or residents of the United States, corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof or therein, or estates or trusts the income of
which is subject to United States federal income taxation regardless of its
source or other holders who are otherwise subject to United States federal
income taxation on a net income basis with respect to Preferred Securities
(collectively "U.S. Holders") and does not address the tax consequences to
holders of Preferred Securities who are not U.S. Holders. This summary does not
deal with special classes of holders such as banks, thrift institutions, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that will
hold the Preferred Securities as other than a capital asset. This summary also
does not address tax consequences to persons that have a functional currency
other than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Preferred Securities. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws of
any state or local government or of any foreign government that may be
applicable to the Preferred Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
In connection with the issuance of the Convertible Debentures, Skadden,
Arps, Slate, Meagher & Flom LLP, tax counsel to the Company, will render its
opinion to the effect that, under then current law and assuming full compliance
with the Indenture, the Convertible Debentures will be classified for United
States federal income tax purposes as indebtedness of the Company. An opinion of
tax counsel, however, is not binding on the Internal Revenue Service (the "IRS")
or the courts. Prospective investors should note that no rulings have been or
are expected to be sought from the IRS with respect to any of these issues, and
no assurance can be given that the IRS will not take contrary positions. No
assurance can be given, however, that any of the opinions expressed herein will
not be challenged by the IRS or, if challenged, that such a challenge would not
be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Skadden, Arps,
Slate, Meagher & Flom LLP, tax counsel to the Company and the Trust, will render
its opinion generally to the effect that, under then current law and assuming
full compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Convertible Debentures, and each holder will be required to
include in its gross income any interest (including OID accrued) with respect to
its allocable share of those Convertible Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. The Company believes that the
likelihood of its exercising its option to defer interest payments is remote
within the meaning of the Regulations. Based on the
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foregoing, the Company believes that, although the matter is not free from
doubt, the Convertible Debentures will not be considered to be issued with OID
at the time of their original issuance and, accordingly, that a holder of the
Preferred Securities should include in gross income such holder's allocable
share of interest on the Convertible Debentures in accordance with such holder's
method of tax accounting.
Under the Regulations, if the option to defer any payment of interest was
determined not to be "remote" or if the Company exercised such option, the
Convertible Debentures would be treated as issued with OID at the time of
issuance or at the time of such exercise, as the case may be, and all stated
interest on the Convertible Debentures would thereafter be treated as OID as
long as the Convertible Debentures remained outstanding. In such event, all of a
holder's taxable interest income with respect to the Convertible Debentures
would constitute OID that would have to be included in income on an economic
accrual basis before the receipt of the cash attributable to the interest,
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a
holder of Preferred Securities would be required to include in gross income OID
even though the Company would not make any actual cash payments during an
Extension Period.
No rulings or other interpretation have been issued by the IRS which have
addressed the meaning of the term "remote" as used in the Regulations, and it is
possible that the IRS could take a position contrary to the interpretation
herein.
Because income on the Preferred Securities will constitute interest (or
OID), corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution," the
Convertible Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such a
distribution, for United States federal income tax purposes, would be treated as
a nontaxable event to each holder, and each holder would receive an aggregate
tax basis in the Convertible Debentures equal to such holder's aggregate tax
basis in its Preferred Securities. A holder's holding period in the Convertible
Debentures so received in liquidation of the Trust would include the period
during which the Preferred Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Convertible Debentures may constitute a taxable event to
holders of Preferred Securities and a holder's holding period for the
Convertible Debentures would begin on the date such Convertible Debentures were
received.
Under certain circumstances described under "Description of the Preferred
Securities -- Special Event Redemption or Distribution," the Convertible
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Preferred Securities. Under
current law, such a redemption of the Convertible Debentures would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder could recognize gain or loss as if
it sold such redeemed Preferred Securities for cash. See "-- Sales of Preferred
Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. Assuming the
Convertible Debentures are not deemed to be issued with OID, a holder's adjusted
tax basis in the Preferred Securities generally will be its initial purchase
price. If the Convertible Debentures are deemed to be issued with OID (either
upon original issuance or at the time the Company exercises its option to defer
interest payments), a holder's tax basis in the Preferred Securities generally
will be its initial issue price, increased by OID previously includible in such
holder's gross income to the date of disposition and decreased by payments
received on the Preferred Securities from and including the date the Convertible
Debentures
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were deemed to be issued with OID. Such gain or loss generally will be a capital
gain or loss and generally will be a long-term capital gain or loss if the
Preferred Securities have been held for more than one year.
If the Preferred Securities are deemed to include OID, such Preferred
Securities may trade at a price that does not accurately reflect the value of
accrued but unpaid interest with respect to the underlying Convertible
Debentures. In such event, a holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Convertible Debentures through the
date of disposition in income as ordinary income and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Convertible
Debentures deemed disposed of. To the extent that a holder sells Preferred
Securities at a price that is less than the holder's adjusted tax basis (which
will include, in the form of OID, all accrued but unpaid interest) a holder will
generally recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
CONVERSION OF PREFERRED SECURITIES
A holder of Preferred Securities generally will not recognize income, gain
or loss upon the conversion, through the Conversion Agent, of its Preferred
Securities into Common Stock. A holder will, however, recognize gain upon the
receipt of cash in lieu of a fractional share of Common Stock equal to the
amount of cash received less the holder's tax basis in such fractional share. A
holder's tax basis in the Common Stock received upon exchange and conversion
will generally be equal to the holder's tax basis in the Preferred Securities
delivered to the Conversion Agent for exchange less the basis allocated to any
fractional share for which cash is received, and a holder's holding period in
the Common Stock received upon exchange and conversion will generally begin on
the date the holder acquired the Preferred Securities delivered to the
Conversion Agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible Debentures
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Common Stock into or for which the Convertible
Debentures are convertible or exchangeable) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased,
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
antidilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Common Stock.
Thus, under certain circumstances, a reduction in the conversion price for the
holders may result in deemed dividend income to holders to the extent of the
current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain legislation (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer and that are issued on or after
December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman William
V. Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a
joint statement (the "Joint Statement") indicating their intent that the
Proposed Legislation, if adopted by either of the tax-writing committees of
Congress, would have an effective date that is no earlier than the date of
"appropriate Congressional action." In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote letters to Treasury officials concurring
with the views expressed in the Joint Statement (the "Democrat Letters"). Based
upon the Joint Statement and the Democrat Letters, it is expected that if the
Proposed Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." Furthermore, even if the Proposed
Legislation were enacted in its current form with effective date
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provisions making it applicable to the Convertible Debentures, it would not
affect the Company's ability to deduct the interest payable on the Convertible
Debentures because their maximum term will not exceed 20 years. There can be no
assurance, however, that any proposed legislation enacted after the date hereof
will not adversely affect the ability of the Company to deduct the interest
payable on the Convertible Debentures. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, income on the Preferred Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Preferred Securities
by January 31 following each calendar year.
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States Federal income tax, provided the
required information is provided to the Internal Revenue Service on a timely
basis.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters has severally agreed to purchase the
number of Preferred Securities set forth opposite its name below. In the
Purchase Agreement, the several Underwriters have agreed, subject to the terms
and conditions set forth therein, to purchase all the Preferred Securities
offered hereby if any of the Preferred Securities are purchased. In the event of
default by an Underwriter, the Purchase Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
-------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Montgomery Securities.....................................................
Morgan Stanley & Co. Incorporated.........................................
---------
Total........................................................ 2,000,000
=========
</TABLE>
The Underwriters propose initially to offer the Preferred Securities to the
public at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $. per Preferred Security. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $. per Preferred Security on sales to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase up to an additional
300,000 Preferred Securities solely to cover over-allotments, if any. To the
extent that the Underwriters exercise their option, each Underwriter will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of such additional Preferred Securities as the number set forth
next to such Underwriter's name in the preceding table bears to the total number
of Preferred Securities shown in such table.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Convertible Debentures of the Company,
the Purchase Agreement provides that the Company will pay as compensation
("Underwriters' Compensation") to the Underwriters, for the Underwriters'
arranging the investment therein of such proceeds, an amount in same day funds
of $ per Preferred Security (or $ in the aggregate, or $ in
the aggregate if the Underwriters' over-allotment option is exercised in full)
for the accounts of the several Underwriters.
The Trust and the Company have agreed that they will not, for a period of
90 days after the date of the Prospectus, except with the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, directly or indirectly
sell, offer to sell, grant any option for the sale of, or otherwise dispose of,
(a) any trust certificates or other securities of the Trust (other than the
Preferred Securities offered hereby and the Common Securities issued to the
Company), (b) any preferred stock or any other security of the Company that is
substantially similar to the Preferred Securities, (c) any shares of any class
of common stock of the Company (other than (i) shares of Common Stock issuable
upon conversion of the Preferred Securities or pursuant to the exercise of
options or warrants outstanding on the date of this Prospectus, and (ii) the
grant of stock options or other stock-based awards (and the exercise thereof) to
directors, officers and employees of the Company or any of its subsidiaries) or
(d) any debt securities of the Company that are substantially similar to the
Convertible Debentures (other than the Convertible Debentures issued to the
Trust). In addition, Mr. Samuel L. Eichenfield, Chairman, President and Chief
Executive Officer of the Company, has agreed, subject to certain exceptions,
that he will not, for a period of 90 days after the date of this Prospectus,
except with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, directly or indirectly sell, offer
72
<PAGE> 74
to sell, grant any option for the sale of, or otherwise dispose of, any shares
of Common Stock or any securities which are convertible into, or exercisable or
exchangeable for, Common Stock.
The Preferred Securities have been approved for listing on the NYSE,
subject to official notice of issuance, under the symbol "FNVprA." Prior to this
offering, there has been no public market for the Preferred Securities. To meet
one of the requirements for listing the Preferred Securities on the NYSE, the
Underwriters will undertake to sell lots of 100 or more Preferred Securities to
a minimum of 400 beneficial holders.
The Company and the Trust have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
LEGAL MATTERS
Certain legal matters with respect to the Company will be passed upon for
the Company by William J. Hallinan, Esq., Senior Vice President -- General
Counsel of the Company. Certain legal matters with respect to the Preferred
Securities, the Convertible Debentures, the Common Stock issuable upon
conversion thereof and the Guarantee will be passed upon for the Company and the
Trust by Skadden, Arps, Slate, Meagher & Flom (ILLINOIS) and Skadden, Arps,
Slate, Meagher & Flom LLP. Brown & Wood LLP, San Francisco, California will act
as counsel for the Underwriters. Skadden, Arps, Slate, Meagher & Flom (ILLINOIS)
and Skadden, Arps, Slate, Meagher & Flom LLP have from time to time represented,
and may continue to represent, certain of the Underwriters.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1995
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
73
<PAGE> 75
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents By
Reference........................... 5
Special Note Regarding Forward-Looking
Statements.......................... 5
Prospectus Summary.................... 6
Risk Factors.......................... 15
FINOVA Finance Trust.................. 20
Accounting Treatment.................. 20
Use of Proceeds....................... 21
Price Range of Common Stock and
Dividends........................... 21
Capitalization........................ 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 28
Description of the Preferred
Securities.......................... 32
Description of the Guarantee.......... 47
Description of the Convertible
Debentures.......................... 50
Effect of Obligations under the
Convertible Debentures and the
Guarantee........................... 60
Description of Capital Stock.......... 61
Certain Federal Income Tax
Considerations...................... 68
Underwriting.......................... 72
Legal Matters......................... 73
Experts............................... 73
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 PREFERRED SECURITIES
LOGO(R)
FINOVA FINANCE TRUST
% CONVERTIBLE TRUST
ORIGINATED PREFERRED
SECURITIES(SM) ("CONVERTIBLE TOPrS(SM)")
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY, AND
CONVERTIBLE INTO
COMMON STOCK OF,
THE FINOVA GROUP INC.(R)
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
MONTGOMERY SECURITIES
MORGAN STANLEY & CO.
INCORPORATED
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated amounts of the expenses of and related to the offering are as
follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission.................... $ 34,851
NYSE listing fee.......................................................... 29,500
NASD filing fees.......................................................... 12,000
* Fees of rating agencies................................................. 75,000
* Printing and engraving expenses......................................... 100,000
* Accounting fees and expenses............................................ 25,000
* Legal fees and expenses................................................. 185,000
* Trustees' fees and expenses............................................. 10,000
* Miscellaneous........................................................... $ 28,649
----------
* Total.............................................................. $500,000
==========
</TABLE>
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware, the state of
incorporation of the Company, and the Certificate of Incorporation and the
Bylaws of the Company provide for indemnification of directors and officers.
Section 145 of the Delaware General Corporation law provides generally that a
person sued as a director, officer, employee or agent of a corporation may be
indemnified by the corporation for reasonable expenses, including attorneys'
fees, if, in cases other than actions brought by or in the right of the
corporation, he or she has acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation (and in the case of a criminal proceeding, had no reasonable cause
to believe that his or her conduct was unlawful). Section 145 provides that no
indemnification for any claim or matter may be made, in the case of an action
brought by or in the right of the corporation, if the person has been adjudged
to be liable, unless the Court of Chancery or other court determines that
indemnity is fair and reasonable despite the adjudication of liability.
Indemnification is mandatory in the case of a director, officer, employee or
agent who has been successful on the merits, or otherwise, in defense of a suit
against him or her.
Directors and officers of the Company are covered under policies of
directors' and officers' liability insurance with coverage aggregating
$100,000,000. The directors serving the Company are parties to Indemnification
Agreements with the Company (the "Indemnification Agreements"). The
Indemnification Agreements provide substantially the same scope of coverage
afforded by provisions in the Certificate of Incorporation and the Bylaws and
are designed to provide greater assurance to the directors that indemnification
will be available because as contracts, the Indemnification Agreements may not
be unilaterally modified by the Company's Board of Directors or stockholders.
The Indemnification Agreements are generally intended to provide indemnification
for any amounts a director is legally obligated to pay because of claims arising
out of the director's service to the Company or any other subsidiary of the
Company.
II-1
<PAGE> 77
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Purchase Agreement
4.1 Restated Certificate of Incorporation of the Company (incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1994 (the "1994 Form 10-K")
4.2 Amended and Restated Bylaws of the Company (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
Exhibit 3.B)
4.3 Specimen Common Stock certificate (incorporated by reference from the 1994 Form
10-K, Exhibit 4.B)
4.4 Amended and Restated Rights Agreement between the Company and Bank One, Arizona,
N.A. (incorporated by reference from the Company's Current Report on Form 8-K,
dated September 22, 1995, Exhibit 4.1)
4.4A Form of Junior Participating Preferred Share Purchase Right (included as an
exhibit to Exhibit 4.4 above)
4.4B Acceptance of Successor Trustee to Appointment under Rights Agreement
(incorporated by reference from the Company's Current Report on Form 8-K, dated
November 30, 1995)
4.5 * Certificate of Trust of FINOVA Finance Trust
4.6 Form of Amended and Restated Declaration of Trust of FINOVA Finance Trust
4.7 Form of Indenture between The FINOVA Group Inc. and Fleet National Bank, as
Indenture Trustee
4.8 Form of Preferred Security (included as an exhibit to Exhibit 4.6 above)
4.9 Form of Convertible Debenture (included as an exhibit to Exhibit 4.7 above)
4.10 Form of Preferred Securities Guarantee Agreement between The FINOVA Group Inc.,
as Guarantor, and Fleet National Bank, as Guarantee Trustee
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom (ILLINOIS)
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
12.0 * Calculation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (ILLINOIS) (included in its
opinion filed as Exhibit 5.1)
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in its opinion
filed as Exhibit 8.1)
24.1 * Power of Attorney
25.1 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Indenture Trustee
25.2 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Property Trustee under the Declaration of Trust
25.3 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Guarantee Trustee under the Guarantee
</TABLE>
- ---------------
* Filed previously
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Act"), each filing
of the Company's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange
II-2
<PAGE> 78
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Phoenix, State of Arizona, on December
3, 1996.
THE FINOVA GROUP INC.
By: /s/ WILLIAM J. HALLINAN
-----------------------------------
William J. Hallinan
Senior Vice President -- General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities on December 3, 1996.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- -------------------------------------------- --------------------------------------------
<C> <S>
/s/ G. ROBERT DURHAM* Director
- --------------------------------------------
G. Robert Durham
/s/ SAMUEL L. EICHENFIELD* Director, Chairman, President and
- -------------------------------------------- Chief Executive Officer
Samuel L. Eichenfield
/s/ JAMES L. JOHNSON* Director
- --------------------------------------------
James L. Johnson
/s/ L. GENE LEMON* Director
- --------------------------------------------
L. Gene Lemon
/s/ KENNETH R. SMITH* Director
- --------------------------------------------
Kenneth R. Smith
/s/ ROBERT P. STRAETZ* Director
- --------------------------------------------
Robert P. Straetz
</TABLE>
II-4
<PAGE> 80
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- -------------------------------------------- --------------------------------------------
<S> <C>
/s/ SHOSHANA B. TANCER* Director
- --------------------------------------------
Shoshana B. Tancer
/s/ JOHN W. TEETS* Director
- --------------------------------------------
John W. Teets
/s/ BRUNO A. MARSZOWSKI* Senior Vice President-Controller
- -------------------------------------------- and Chief Financial Officer (Principal
Bruno A. Marszowski Financial and Accounting Officer)
*By /s/ WILLIAM J. HALLINAN
----------------------------------------
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, and has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Phoenix, State of Arizona, on December
3, 1996.
FINOVA FINANCE TRUST
By: THE FINOVA GROUP INC.,
as Sponsor
By: /s/ WILLIAM J. HALLINAN
------------------------------------
Name: William J. Hallinan
Title: Senior Vice President --
General Counsel and Secretary
II-6
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C>
1.1 Form of Purchase Agreement
4.1 Restated Certificate of Incorporation of the Company (incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1994 (the "1994 Form 10-K")
4.2 Amended and Restated Bylaws of the Company (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
Exhibit 3.B)
4.3 Specimen Common Stock certificate (incorporated by reference from the 1994 Form
10-K, Exhibit 4.B)
4.4 Amended and Restated Rights Agreement between the Company and Bank One, Arizona,
N.A. (incorporated by reference from the Company's Current Report on Form 8-K,
dated September 22, 1995, Exhibit 4.1)
4.4A Form of Junior Participating Preferred Share Purchase Right (included as an
exhibit to Exhibit 4.4 above)
4.4B Acceptance of Successor Trustee to Appointment under Rights Agreement
(incorporated by reference from the Company's Current Report on Form 8-K, dated
November 30, 1995)
4.5 * Certificate of Trust of FINOVA Finance Trust
4.6 Form of Amended and Restated Declaration of Trust of FINOVA Finance Trust
4.7 Form of Indenture between The FINOVA Group Inc. and Fleet National Bank, as
Indenture Trustee
4.8 Form of Preferred Security (included as an exhibit to Exhibit 4.6 above)
4.9 Form of Convertible Debenture (included as an exhibit to Exhibit 4.7 above)
4.10 Form of Preferred Securities Guarantee Agreement between The FINOVA Group Inc.,
as Guarantor, and Fleet National Bank, as Guarantee Trustee
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom (ILLINOIS)
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
12.0 * Calculation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (ILLINOIS) (included in its
opinion filed as Exhibit 5.1)
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in its opinion
filed as Exhibit 8.1)
24.1 * Power of Attorney
25.1 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Indenture Trustee
25.2 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Property Trustee under the Declaration of Trust
25.3 * Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Fleet
National Bank, as Guarantee Trustee under the Guarantee
</TABLE>
- ---------------
* Filed previously
<PAGE> 1
EXHIBIT 1.1
2,000,000 PREFERRED SECURITIES
FINOVA FINANCE TRUST
(A DELAWARE TRUST)
% CONVERTIBLE TRUST ORIGINATED PREFERRED SECURITIES(SM)("CONVERTIBLE TOPRS(SM)")
(LIQUIDATION AMOUNT OF $50 PER PREFERRED SECURITY)
PURCHASE AGREEMENT
December , 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
MONTGOMERY SECURITIES
MORGAN STANLEY & CO. INCORPORATED
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
FINOVA Finance Trust (the "Trust"), a statutory business trust
organized under the Business Trust Act of the State of Delaware (Chapter 38,
Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq.) (the "Delaware
Act"), and The FINOVA Group Inc., a Delaware corporation (the "Company" and,
together with the Trust, the "Offerors"), confirm their agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Montgomery Securities, Morgan Stanley & Co. Incorporated and each of
the other Underwriters, if any, named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom you are acting as
representatives (in such capacity, you shall hereinafter be
- -----------------------
(SM) "Trust Originated Preferred Securities" and "Convertible TOPrS" are service
marks of Merrill Lynch & Co., Inc.
<PAGE> 2
referred to as the "Representatives"), with respect to the sale by the Trust and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of the Trust's % Convertible Trust Originated Preferred
Securities (liquidation amount $50 per preferred security) (the "Convertible
TOPrS") set forth in Schedule A hereto, and with respect to the grant by the
Trust to the Underwriters, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of 300,000
additional Convertible TOPrS to cover over-allotments. The aforesaid 2,000,000
Convertible TOPrS (the "Initial Preferred Securities") to be purchased by the
Underwriters and all or any part of the 300,000 Convertible TOPrS subject to the
option described in Section 2(b) hereof (the "Option Preferred Securities") are
collectively hereinafter called the "Preferred Securities."
The Preferred Securities will be guaranteed by the Company, to the
extent set forth in the Prospectus (as defined herein), with respect to
distributions and payments upon liquidation, redemption and otherwise (the
"Preferred Securities Guarantee"), pursuant to the Preferred Securities
Guarantee Agreement dated as of December , 1996 (the "Preferred Securities
Guarantee Agreement") between the Company and Fleet National Bank, a national
banking association ("Fleet"), as trustee (the "Guarantee Trustee"), and
entitled to the benefits of certain backup undertakings described in the
Prospectus with respect to the Company's agreement pursuant to the Indenture (as
defined herein) to pay all expenses relating to the administration of the Trust.
Each Preferred Security will be convertible, in accordance with the terms of the
Preferred Securities and the Indenture, at the option of the holder thereof into
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock").
The entire proceeds from the sale of the Preferred Securities will be
combined with the entire proceeds from the sale by the Trust to the Company of
its common securities (the "Common Securities"), and will be used by the Trust
to purchase $103,092,800 aggregate principal amount (plus up to an additional
$15,463,950 aggregate principal amount if the Underwriters' over-allotment
option is exercised) of % Convertible Subordinated Debentures due 2016 (the
"Convertible Debentures") issued by the Company. The Common Securities will be
guaranteed by the Company, to the extent set forth in the Prospectus, with
respect to distributions and payments upon liquidation and redemption (the
"Common Securities Guarantee" and, together with the Preferred Securities
Guarantee, the "Guarantees") pursuant to the Common Securities Guarantee
Agreement dated as of December , 1996 executed by the Company (the "Common
Securities Guarantee Agreement" and, together with the Preferred Securities
Guarantee Agreement, the "Guarantee Agreements"). The Preferred Securities and
the Common Securities will be issued pursuant to the Amended and Restated
Declaration of Trust of the Trust dated as of December , 1996 (the
"Declaration") among the Company, as sponsor, Robert J. Fitzsimmons and Bruno A.
Marszowski (the "Regular Trustees"), Fleet, as property trustee (the "Property
Trustee"), and First Union Bank of Delaware, as Delaware trustee (the "Delaware
Trustee," and together with the Regular Trustees and the Property Trustee, the
"Trustees"), and the holders from time to time of undivided beneficial interests
in the assets of the Trust. The Convertible Debentures will be issued pursuant
to an Indenture dated as of December , 1996 (the "Indenture") between the
Company and Fleet, as trustee (the "Indenture Trustee").
2
<PAGE> 3
The Offerors have filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 333-15445),
including the related preliminary prospectus or prospectuses, for the
registration under the Securities Act of 1933, as amended (the "1933 Act"), of
(i) the Preferred Securities, (ii) the Preferred Securities Guarantee, (iii) the
Convertible Debentures, (iv) the Common Stock issuable upon conversion of the
Preferred Securities and (v) certain junior participating preferred share
purchase rights (the "Rights") issuable pursuant to an Amended and Restated
Rights Agreement dated as of September 14, 1995, as amended (the "Rights
Agreement"), between the Company and Harris Trust & Savings Bank, N.A.
(successor to BankOne Arizona, N.A.), as rights agent (the securities set forth
in the foregoing clauses (i) through (v) inclusive, collectively, the
"Registered Securities"). Promptly after execution and delivery of this
Agreement, the Company will either (i) prepare and file a prospectus in
accordance with the provisions of Rule 430A ("Rule 430A") of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations")
and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or
(ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933
Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance
with the provisions of Rule 434 and Rule 424(b). The information included in
such prospectus or in such Term Sheet, as the case may be, that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective (i)
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information"
or (ii) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto, schedules thereto, if any, and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as a "Rule 462(b) Registration Statement," and after such
filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933
Act, in the form first furnished to the Underwriters for use in connection with
the offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus dated
November 20, 1996 together with the Term Sheet and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included," "stated," "described" or
"referred to" in the Registration Statement, any preliminary prospectus or the
Prospectus (and all other references
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of like import) shall be deemed to mean and include all such documents,
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), after the date of this Agreement which is or is deemed to be
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
The Offerors understand that the Underwriters propose to make a public
offering of the Preferred Securities as soon as the Representatives deem
advisable after this Agreement has been executed and delivered and the
Declaration, the Indenture and the Preferred Securities Guarantee Agreement have
been qualified under the Trust Indenture Act of 1939, as amended (the "1939
Act").
SECTION 1. Representations and Warranties.
(a) The Offerors jointly and severally represent and warrant to, and
covenant and agree with, each Underwriter as of the date hereof, as of Closing
Time (as defined in Section 2) and as of each Date of Delivery (as defined in
Section 2), if any, as follows:
(i) The Offerors meet the requirements for use of Form S-3
under the 1933 Act. Each of the Registration Statement and any Rule
462(b) Registration Statement has become effective under the 1933 Act
and no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of either of the
Offerors, are contemplated by the Commission, and any request on the
part of the Commission for additional information has been complied
with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became or become effective and at the Closing Time (and, if any Option
Securities are purchased, at each Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at
the time the Prospectus or any such amendment or supplement was issued
and the Closing Time (and, if any Option Securities are purchased, at
each Date of Delivery), included or will include an untrue statement of
a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434. The
representations and
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warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through Merrill Lynch expressly
for use in the Registration Statement or Prospectus and that part of
the Registration Statement which constitutes the Statement of
Eligibility on Form T-1 of the Indenture Trustee, the Guarantee Trustee
or the Property Trustee under the 1939 Act (each, a "Form T-1").
Each preliminary prospectus and the Prospectus delivered to
the Underwriters for use in connection with this offering was identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(ii) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement or the Prospectus, at the
time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission under the 1934 Act
(the "1934 Act Regulations"), as applicable, and, when read together
with the other information in the Prospectus, at the respective times
the Registration Statement, any Rule 462(b) Registration Statement or
any post-effective amendment thereto became or becomes effective and at
the Closing Time (and, if any Option Securities are purchased, at each
Date of Delivery) did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(iii) The accountants who certified the financial statements
included in the Prospectus are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(iv) The financial statements of the Company and its
consolidated subsidiaries included in the Prospectus, together with the
related schedules (if any) and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at or as of
the dates indicated and the results of their operations for the periods
specified; and except as stated therein, said financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis.
(v) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein or contemplated thereby, (A) there has been no
material adverse change in the condition, financial or otherwise, of
the Company and its subsidiaries considered as one enterprise or of the
Trust or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise or of the
Trust, whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Company or any of
its subsidiaries other than those in the ordinary
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<PAGE> 6
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) except for
regular quarterly dividends on the Common Stock in amounts per share
that are consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement and to enter into and perform its obligations
under this Agreement, the Indenture, the Convertible Debentures, the
Guarantee Agreements and the Declaration and to purchase, own and hold
the Common Securities issued by the Trust; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
except where the failure of the Company to so qualify, in the
aggregate, will not have a material adverse effect on the consolidated
financial condition or combined operations of the Company and its
subsidiaries.
(vii) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, except where the failure of any such subsidiaries to so
qualify, in the aggregate, will not have a material adverse effect on
the consolidated financial condition or combined operations of the
Company and its subsidiaries; all of the issued and outstanding capital
stock of each such subsidiary has been duly authorized and validly
issued and is fully paid and non-assessable; and all the capital stock
of each such subsidiary is owned by the Company or its affiliates,
directly or through subsidiaries, except for directors' qualifying
shares, free and clear of any mortgage, pledge, lien, encumbrance,
claim or equity.
(viii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Registration Statement (except for
subsequent issuances, if any, pursuant to reservations, agreements or
employee benefit plans referred to in the Registration Statement); all
of the shares of issued and outstanding Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable and
are not subject to any preemptive or other similar rights; the
Registered Securities, the Common Securities, the Common Securities
Guarantee, the Indenture, the Guarantee Agreements, the Rights
Agreement, the Company's charter and by-laws and the Declaration
conform and will conform to all statements relating thereto contained
in the Registration Statement and the Prospectus.
(ix) Neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws; the Trust is not in violation of
the Declaration or its certificate of trust dated November 1, 1996
filed with the State of Delaware (the "Certificate of
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Trust"); neither the Company nor any of its subsidiaries nor the Trust
is in default in the performance or observance of any obligations,
agreements, covenants or conditions contained in any contracts,
indentures, mortgages, loan agreements, notes, leases or other
instruments to which the Company, any of its subsidiaries or the Trust
is a party or by which any of them or any of their respective
properties may be bound, except for such defaults which, alone or in
the aggregate, would not have a material adverse effect on the Company
and its subsidiaries considered as one enterprise or on the Trust; and
the execution, delivery and performance of this Agreement, the
Indenture, the Convertible Debentures, the Guarantee Agreements, the
Declaration, the Certificate of Trust, the Preferred Securities and the
Common Securities (collectively, the "Operative Instruments"), the
consummation of the transactions contemplated herein and therein
(including, without limitation, the issuance and sale of the Preferred
Securities, Common Securities, Convertible Debentures and Guarantees
and the issuance of shares of Common Stock and Rights upon conversion
of the Preferred Securities and Convertible Debentures), and the
performance of the other obligations hereunder and thereunder, have
been duly authorized by all necessary action on the part of the
Offerors and do not and will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company,
any of its subsidiaries or the Trust pursuant to, any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company, any of its subsidiaries or the Trust is a party or
by which the Company, any of its subsidiaries or the Trust may be bound
or to which any of the property or assets of the Company, any of its
subsidiaries or the Trust is subject, except for such conflicts,
breaches, defaults, liens, charges or encumbrances that would not,
alone or in the aggregate, have a material adverse effect on the
Company and its subsidiaries considered as one enterprise or on the
Trust, nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or the Declaration or
Certificate of Trust or, to the best knowledge of the Offerors, any
applicable law, administrative regulation or administrative or court
order or decree; and no consent, approval, authorization, order or
decree of any court or governmental agency or body is required for the
execution, delivery and performance of the Operative Instruments, the
consummation of the transactions contemplated by the Operative
Instruments (including, without limitation, the issuance and sale of
the Preferred Securities, Common Securities, Convertible Debentures and
Guarantees and the issuance of shares of Common Stock and Rights upon
conversion of the Preferred Securities and Convertible Debentures), and
the performance of the other obligations under the Operative
Instruments, except such as may have already been obtained and as to
which the Offerors shall have advised you in writing and such as may be
required under the 1933 Act, the 1933 Act Regulations, the 1939 Act or,
if applicable, state securities or Blue Sky laws in connection with the
purchase and distribution of the Registered Securities.
(x) The Company and its subsidiaries own or possess or have
obtained, can obtain on reasonable terms or are in the process of
obtaining all material governmental licenses, permits, consents,
orders, approvals and other authorizations necessary to lease or own,
as the case may be, and to operate their respective properties and to
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<PAGE> 8
carry on their respective businesses as presently conducted, except
such as may be required under state securities or Blue Sky laws, if
applicable, in connection with the purchase and distribution of the
Registered Securities.
(xi) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, adequate trademarks, service marks and
trade names necessary to conduct the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others with
respect to any trademarks, servicemarks or trade names which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to materially adversely affect
the conduct of the business, operations, financial condition or income
of the Company and its subsidiaries considered as one enterprise.
(xii) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the actual knowledge of the Offerors, threatened against or
affecting, the Company or any of its subsidiaries, which would
reasonably be expected to result in any material adverse change in the
condition, financial or otherwise, of the Company and its subsidiaries
considered as one enterprise, or in the business prospects of the
Company and its subsidiaries considered as one enterprise or which
could reasonably be expected to materially and adversely affect the
consummation of the transactions contemplated by this Agreement; there
is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the actual
knowledge of the Offerors, threatened against or affecting the Trust;
and there are no material contracts or documents of the Company, any of
its subsidiaries or the Trust which are required to be filed as
exhibits to the Registration Statement by the 1933 Act or the 1933 Act
Regulations which have not been so filed.
(xiii) No labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is
imminent and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors, in any such case which would be expected
to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, affairs or business prospects of the
Company and its subsidiaries considered as one enterprise.
(xiv) The financing contracts reflected in the consolidated
balance sheet of the Company and its consolidated subsidiaries as of
September 30, 1996, and the financing contracts entered into by the
Company or any subsidiary since such date, are legal, valid and binding
obligations of the obligors enforceable in accordance with their
respective terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equity principles,
including concepts of commercial reasonableness, and except where the
failure of any such financing contracts to be legal, valid, binding or
enforceable would not, individually or in the aggregate, have a
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<PAGE> 9
material adverse effect on the Company and its subsidiaries considered
as one enterprise; the obligors thereunder are, in all material
respects, in the good faith business judgment of the Company and except
to the extent reflected or stated in the Prospectus, financially
capable of performing their respective obligations thereunder, and any
defaults in the payments under all such contracts in the aggregate are
not of such amount that, were no more payments to be received under the
financing contracts in respect of which such defaults exist, and after
considering estimated collateral values to be recovered, the
consolidated financial condition or operations of the Company and its
consolidated subsidiaries would be materially adversely affected
thereby, excluding impairment of related reserves.
(xv) Neither of the Offerors nor FINOVA Capital Corporation
("FINOVA Capital") is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "1940 Act").
(xvi) This Agreement has been duly authorized, executed and
delivered by the Company and the Trust.
(xvii) The Trust has been duly created and is validly existing
and in good standing as a business trust under the Delaware Act; the
Trust has the power and authority to own property and to conduct its
business as described in the Registration Statement and the Prospectus
and to enter into and perform its obligations under this Agreement, the
Preferred Securities, the Common Securities and the Declaration and to
comply with its obligations hereunder and thereunder; the Trust is duly
qualified to transact business and is in good standing in each
jurisdiction in which such qualification is necessary, except to the
extent that the failure to so qualify would not have a material adverse
effect on the Trust; the Trust is not a party to or otherwise bound by
any agreement or instrument other than those described in the
Registration Statement; the Trust is and will be classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation, and the Offerors will treat the
Convertible Debentures as indebtedness of the Company for United States
federal income tax purposes; and the Trust is and will be treated as a
consolidated subsidiary of the Company pursuant to generally accepted
accounting principles.
(xviii) The Declaration has been duly authorized by the
Company and, at the Closing Time, the Declaration will have been duly
executed and delivered by the Company and the Regular Trustees and will
be a valid and binding obligation of the Company and the Regular
Trustees, enforceable against the Company and the Regular Trustees in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency (including without limitation all laws
relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equity principles (regardless of whether enforcement is
considered in a proceeding at law or in equity), including concepts of
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<PAGE> 10
commercial reasonableness; and at the Closing Time, the Declaration
will have been duly qualified under the 1939 Act.
(xix) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company
against payment of the consideration therefor as described in the
Registration Statement, will be validly issued and (except as provided
in Section 9.1(b) of the Declaration) fully paid and non-assessable
undivided beneficial interests in the assets of the Trust; the issuance
of the Common Securities is not subject to any preemptive or other
similar rights; and at the Closing Time, all of the issued and
outstanding Common Securities of the Trust will be owned by the
Company, directly or through wholly-owned subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(xx) The Preferred Securities have been duly authorized by the
Declaration and, when authenticated in the manner provided for in the
Declaration and issued and delivered by the Trust against payment of
the consideration therefor set forth in this Agreement, will be validly
issued and fully paid and non-assessable undivided beneficial interests
in the assets of the Trust and will be entitled to the benefits of the
Declaration; the issuance of the Preferred Securities is not subject to
any preemptive or other similar rights; and holders of Preferred
Securities will be entitled to the same limitation of personal
liability under Delaware law as extended to stockholders of private
corporations for profit.
(xxi) Each of the Guarantee Agreements has been duly
authorized by the Company and, at the Closing Time, each of the
Guarantee Agreements will have been duly executed and delivered by the
Company and will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including without limitation all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equity
principles (regardless of whether enforcement is considered in a
proceeding at law or in equity), including concepts of commercial
reasonableness; and at the Closing Time, the Preferred Securities
Guarantee Agreement will have been duly qualified under the 1939 Act.
(xxii) The Indenture has been duly authorized by the Company
and, at the Closing Time, the Indenture will have been duly executed
and delivered by the Company and will be a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including without limitation all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equity principles (regardless of whether enforcement is considered in a
proceeding at law or in equity), including concepts of commercial
reasonableness; and at the Closing Time, the Indenture will have been
duly qualified under the 1939 Act.
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(xxiii) The Convertible Debentures have been duly authorized
by the Company; at the Closing Time, the Convertible Debentures will
have been duly executed by the Company and, when issued and delivered
in the manner provided for in the Indenture and sold and paid for as
described in the Prospectus, will constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including without limitation all
laws relating to fraudulent transfers), reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally
or by general equity principles (regardless of whether enforcement is
considered in a proceeding at law or in equity), including concepts of
commercial reasonableness, and will be in the form contemplated by, and
entitled to the benefits of, the Indenture; and the issuance of the
Convertible Debentures is not and will not be subject to any preemptive
or other similar rights.
(xxiv) The Company's obligations under the Guarantees are and
will be subordinate and junior in right of payment to all liabilities
of the Company and are and will be pari passu with the most senior
preferred stock hereafter issued by the Company and any guarantee
hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the
Company.
(xxv) The Convertible Debentures are and will be subordinate
and junior in right of payment to all "Senior Indebtedness" (as defined
in the Indenture) of the Company.
(xxvi) The shares of Common Stock issuable by the Company upon
conversion of the Convertible Debentures and the Preferred Securities
have been duly and validly authorized and reserved for issuance upon
such conversion by the Company and such shares, when issued upon such
conversion, will be validly issued, fully paid and non-assessable, and
the issuance of such shares upon such conversion is not and will not be
subject to any preemptive or other similar rights.
(xxvii) The Rights have been duly authorized by the Company
and, when shares of Common Stock are issued and delivered by the
Company upon conversion of the Preferred Securities and the Convertible
Debentures, the Rights attached to such shares will be validly issued
(unless the Rights have theretofore been redeemed or exchanged or have
expired pursuant to the Rights Agreement).
(xxviii) Each of the Regular Trustees of the Trust is an
employee of the Company and has been duly authorized by the Company to
execute and deliver the Declaration.
(xxix) There are no persons with registration or other similar
rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the 1933 Act.
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Any certificate signed by any officer of the Company or any Trustee of
the Trust and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a joint and several representation and warranty by
the Company and the Trust to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Trust
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Trust, at
the price of $50.00 per Preferred Security, the number of Preferred Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional number of Preferred Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Trust hereby grants an option to the Underwriters, severally and not jointly, to
purchase up to an additional 300,000 Preferred Securities at the price of $50.00
per Preferred Security, less an amount per Preferred Security equal to any
distributions payable on the Initial Preferred Securities but not payable on the
Option Preferred Securities. The option hereby granted will expire 30 days after
the date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Initial Preferred Securities upon notice by
the Representatives to the Offerors setting forth the number of Option Preferred
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Preferred
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time (as hereinafter defined) unless otherwise agreed by the
Representatives and the Offerors. If the option is exercised as to all or any
portion of the Option Preferred Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Preferred Securities then being purchased which the number of Initial
Preferred Securities set forth in Schedule A opposite the name of such
Underwriter bears to the total number of Initial Preferred Securities, subject
in each case to such adjustments as the Representatives in their discretion
shall make to eliminate any sales or purchases of fractional shares.
(c) Payment of the purchase price for, and delivery of the certificates
evidencing, the Initial Preferred Securities shall be made at the office of the
Company in Phoenix, Arizona, or at such other place as shall be agreed upon by
the Representatives and the Offerors, at 9:00 a.m. (Eastern time) on the third
(or fourth, if the pricing occurs after 4:30 p.m. (Eastern time) on any given
day) business day after the date hereof (unless postponed in accordance with the
provisions of Section 10 hereof), or at such other time not later than ten
business days after such date as shall be agreed upon by the Representatives and
the Offerors (such time and date being herein called "Closing Time"). In
addition, in the event that any or all of the Option Preferred Securities are
purchased by the Underwriters, payment of the
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purchase price for, and delivery of certificates for, such Option Preferred
Securities shall be made at the above-mentioned offices or at such other place
as shall be agreed upon by the Representatives and the Offerors, on each Date of
Delivery as specified in the notice from the Representatives to the Offerors.
Payment shall be made to the Trust by wire transfer of immediately
available funds to a bank account designated by the Company against delivery to
the Representatives for the respective accounts of the Underwriters of the
certificates for the Preferred Securities purchased by them. Certificates for
the Initial Preferred Securities and the Option Preferred Securities, if any,
shall be in such denominations and registered in such names as the
Representatives may request in writing at least one full business day prior to
Closing Time or the relevant Date of Delivery, as the case may be. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Preferred Securities and the Option Preferred Securities,
if any, which such Underwriter has agreed to purchase. Merrill Lynch,
individually and not as a representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Preferred
Securities or the Option Preferred Securities, if any, to be purchased by any
Underwriter whose funds have not been received by Closing Time or the relevant
Date of Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(d) The certificates for the Initial Preferred Securities and the
Option Preferred Securities, if any, will be made available for examination and
packaging by the Representatives at or before 10:00 a.m. New York City time on
the last business day prior to Closing Time or the relevant Date of Delivery, as
the case may be.
(e) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested by the Trust in the Convertible Debentures, the
Company hereby agrees to pay the several Underwriters as compensation (the
"Underwriters' Compensation") for their arranging for the investment therein of
such proceeds, $ per Preferred Security purchased by the Underwriters at the
Closing Time and each Date of Delivery, if any ($ in the aggregate assuming no
exercise of the Underwriters' over-allotment option or $ in the aggregate
assuming exercise of such over-allotment option in full). Such Underwriters'
Compensation shall be payable to the Underwriters by wire transfer of
immediately available funds to Merrill Lynch at the Closing Time and at each
Date of Delivery (if any) or, if agreed by Merrill Lynch and the Company, by
deduction from the amount payable by the Underwriters to the Trust in respect of
the Preferred Securities being purchased on such date.
SECTION 3. Covenants of the Offerors. Each of the Offerors jointly and
severally covenants with each Underwriter as follows:
(a) The Offerors, subject to Section 3(b), will comply with
the requirements of Rule 430A or 434, as applicable and will notify the
Representatives immediately, and confirm the notice in writing, (i) of
the effectiveness of any post-effective amendment to the Registration
Statement, (ii) of the mailing or the delivery to the Commission for
filing of the Prospectus or any amendment or supplement to the
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Prospectus or any document to be filed pursuant to the 1934 Act, (iii)
of the receipt of any comments from the Commission, (iv) of any request
by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for additional
information, and (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Offerors will make
every reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment. The Offerors will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as they deem
necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, will promptly file such
prospectus.
(b) The Offerors will give the Representatives notice of their
intention to file or prepare any post-effective amendment to the
Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment or supplement to the Prospectus, whether
pursuant to the 1934 Act, the 1933 Act or otherwise, and will furnish
the Representatives with copies of any such amendment or supplement or
other document proposed to be filed a reasonable amount of time prior
to such proposed filing and will not file any such amendment or
supplement or other document or use any such prospectus to which the
Representatives or counsel to the Underwriters shall reasonably object.
(c) The Company will deliver to each Representative a copy of
each document incorporated by reference in the Prospectus.
(d) The Offerors will deliver to the Representatives a signed
copy of the registration statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated
by reference therein) and will also deliver to the Representatives as
many conformed copies of the Registration Statement and of each
amendment thereto as the Representatives may reasonably request. The
copies of the Registration Statement, and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(e) The Offerors have delivered to each Underwriter, without
charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Offerors hereby consent to
the use of such copies for purposes permitted by the 1933 Act. The
Offerors will furnish to each Underwriter, without charge, during the
period when the Prospectus is required to be delivered under the 1933
Act or the 1934 Act, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably request. If
applicable, the Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
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<PAGE> 15
(f) If, at any time when a Prospectus is required by the 1933
Act to be given in connection with sales of the Preferred Securities,
any event shall occur or condition exist as a result of which it is
necessary, in the opinion of counsel to the Underwriters or counsel to
the Company, to amend or supplement the Prospectus to make the
Prospectus not misleading in the light of circumstances existing at the
time it is delivered to a purchaser, the Offerors will forthwith amend
or supplement the Prospectus (subject to Section 3(b) hereof), whether
by filing documents pursuant to the 1934 Act or otherwise, so that, as
so amended or supplemented, the Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, and the Offerors will furnish to the Underwriters a
reasonable number of copies of such amendment or supplement.
(g) The Offerors will endeavor, in cooperation with the
Underwriters, to qualify the Registered Securities for offering and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Representatives may
reasonably designate, but only to the extent that such qualification is
required by law; provided, however, that neither of the Offerors shall
be obligated to file any general consent to service of process or to
qualify as a foreign corporation or trust in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Registered Securities have
been so qualified, the Offerors will file such statements and reports
as may be required by the laws of such jurisdiction to continue such
qualification in effect for as long as may be required for the
distribution of the Preferred Securities or, in the case of such
Convertible Debentures, for as long as such Convertible Debentures are
issuable as contemplated by the Prospectus or, in the case of shares of
Common Stock and Rights issuable upon conversion of Preferred
Securities and Convertible Debentures, for so long as is required by
applicable law. The Offerors will promptly advise the Representatives
of the receipt by either of the Offerors of any notification with
respect to the suspension of the qualification of the Registered
Securities for sale or issuance, as the case may be, in any such state
or jurisdiction or the initiating or threatening of any proceeding for
such purpose.
(h) The Company will, on behalf of the Trust, make generally
available to the Trust's security holders as soon as practicable, but
not later than 120 days after the close of the period covered thereby,
an earnings statement (in form complying with the provisions of Rule
158 of the 1933 Act Regulations) covering a twelve month period
beginning not later than the first day of the Company's fiscal quarter
next following the "effective date" (as defined in said Rule 158) of
the Registration Statement.
(i) The Offerors will use their best efforts to effect the
listing of the Preferred Securities and the Common Stock issuable upon
conversion of the Preferred Securities on the New York Stock Exchange
(the "NYSE"); if the Preferred Securities are exchanged for Convertible
Debentures, the Company will use its best efforts to
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<PAGE> 16
effect the listing of the Convertible Debentures on the exchange or
quotation system on which the Preferred Securities were then listed.
(j) The Offerors, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, will file,
in accordance with the 1934 Act, all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act
within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(k) The Offerors will use the net proceeds received in
connection with the sale of the Preferred Securities and the
Convertible Debentures in the manner specified in the Prospectus under
"Use of Proceeds".
(l) During the period beginning the date hereof and continuing
for 90 days from such date, neither the Trust nor the Company will,
without the prior written consent of Merrill Lynch, directly or
indirectly, (I) sell, offer to sell, grant any option for the sale of,
or otherwise dispose of, (a) any trust certificates or other securities
of the Trust (other than the Preferred Securities and the Common
Securities issued to the Company), (b) any preferred stock or any other
security of the Company that is substantially similar to the Preferred
Securities, (c) any shares of any class of common stock of the Company
(other than (i) shares of Common Stock issuable upon conversion of the
Preferred Securities or pursuant to the exercise of options or warrants
outstanding on the date hereof and (ii) the grant of stock options or
other stock-based awards (and the exercise thereof) to directors,
officers and employees of the Company and its subsidiaries), (d) any
debt securities of the Company that are substantially similar to the
Convertible Debentures (other than the Convertible Debentures issued to
the Trust) or (e) any other securities which are convertible into, or
exercisable or exchangeable for, any securities of the type referred to
in clauses (a) through (d) above (subject, however, to the same
exceptions, to the extent applicable, as are set forth in clauses (a)
through (d) above) or (II) enter into any swap or any other agreement
or any transaction that transfers, directly or indirectly, the economic
consequences of ownership of any of the securities described in clauses
(a) through (d) above whether or not such swap is to be settled by
delivery of such securities, in cash or otherwise.
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of the obligations of the Offerors under this
Agreement, including (i) the printing and filing of the Registration Statement
as originally filed and of each amendment thereto, (ii) the preparation,
issuance and delivery of the certificates for the Preferred Securities, (iii)
the fees and disbursements of the Company's and the Trust's counsel and
accountants, (iv) the printing and delivery to the Underwriters of copies of the
Registration Statement as originally filed and all amendments thereto, of each
preliminary prospectus, any Term Sheets, and of the Prospectus and any
amendments or supplements thereto, (v) the fees and expenses of the Indenture
Trustee, including the fees and disbursements of counsel for the Indenture
Trustee, (vi) the fees and expenses of the Property Trustee, including the fees
and disbursements of counsel for the Property Trustee, (vii) the fees and
expenses of the
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<PAGE> 17
Guarantee Trustee, (viii) the filing fees incident to the review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of sale of the
Preferred Securities, (ix) any fees in connection with the rating of Preferred
Securities and, if applicable, the Convertible Debentures, and (x) the fees and
expenses incurred in connection with the listing on the NYSE of the Preferred
Securities and the shares of Common Stock issuable upon conversion of the
Preferred Securities, and, if applicable, the Convertible Debentures, (xi) the
fees and expenses of any transfer agent, paying agent or registrar, and (xii)
the cost of qualifying the Preferred Securities, and if applicable, the
Convertible Debentures, with The Depository Trust Company.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall
reimburse the Underwriters for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Preferred Securities pursuant to
this Agreement are subject to the accuracy of the representations and warranties
of the Offerors herein contained, to the accuracy of the statements of the
Company's officers or the Trustees, as the case may be, made in any certificate
furnished pursuant to the provisions hereof, to the performance by the Offerors
of all of their respective covenants and other obligations hereunder, and to the
following further conditions:
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, shall be effective as of the time of execution
of this Agreement; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission. A Prospectus containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 424(b) (or
a post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of
Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term
Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) At Closing Time, you shall have received:
(1) The favorable opinion, dated as of the Closing
Time, of William J. Hallinan, Esq., Senior Vice President,
General Counsel and Secretary of the Company, in form and
scope satisfactory to the Representatives and to counsel for
the Underwriters, to the effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the State of Delaware.
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<PAGE> 18
(ii) The Company has corporate power and
authority to own, lease and operate its properties
and conduct its business as described in the
Registration Statement.
(iii) The Company is duly qualified as a
foreign corporation to transact business and is in
good standing in each jurisdiction in which such
qualification is required, except where the failure
of the Company to so qualify, in the aggregate, will
not have a material adverse effect on the
consolidated financial condition or combined
operations of the Company and its subsidiaries.
(iv) Each subsidiary of the Company has been
duly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate
power and corporate authority to own, lease and
operate its properties and conduct its business as
described in the Registration Statement, and is duly
qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction
in which such qualification is required, whether by
reason of the ownership or leasing of property or the
conduct of business, except where the failure to so
qualify, in the aggregate, will not have a material
adverse effect on the consolidated financial
condition or combined operations of the Company and
its subsidiaries; and all of the issued and
outstanding capital stock of each such subsidiary has
been duly authorized and validly issued and is fully
paid and nonassessable, and all of such capital stock
is owned by the Company or its affiliates, directly
or through subsidiaries, free and clear of any
mortgage, pledge, lien, encumbrance or claim.
(v) The authorized, issued and outstanding
capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the
caption "Capitalization" (and in the line items
corresponding to such column) and under the caption
"Description of Capital Stock", and the shares of
issued and outstanding Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable.
(vi) There are no legal or governmental
proceedings pending or to the best knowledge of such
counsel threatened which are required to be disclosed
in the Registration Statement, other than those
disclosed therein, and all pending legal or
governmental proceedings to which the Company or any
subsidiary is a party or of which any of their
property is the subject which are not described in
the Registration Statement, including ordinary
routine litigation incidental to the business, are
reasonably expected not to have, individually or in
the aggregate, a material adverse effect on the
Company and its subsidiaries considered as one
enterprise or on the Trust. Neither the Trust nor any
of its
18
<PAGE> 19
property is subject to any pending or, to the best
knowledge of such counsel, threatened legal or
governmental proceedings.
(vii) To the best of such counsel's
knowledge, there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to
in the Registration Statement or to be filed as
exhibits thereto other than those described or
referred to therein or filed or incorporated by
reference as exhibits thereto, the descriptions
thereof or references thereto are correct (provided
that such counsel need express no opinion as to the
descriptions of the Operative Instruments), and no
default exists by the Company or the Trust in the due
performance or observance of obligations, agreements,
covenants or conditions, which alone or in the
aggregate are material, contained in any contracts,
indentures, loan agreements, notes, leases or other
instruments, which alone or in the aggregate are
material, so described, referred to, filed or
incorporated by reference.
(viii) No consent, approval, authorization,
or order of any court or governmental authority or
agency is required in connection with the execution,
delivery and performance of the Operative Instruments
by the Offerors, the consummation of the transactions
contemplated in the Operative Instruments (including,
without limitation, the issuance and sale of the
Preferred Securities, Common Securities, Convertible
Debentures and Guarantees and the issuance of shares
of Common Stock and Rights upon conversion of the
Preferred Securities and Convertible Debentures), and
the performance by the Offerors of their other
obligations under the Operative Instruments, except
such as may be required under the 1933 Act, the 1933
Act Regulations, the 1939 Act or, if applicable,
state securities laws; and the execution, delivery
and performance of the Operative Instruments by the
Offerors, the consummation of the transactions
contemplated by the Operative Instruments (including,
without limitation, the issuance and sale of the
Preferred Securities, Common Securities, Convertible
Debentures and Guarantees and the issuance of shares
of Common Stock and Rights upon conversion of the
Preferred Securities and Convertible Debentures), and
performance by the Offerors of their other
obligations under the Operative Instruments, do not
and will not conflict with or constitute a breach of,
or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any
subsidiary or the Trust pursuant to, any material
contract, indenture, mortgage, loan agreement, note,
lease or other instrument known to such counsel and
to which the Company, any of its subsidiaries or the
Trust is a party or by which the Company, any of its
subsidiaries or the Trust may be bound or to which
any of the property or assets of the Company or any
of its subsidiaries or the Trust
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<PAGE> 20
is subject, or any law, administrative regulation or
administrative or court decree known to such counsel
to be applicable to the Company or the Trust of any
court or governmental agency, authority or body or
any arbitrator having jurisdiction over the Company
or the Trust.
(ix) Each document filed pursuant to the
1934 Act (other than the financial statements,
schedules and other financial and statistical data
included therein, as to which no opinion need be
rendered) and incorporated by reference in the
Prospectus, complied when filed as to form in all
material respects with the 1934 Act and the 1934 Act
Regulations.
(x) To the best knowledge of counsel, the
Company and its subsidiaries own or possess or have
obtained adequate trademarks, service marks and trade
names necessary to conduct the business now operated
by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with
respect to any trademarks, service marks or trade
names which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or
finding, would reasonable be expected to materially
adversely affect the conduct of the business,
operations, financial condition or income of the
Company and its subsidiaries considered as one
enterprise.
(xi) Neither the Company nor FINOVA Capital
is an "investment company" or "controlled" by an
"investment company" as such terms are defined in the
Investment Company Act.
(xii) The Trust is duly qualified to
transact business and is in good standing in each
jurisdiction in which such qualification is
necessary, except where the failure to so qualify
would not have a material adverse effect on the
Trust; and, to the best knowledge of such counsel,
the Trust is not a party to or otherwise bound by any
agreements or instruments other than those described
in the Prospectus.
(xiii) The Declaration has been duly
executed and delivered by the Regular Trustees and
(assuming due authorization, execution and delivery
by the Company, the Property Trustee and the Delaware
Trustee) the Declaration constitutes a valid and
binding obligation of the Regular Trustees,
enforceable against the Regular Trustees in
accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency (including
without limitation all laws relating to fraudulent
transfers), reorganization, moratorium or other
similar laws relating to or affecting creditors'
rights generally and except as enforcement thereof
may be subject to general principles of equity
(regardless of whether
20
<PAGE> 21
enforcement is considered in a proceeding at law or
in equity), including concepts of commercial
reasonableness.
and to such further effect with respect to other legal matters
relating to this Agreement and the sale of the Preferred
Securities hereunder as counsel to the Underwriters may
reasonably request. In giving such opinions such counsel may
rely as to all matters of state law other than the Federal
laws of the United States of America, the laws of the State of
Arizona and the General Corporation Law of the State of
Delaware (the "DGCL"), and as to all matters of foreign law,
upon opinions of counsel satisfactory to counsel for the
Underwriters, in which case, the opinion shall state that,
although such counsel has not made an independent
investigation of the laws of any jurisdiction other than the
Federal laws of the United States of America, the DGCL and the
laws of Arizona, such counsel believes that the Underwriters
and he are entitled so to rely. In giving the opinions
referred to in the foregoing clause (iv), such counsel may
omit reference to a foreign subsidiary as long as (A) he shall
have delivered to you a signed opinion of other counsel for
such foreign subsidiary, satisfactory to counsel for the
Underwriters, which other opinion shall give substantially the
same opinions with respect to such foreign subsidiary as
required by the foregoing clause (iv), and (B) he states that
such other opinion is satisfactory to him and that although he
has not made an independent investigation of the foreign laws
applicable to such foreign subsidiary, he believes that the
Underwriters are entitled to rely on such other opinion. Any
such opinion may be in the form and contain such assumptions,
qualifications and limitations as customarily appear in legal
opinions issued in the jurisdiction in which any such opinion
is rendered or as may have appeared in opinions previously
delivered to Merrill Lynch by the Company's local counsel.
(2) The favorable opinion of Skadden, Arps, Slate,
Meagher & Flom LLP or Skadden, Arps, Slate, Meagher & Flom
(Illinois), special counsel for the Company and the Trust,
dated as of Closing Time, in form and scope satisfactory to
the Representatives and to counsel for the Underwriters, to
the effect that:
(i) The Company has corporate power and
corporate authority to enter into and to perform its
obligations under the Operative Instruments to which
it is a party and to purchase, own and hold the
Common Securities issued by the Trust.
(ii) The Trust has been duly created and is
validly existing in good standing as a business trust
under the Delaware Act.
(iii) Under the Delaware Act and the
Declaration, the Trust has the power and authority
(a) to enter into and perform its obligations under
this Agreement, (b) to perform its obligations under
the Declaration, (c) to issue and perform its
obligations under the Preferred
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<PAGE> 22
Securities and the Common Securities and (d) to
purchase and hold the Convertible Debentures.
(iv) The Declaration has been duly
authorized, executed and delivered by the Company and
(assuming due authorization, execution and delivery
by the Regular Trustees, the Property Trustee and the
Delaware Trustee) the Declaration constitutes a valid
and binding obligation of the Company and the Regular
Trustees, enforceable against the Company and the
Regular Trustees in accordance with its terms, except
as enforcement may be limited by bankruptcy,
insolvency (including without limitation all laws
relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or
affecting creditors' rights generally and except as
enforcement thereof may be subject to general
principles of equity (regardless of whether
enforcement is considered in a proceeding at law or
in equity), including concepts of commercial
reasonableness; and the Declaration has been duly
qualified under the 1939 Act.
(v) The Common Securities have been duly
authorized by the Declaration and, when duly issued
and delivered by the Trust to the Company against
payment of the consideration therefor as described in
the Registration Statement, will be validly issued
and, except as otherwise provided in Section 9.1 of
the Declaration, fully paid and non-assessable
undivided beneficial interests in the assets of the
Trust and will be owned of record by the Company; and
the issuance of the Common Securities is not subject
to preemptive or other similar rights arising under
the Delaware Act or the Declaration.
(vi) The Preferred Securities have been duly
authorized by the Declaration and, when issued,
delivered and paid for in accordance with the terms
of this Agreement, will be validly issued, fully paid
and non-assessable undivided beneficial interests in
the assets of the Trust and will entitle the holders
thereof to the benefits of the Declaration; the
holders of the Preferred Securities will be entitled
to the same limitation of personal liability as
extended to stockholders of private corporations for
profit organized under the DGCL; and the issuance of
the Preferred Securities is not subject to preemptive
or other similar rights arising under the Delaware
Act or the Declaration. Such counsel may state that
they bring to your attention that holders of
Preferred Securities may be obligated, pursuant to
the Declaration, to (a) provide indemnity and/or
security in connection with and pay taxes or
governmental charges arising from transfers of
Preferred Securities and the issuance of replacement
Preferred Securities, and (b) provide security and
indemnity in connection with requests of or
directions to the Property Trustee to exercise its
rights and powers under the Declaration.
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<PAGE> 23
(vii) Each of the Guarantee Agreements has
been duly authorized, executed and delivered by the
Company and, assuming, with respect to the Preferred
Securities Guarantee Agreement, due authorization,
execution and delivery thereof by the Guarantee
Trustee, each of the Guarantee Agreements constitutes
a valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms, except as enforcement thereof may be
limited by the bankruptcy, insolvency (including
without limitation all laws relating to fraudulent
transfers), reorganization, moratorium or other
similar laws relating to or affecting creditors'
rights generally and except as enforcement thereof
may be subject to general principles of equity
(regardless of whether enforcement is considered in a
proceeding at law or in equity), including concepts
of commercial reasonableness; and the Preferred
Securities Guarantee Agreement has been duly
qualified under the 1939 Act.
(viii) The Indenture has been duly
authorized, executed and delivered by the Company and
(when duly authorized, executed and delivered by the
Indenture Trustee) will constitute a valid and
binding obligation of the Company, enforceable
against the Company in accordance with its terms,
except as enforcement thereof may be limited by the
bankruptcy, insolvency (including without limitation
all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally
and except as enforcement thereof may be subject to
general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or
in equity), including concepts of commercial
reasonableness; and the Indenture has been duly
qualified under the 1939 Act.
(ix) The Convertible Debentures have been
duly authorized by the Company and, when the
Convertible Debentures have been duly executed by the
Company and authenticated and delivered by the
Indenture Trustee in the manner provided in the
Indenture and paid for by the Trust of the
consideration therefor, will constitute valid and
binding obligations of the Company, enforceable
against the Company in accordance with their terms,
except as enforcement thereof may be limited by
bankruptcy, insolvency (including without limitation
all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally
and except as enforcement thereof may be subject to
general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or
in equity), including concepts of commercial
reasonableness, and will be entitled to the benefits
of the Indenture; and the issuance of the Convertible
Debentures is not subject to preemptive or other
similar rights arising under the charter or by-laws
of the Company, under the DGCL or, to the best
knowledge of such counsel, otherwise.
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<PAGE> 24
(x) The shares of Common Stock issuable upon
conversion of the Convertible Debentures have been
duly authorized and reserved by the Company for
issuance upon such conversion and, if and when issued
upon such conversion in accordance with the
provisions of the Indenture at conversion prices
equal to or in excess of the par value of such shares
of Common Stock at such time, will be validly issued,
fully paid and non-assessable, and the issuance of
such shares is not subject to preemptive or other
similar rights arising under the charter or by-laws
of the Company, under the DGCL or, to the best
knowledge of such counsel, otherwise.
(xi) This Agreement has been duly
authorized, executed and delivered by the Company and
the Trust.
(xii) No authorization, approval, consent or
order of any court or governmental authority or
agency (other than under the 1933 Act and the 1933
Act Regulations, which have been obtained, or as may
be required under the securities or blue sky laws of
the various states, as to which such counsel need
express no opinion) is required in connection with
the issuance and sale of the Preferred Securities by
the Trust to the Underwriters pursuant to this
Agreement, the issuance and sale of the Common
Securities by the Trust to the Company, the issuance
and sale of the Convertible Debentures by the Company
to the Trust, the issuance by the Company of shares
of Common Stock and rights upon conversion of the
Convertible Debentures or the execution, delivery or
performance by the Company or the Trust of their
respective obligations under this Agreement, the
Indenture, the Convertible Debentures, the Guarantee
Agreements, the Declaration, the Preferred Securities
or the Common Securities, except that such counsel
need not express any opinion as to (i) the rules and
regulations of the NASD and (ii) laws other than
those that, in such counsel's experience, are
normally applicable to transactions of the type
contemplated by this Agreement. The execution,
delivery and performance of this Agreement, the
Declaration, the Guarantee Agreements and the
Indenture (including, without limitation, the
issuance and sale of the Preferred Securities, Common
Securities, Convertible Debentures and the issuance
of shares of Common Stock and Rights upon conversion
of the Convertible Debentures) and the consummation
by the Company and the Trust of the transactions
contemplated hereby and thereby do not and will not
result in any violation of the provisions of the
charter or by-laws of the Company, the Declaration or
any applicable law, administrative regulation or
administrative or court decree known to such counsel
to be applicable to the Company or the Trust.
(xiii) The Trust is not required to be
registered under the 1940 Act.
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<PAGE> 25
(xiv) Such counsel has been orally advised
by the staff of the Commission that the Registration
Statement, including any Rule 462(b) Registration
Statement, was declared effective under the 1933 Act;
any required filing of the Prospectus pursuant to
Rule 424(b) under the 1933 Act has been made in the
manner and within the time period required by Rule
424(b); and such counsel has been orally advised by
the staff of the Commission that no stop order
suspending the effectiveness of the Registration
Statement, including any Rule 462(b) Registration
Statement, has been issued by the Commission and, to
such counsel's knowledge, no proceedings for that
purpose have been initiated or threatened by the
Commission.
(xv) Each of the Registration Statement and
any 462(b) Registration Statement, as of its
effective date and as of the effective date of any
subsequent amendment thereto, and the Prospectus, as
of its date and as of the date of any amendments or
supplements thereto, appeared on its face to be
appropriately responsive in all material respects to
the requirements of the 1933 Act and the 1933 Act
Regulations (except that in each case such counsel
need not express an opinion as to documents
incorporated or deemed to be incorporated by
reference therein, the financial statements,
schedules and other financial and statistical data
included therein or excluded therefrom and any Form
T-1, and such counsel need not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the
Registration Statement or the Prospectus except
insofar as set forth in paragraph (xvi) and (xix)
below).
(xvi) The statements in the Prospectus under
the captions "Description of the Preferred
Securities," "Description of the Guarantee,"
"Description of the Convertible Debentures," "Effect
of Obligations under the Convertible Debentures and
the Guarantee" and "Description of Capital Stock,"
insofar as such statements constitute a summary of
certain provisions of law or certain provisions of
the Preferred Securities, the Common Securities, the
Convertible Debentures, the Guarantees, the
Indenture, the Declaration, the Guarantee Agreements,
the charter and by-laws of the Company or the Rights
Agreement, or legal conclusions, have been reviewed
by such counsel and are, in all material respects an
accurate summary of such provisions and legal
conclusions.
(xvii) The Trust will be classified for
United States federal income tax purposes as a
grantor trust and not as an association taxable as a
corporation; accordingly, for United States federal
income tax purposes, each holder of Preferred
Securities generally will be considered the owner of
an undivided interest in the Convertible Debentures.
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(xviii) The Convertible Debentures will be
classified for United States federal income tax
purposes as indebtedness of the Company.
(xix) The discussion set forth in the
Prospectus under the caption "Certain Federal Income
Tax Considerations" is a fair and accurate summary of
the matters set forth therein, based upon current law
and the assumptions stated therein; and the opinions
of such counsel set forth under such caption are
confirmed.
In rendering such opinion, such counsel (i) shall
state that such opinion is limited to matters arising under
the laws of the States of New York, Illinois, and Delaware and
the federal laws of the United States, (ii) may rely as to all
matters of Delaware law (other than the DGCL) on the opinion
of Skadden, Arps, Slate, Meagher & Flom (Delaware) ("Delaware
Counsel"), so long as such opinion of Delaware Counsel shall
be addressed to you, as Representatives of the several
Underwriters, shall expressly state that Brown & Wood LLP may
rely on such opinion in rendering their opinion pursuant to
this Agreement, and shall be in form and substance
satisfactory to the Representatives and to counsel for the
Underwriters, and (iii) shall state that, in rendering their
opinion pursuant to this Agreement, Brown & Wood LLP may rely
on such opinion of special counsel to the Company and the
Trust with respect to matters involving the application of
Delaware law as to the Trust, the Declaration, the Preferred
Securities and matters related thereto.
(3) The favorable opinion of Shipman & Goodwin LLP,
counsel to the Property Trustee and Guarantee Trustee, dated
as of the Closing Time, in form and substance satisfactory to
the Representatives and counsel for the Underwriters, to the
effect that:
(i) Fleet National Bank is a national
banking association with trust powers, duly
organized, validly existing and in good standing
under the federal laws of the United States of
America, with all necessary corporate power and
authority to execute and deliver, and to carry out
and perform its obligations under, the Declaration
and the Preferred Securities Guarantee Agreement.
(ii) The Declaration and the Preferred
Securities Guarantee Agreement have been duly
authorized, executed and delivered by the Property
Trustee and the Guarantee Trustee, respectively, and
constitute valid and binding obligations of the
Property Trustee and the Guarantee Trustee,
respectively, enforceable against the Property
Trustee and the Guarantee Trustee, respectively, in
accordance with their terms, except as enforcement
may be limited by bankruptcy, insolvency, moratorium
or other similar laws relating to or affecting
creditors' rights generally or by general equity
principles, including concepts of commercial
reasonableness.
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(iii) The execution, delivery and
performance of the Declaration and the Preferred
Securities Guarantee Agreement by the Property
Trustee and the Guarantee Trustee, respectively, do
not conflict with or constitute a breach of the
charter or by-laws of the Property Trustee or the
Guarantee Trustee, respectively.
(iv) No consent, approval or authorization
of, or registration with or notice to, any federal
banking authority is required for the execution,
delivery or performance by the Property Trustee or
the Guarantee Trustee of the Declaration or the
Preferred Securities Guarantee Agreement,
respectively.
(4) The favorable opinion of Morris, James, Hitchens
& Williams, counsel to the Delaware Trustee, dated as of the
Closing Time, in form and scope satisfactory to the
Representatives and counsel for the Underwriters, to the
effect that:
(i) First Union Bank of Delaware is a
Delaware banking corporation with trust powers,
validly existing and in good standing under the laws
of the State of Delaware, with all necessary power
and authority to execute and deliver, and to carry
out and perform its obligations under, the
Declaration.
(ii) The Declaration has been duly
authorized, executed and delivered by the Delaware
Trustee and constitutes a valid and binding
obligation of the Delaware Trustee, enforceable
against the Delaware Trustee in accordance with its
terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar
laws relating to or affecting creditors' rights
generally or by general equity principles, including
concepts of commercial reasonableness.
(iii) The execution, delivery and
performance of the Declaration by the Delaware
Trustee do not conflict with or constitute a breach
of the charter or by-laws of the Delaware Trustee.
(iv) No consent, approval or authorization
of, or registration with or notice to, any federal or
Delaware banking authority is required for the
execution, delivery or performance by the Delaware
Trustee of the Declaration.
(5) The favorable opinion, dated as of Closing Time,
of Brown & Wood LLP, counsel for the Underwriters, in form and
scope satisfactory to the Representatives, with respect to the
incorporation and legal existence of the Company, the legal
existence of the Trust, the Preferred Securities, the
Indenture, the Preferred Securities Guarantee Agreement, this
Agreement, the Registration Statement, the Prospectus and
other related matters as the
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Representatives may require. In rendering such opinion, such
counsel may rely, with respect to certain matters involving
the application of Delaware law as to the Trust, the Preferred
Securities and matters related thereto, to the extent they
deem proper and specified in such opinion, upon the opinion of
special counsel to the Company and the Trust delivered
pursuant to Section 5(b)(2) hereof.
(6) In giving their opinions required by subsections
(b)(1), (b)(2) and (b)(5), respectively, of this Section ,
William J. Hallinan, Esq., Skadden, Arps, Slate, Meagher &
Flom (Illinois) and Brown & Wood LLP shall each additionally
state that nothing has come to their attention that would lead
such counsel to believe that the Registration Statement or any
amendment thereto, including the Rule 430A Information and
Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial and statistical
data included or incorporated by reference therein and except
for any Form T-1, as to which such counsel need make no
statement), at the time the Registration Statement or any such
amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by
reference therein, as to which such counsel need make no
statement), as of the date of the Prospectus or any such
amended or supplemented prospectus or as of the Closing Time
(or, if applicable, as of the Date of Delivery), included or
includes any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change in the condition, financial or otherwise, of the Company and its
subsidiaries considered as one enterprise or of the Trust, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of the Trust, in each case
whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the Chairman,
President and Chief Executive Officer or a Senior Vice President or
Vice President of the Company and of the chief financial officer or
chief accounting officer of the Company and of the Regular Trustees of
the Trust, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the other representations
and warranties contained in Section 1 are true and correct as of
Closing Time with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Trust and the Company have complied
with all agreements and satisfied all conditions on their part to be
performed or satisfied at or prior to the Closing Time, and (iv) to the
best of their knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued under the
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1933 Act and no proceedings for that purpose have been initiated or
threatened by the Commission.
(d) At the time of execution of this Agreement, the
Representatives shall have received from Deloitte & Touche LLP a
letter, dated the date of this Agreement, in form and substance
satisfactory to the Representatives, and substantially in the same form
as the draft letter previously delivered to and approved by the
Representatives.
(e) At Closing Time the Representatives shall have received
from Deloitte & Touche LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (d) of this Section , except that the "specified
date" referred to in such letter shall be a date not more than five
days prior to the Closing Time.
(f) At the date of this Agreement and at Closing Time, the
Preferred Securities and Convertible Debentures shall have been rated
at least BBB+ by Standard and Poor's Ratings Group ("Standard &
Poor's") and at least Baa2 by Moody's Investors Service Inc.
("Moody's"); and, since the date of this Agreement, there shall not
have occurred any downgrading in the ratings of any of the Convertible
Debentures or any other securities of the Company or of the Preferred
Securities by Standard & Poor's or Moody's or any other "nationally
recognized statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and
neither Standard & Poor's nor Moody's nor any other "nationally
recognized statistical rating organization" shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of the Convertible Debentures or any
other securities of the Company or of the Preferred Securities.
(g) At the date of this Agreement and at the Closing Time, the
Preferred Securities and the shares of Common Stock issuable upon
conversion of the Preferred Securities shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
(h) At the date of this Agreement, the NASD shall have
confirmed that it has not raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(i) On or prior to the date of this Agreement, the Company
shall have delivered to the Representatives an agreement, substantially
in the form of Exhibit A hereto, signed by Mr. Samuel L. Eichenfield,
Chairman, President and Chief Executive Officer of the Company.
(j) At Closing Time and at each Date of Delivery (if any),
counsel for the Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for the purpose
of enabling them to pass upon the issuance and sale of the Preferred
Securities, Common Securities and Convertible Debentures as herein
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<PAGE> 30
contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained, and all
proceedings taken by the Company and the Trust in connection with the
authorization, issuance and sale of the Preferred Securities, Common
Securities and Convertible Debentures as herein contemplated shall be
reasonably satisfactory in form and scope to the Representatives and
counsel for the Underwriters.
(k) In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the
Option Preferred Securities, the representations and warranties of the
Company and the Trust contained herein and the statements in any
certificates furnished by the Company or the Trust hereunder shall be
true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the Representatives shall have received:
(1) A certificate, dated such Date of Delivery, of
the Chairman, President and Chief Executive Officer or a
Senior Vice President or Vice President of the Company and of
the chief financial officer or chief accounting officer of the
Company and of the Regular Trustees of the Trust confirming
that the certificate delivered at the Closing Time pursuant to
Section 5(c) hereof remains true and correct as of such date
of delivery.
(2) The favorable opinion of William J. Hallinan,
Esq., Senior Vice President and General Counsel of the
Company, in form and scope satisfactory to the Representatives
and counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Preferred Securities to be purchased on
such Date of Delivery (and the related Convertible Debentures
to be sold to the Trust) and otherwise to the same effect as
the opinion required by Sections 5(b)(1) and 5(b)(6) hereof.
(3) The favorable opinions of Skadden, Arps, Slate,
Meagher & Flom (Illinois) and Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel for the Company and Trust, in form
and scope satisfactory to the Representatives and to counsel
for the Underwriters, dated such Date of Delivery, relating to
the Preferred Securities to be purchased on such Date of
Delivery (and the related Convertible Debentures to be sold to
the Trust) and otherwise to the same effect as the opinions
required by Sections 5(b)(2) and 5(b)(6) hereof.
(4) The favorable opinion of Shipman & Goodwin LLP,
counsel for the Property Trustee and the Guarantee Trustee, in
form and scope satisfactory to the Representatives and to
counsel to the Underwriters, dated such Date of Delivery, to
the same effect as the opinion required by Section 5(b)(3).
(5) The favorable opinion of Morris, James, Hitchens
& Williams, counsel for the Delaware Trustee, in form and
scope satisfactory to the
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Representatives and to counsel to the Underwriters, dated such
Date of Delivery, to the same effect as the opinion required
by Section 5(b)(4) hereof.
(6) The favorable opinion of Brown & Wood LLP,
counsel for the Underwriters, dated such Date of Delivery,
relating to the Preferred Securities to be purchased on such
Date of Delivery (and the related Convertible Debentures to be
sold to the Trust) and otherwise to the same effect as the
opinion required by Sections 5(b)(5) and 5(b)(6) hereof.
(7) A letter from Deloitte & Touche LLP, in form and
substance satisfactory to the Representatives and dated such
Date of Delivery, substantially the same in form and substance
as the letter furnished to the Representatives pursuant to
Section 5(e) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date
not more than five days prior to such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representatives by notice to the Company at any time at or prior to
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4 hereof.
SECTION 6. Indemnification.
(a) The Offerors agree, jointly and severally, to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(e) below) any such settlement is effected
with the written consent of the Company; and
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<PAGE> 32
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), as incurred, reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further, that
the foregoing indemnity with respect to any untrue statement or alleged untrue
statement contained in or omission or alleged omission from a preliminary
prospectus shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) from whom the person asserting any such loss,
liability, claim, damage or expense purchased the Preferred Securities which are
the subject thereof if such person was not sent or given a copy of the
Prospectus (or the Prospectus as then amended or supplemented if the Offerors
shall have furnished any amendments or supplements thereto), in each case
exclusive of documents incorporated or deemed to be incorporated therein by
reference, at or prior to the written confirmation of the sale of such Preferred
Securities to such person in any case where such delivery is required by the
1933 Act and such untrue statement contained in or omission from such
preliminary prospectus was corrected in the Prospectus (or the Prospectus as so
amended or supplemented).
(b) The Company agrees to indemnify and hold harmless the Trust against
any and all loss, liability, claim, damage and expense whatsoever, as due from
the Trust under Section 6(a) hereunder.
(c) Each Underwriter severally agrees to indemnify and hold harmless
the Offerors, the directors of the Company, the Trustees of the Trust, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Offerors within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section , as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement, or any amendment thereto, including the Rule 430A Information and the
Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Offerors by such
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
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(d) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of the parties
indemnified pursuant to Section 6(a) above, counsel to the indemnified party
shall be selected by Merrill Lynch and, in the case of parties indemnified
pursuant to 6(b) and 6(c) above, counsel to the indemnified parties shall be
selected by the Company. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to one local counsel per jurisdiction) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(e) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
6(a)(ii) effected without its consent if such indemnifying party (x) reimburses
such indemnified party in accordance with such request to the extent the
indemnifying party in its judgment considers such request to be reasonable and
(y) provides written notice to the indemnified party stating the reason it deems
the unpaid balance unreasonable, in each case prior to 45 days after receipt by
such indemnifying party of the aforesaid request from the indemnified party.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect
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of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Offerors on the one hand and the Underwriters
on the other hand from the offering of the Preferred Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Offerors on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Offerors on the one hand and the
Underwriters on the other hand in connection with the offering of the Preferred
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds received by the Offerors from
the offering of the Preferred Securities pursuant to this Agreement (before
deducting expenses but after deducting the total Underwriters' Compensation
received by the Underwriters) and the total Underwriters' Compensation received
by the Underwriters, in each case as set forth on the cover of the Prospectus
(or, if Rule 434 is used, the corresponding location on the Term Sheet), bear to
the aggregate initial public offering price of the Preferred Securities as set
forth on such cover (or corresponding location on the Term Sheet, as the case
may be).
The relative fault of the Offerors on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Offerors or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Offerors and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Preferred Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
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No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, each Trustee of the Trust and each person, if any, who
controls an Offeror within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as such Offeror.
The obligations of the Offerors to contribute pursuant to this Section 7 are
joint and several. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the number of Initial
Preferred Securities set forth opposite their respective names in Schedule A
hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company or Trustees of
the Trust submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Offerors, and shall
survive delivery of the Preferred Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) The Representatives may terminate this Agreement, immediately upon
notice to the Company, at any time at or prior to Closing Time (i) if there has
been since the date of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise or of the Trust, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or elsewhere or any outbreak or
escalation of hostilities or other calamity or crisis the effect of which on the
financial markets of the United States is to make it, in the judgment of the
Representatives, impracticable to market the Preferred Securities or to enforce
contracts for the sale of the Preferred Securities, or (iii) if trading in the
Preferred Securities or the Common Stock shall have been suspended by the
Commission or the NYSE, or trading generally on any of the American Stock
Exchange, the NYSE or the Nasdaq National Market shall have been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by any of said Exchanges or by the
Nasdaq National Market or by order of the Commission or any other governmental
authority, or if a banking moratorium has been declared by either federal or New
York authorities. Notice of any such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
(b) If this Agreement is terminated pursuant to this Section , such
termination shall be without liability of any party except as provided in
Section 4.
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SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Preferred Securities which it or they are obligated to purchase hereunder
(the "Defaulted Securities"), then the Representatives shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, during such 24 hours the
Representatives shall not have completed such arrangements for the purchase of
all of the Defaulted Securities, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Preferred Securities to be purchased on such date
pursuant to this Agreement, each of the non-defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting
obligations bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Preferred Securities to be purchased on such date pursuant to
this Agreement, this Agreement or, with respect to any Date of Delivery
which occurs after the Closing Time, the obligations of the
Underwriters to purchase and of the Company to sell the Option
Preferred Securities to be purchased and sold on such Date of Delivery,
shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default under this Agreement.
In the event of any such default by any Underwriter or Underwriters as
set forth in this Section which does not result in a termination of this
Agreement or, in the case of a Date of Delivery which is after the Closing Time,
which does not result in a termination of the obligation of the Underwriters to
purchase and the Company to sell the relevant Option Securities, as the case may
be, either the Representatives or the Company shall have the right to postpone
the Closing Time or the relevant Date of Delivery, as the case may be, for a
period not exceeding seven days to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Merrill Lynch at the
address set forth above; and notices to the Offerors shall be directed to them
at 1850 North Central Avenue, P.O. Box 2209, Phoenix, Arizona 85002-2209,
attention of Robert J. Fitzsimmons, Senior Vice President, Treasurer and
Investor Relations.
SECTION 12. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters, the Company, the Trust and their respective
successors. Nothing
36
<PAGE> 37
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the parties hereto and their
respective successors and the controlling persons and officers, trustees and
directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto and their respective successors and said
controlling persons and said officers, trustees and directors and their heirs
and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Preferred Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State.
37
<PAGE> 38
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Underwriters, on the one hand, and the Company and the Trust, on the other,
in accordance with its terms.
Very truly yours,
THE FINOVA GROUP INC.
By: ________________________________________
Name:
Title:
FINOVA FINANCE TRUST
By: ________________________________________
Trustee
By: ________________________________________
Trustee
Confirmed and accepted, as of the date first above written.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
MONTGOMERY SECURITIES
MORGAN STANLEY & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ______________________________________
Authorized Signature
For themselves and as Representatives of the Underwriters named in Schedule
A hereto.
38
<PAGE> 39
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Preferred
Name of Underwriter Securities
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated................
Montgomery Securities.............................................
Morgan Stanley & Co. Incorporated.................................
---------
Total............................................. 2,000,000
=========
</TABLE>
<PAGE> 40
Exhibit A
December , 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Montgomery Securities
Morgan Stanley & Co. Incorporated
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
The undersigned, the Chairman, President and Chief Executive Officers
of The FINOVA Group Inc., a Delaware corporation (the "Company"), understands
that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Montgomery Securities and Morgan Stanley & Co. Incorporated
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company and FINOVA Finance Trust, a Delaware business trust (the "Trust"),
providing for the public offering of Convertible Trust Originated Preferred
Securities (the "Preferred Securities") of the Trust which will be convertible
into the common stock, par value $.01 per share (the "Common Stock"), of the
Company. In recognition of the benefits that such an offering will confer upon
the undersigned as an officer and stockholder of the Company, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreement that, during a period of 90 days from the date of the
Purchase Agreement, the undersigned will not, in my individual capacity, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) sell,
offer to sell, grant any option for the sale of, or otherwise dispose of, any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
<PAGE> 41
indirectly, the economic consequence of ownership of the Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether any such swap or transaction is to be settled by delivery of Common
Stock or other securities, in cash or otherwise; provided that the foregoing
prohibition shall not be applicable with respect to [the offer to sell, sale or
other disposition of any agreement or transaction that transfers or purports to
transfer any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock in the event of the acceleration of
the vesting or exercisability of, or the termination of transfer or other
restrictions with respect, to such shares or securities as a result of a "change
of control" of the Company or a "change in control" of the Company, as such
terms are defined or referred to in any employee benefit plan of the Company or
other similar agreement or other arrangement of the Company to which the
undersigned is a party or under which the undersigned is a beneficiary.]
Very truly yours,
Signature: ____________________________
Samuel L. Eichenfield
<PAGE> 1
EXHIBIT 4.6
[FORM OF AMENDED AND RESTATED DECLARATION OF TRUST]
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FINOVA FINANCE TRUST
Dated as of December __, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions........................................................ 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application................................... 10
SECTION 2.2 Lists of Holders of Securities..................................... 10
SECTION 2.3 Reports by the Property Trustee.................................... 11
SECTION 2.4 Periodic Reports to Property
Trustee............................................................ 11
SECTION 2.5 Evidence of Compliance with
Conditions Precedent............................................... 12
SECTION 2.6 Events of Default; Waiver.......................................... 12
SECTION 2.7 Event of Default; Notice........................................... 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name............................................................... 15
SECTION 3.2 Office............................................................. 15
SECTION 3.3 Purpose............................................................ 15
SECTION 3.4 Prohibition of Actions by the Trust
and the Trustees................................................... 16
SECTION 3.5 General Authority of the Trustees.................................. 17
SECTION 3.6 Title to Property of the Trust..................................... 17
SECTION 3.7 Not Responsible for Recitals or
Issuance of Securities............................................. 17
SECTION 3.8 Duration of Trust.................................................. 17
SECTION 3.9 Mergers............................................................ 17
SECTION 3.10 Termination of Trust............................................... 20
ARTICLE IV
SPONSOR
</TABLE>
<PAGE> 3
<TABLE>
Page
<S> <C> <C>
SECTION 4.1 Sponsor's Purchase of Common
Securities......................................................... 21
SECTION 4.2 Responsibilities of the Sponsor.................................... 21
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees................................................. 22
SECTION 5.2 Delaware Trustee................................................... 22
SECTION 5.3 Property Trustee; Eligibility...................................... 23
SECTION 5.4 Qualifications of Regular Trustees
and Delaware Trustee Generally..................................... 24
SECTION 5.5 Initial Trustees................................................... 25
SECTION 5.6 Appointment, Removal and
Resignation of Trustees............................................ 25
SECTION 5.7 Vacancies among Trustees........................................... 27
SECTION 5.8 Merger, Conversion, Consolidation
or Succession to Business of a Trustee............................. 28
SECTION 5.9 Authority, Powers and Duties of the
Regular Trustees................................................... 28
SECTION 5.10 Delegation of Powers and Duties of
the Regular Trustees............................................... 33
SECTION 5.11 Powers and Duties of the Property
Trustee............................................................ 33
SECTION 5.12 Certain Duties and Responsibilities
of the Property Trustee............................................ 35
SECTION 5.13 Certain Rights of Property Trustee................................. 37
SECTION 5.14 Delaware Trustee................................................... 40
SECTION 5.15 Meetings........................................................... 40
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions...................................................... 41
ARTICLE VII
THE SECURITIES
SECTION 7.1 Title and Terms.................................................... 41
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 7.2 General Provisions Regarding the
Securities......................................................... 42
SECTION 7.3 General Form of Certificates....................................... 42
SECTION 7.4 Form of Preferred Securities
Certificates; Global Certificates.................................. 43
SECTION 7.5 Execution and Dating of
Certificates....................................................... 44
SECTION 7.6 Authentication of Preferred
Security Certificates.............................................. 45
SECTION 7.7 Definitive Preferred Security Cer-
tificates.......................................................... 45
SECTION 7.8 Temporary Certificates............................................. 46
SECTION 7.9 Registrar, Paying Agent and Conver-
sion Agent......................................................... 46
SECTION 7.10 Paying Agent to Hold Money in
Trust.............................................................. 47
SECTION 7.11 Outstanding Preferred Securities................................... 47
SECTION 7.12 Preferred Securities in Treasury................................... 48
SECTION 7.13 Notices to Clearing Agency......................................... 48
SECTION 7.14 Appointment of Successor Clearing
Agency............................................................. 48
SECTION 7.15 Deemed Security Holders............................................ 48
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF SECURITIES
SECTION 8.1 General............................................................ 49
SECTION 8.2 Transfer Procedures and
Restrictions for Global
Certificates....................................................... 50
SECTION 8.3 Mutilated, Destroyed, Lost or
Stolen Certificates; Replacement
Securities......................................................... 51
SECTION 8.4 Cancellation of Preferred Security
Certificates....................................................... 52
ARTICLE IX
LIMITATION OF LIABILITY OF
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
HOLDERS OF SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 Liability.......................................................... 52
SECTION 9.2 Exculpation........................................................ 53
SECTION 9.3 Fiduciary Duty..................................................... 53
SECTION 9.4 Indemnification.................................................... 55
SECTION 9.5 Outside Businesses................................................. 59
ARTICLE X
ACCOUNTING
SECTION 10.1 Fiscal Year........................................................ 59
SECTION 10.2 Certain Accounting Matters......................................... 60
SECTION 10.3 Banking............................................................ 60
SECTION 10.4 Withholding........................................................ 61
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments......................................................... 61
SECTION 11.2 Meetings of the Holders of
Securities; Action by Written
Consent............................................................ 64
ARTICLE XII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of
Property Trustee................................................... 66
SECTION 12.2 Representations and Warranties of
Delaware Trustee................................................... 67
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices............................................................ 68
SECTION 13.2 Governing Law...................................................... 69
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 13.3 Intention of the Parties........................................................ 70
SECTION 13.4 Headings........................................................................ 70
SECTION 13.5 Successors and Assigns.......................................................... 70
SECTION 13.6 Partial Enforceability.......................................................... 70
SECTION 13.7 Counterparts.................................................................... 70
ANNEX I Terms of Securities
ANNEX AND EXHIBITS
ANNEX I Terms of Securities
Exhibit A-1 Form of Preferred Security
Exhibit A-2 Form of Common Security
Exhibit B Specimen of Debenture
</TABLE>
v
<PAGE> 7
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
310(a)........................................... 5.3(a)
310(c)........................................... Inapplicable
311(c)........................................... Inapplicable
312(a)........................................... 2.2(a)
312(b)........................................... 2.2(b)
313.............................................. 2.3
314(a)........................................... 2.4
314(b)........................................... Inapplicable
314(c)........................................... 2.5
314(d)........................................... Inapplicable
314(f)........................................... Inapplicable
315(a)........................................... 5.12(b)-(e)
315(c)........................................... 5.12(a)
315(d)........................................... 5.12(a)
316(a)........................................... Annex I
316(c)........................................... 5.9(d)(v)
</TABLE>
- ---------------
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
vi
<PAGE> 8
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FINOVA FINANCE TRUST
DECEMBER __, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of December __, 1996, by the undersigned trustees
(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"),
The FINOVA Group Inc., a Delaware corporation, as trust sponsor (the "Sponsor"),
and by the holders, from time to time, of undivided beneficial interests in the
Trust issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established FINOVA
Finance Trust (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a Declaration of Trust dated as of December 1, 1996 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on December 1, 1996, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures (as defined herein) of the Debenture Issuer (as defined
herein);
WHEREAS, as of the date hereof, no interests in the Trust have
been issued; and
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration
<PAGE> 9
constitute the governing instrument of such business trust, the Trustees declare
that all assets contributed to the Trust will be held in trust for the benefit
of the holders, from time to time, of the securities representing undivided
beneficial interests in the assets of the Trust issued hereunder, subject to the
provisions of this Declaration.
2
<PAGE> 10
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;
(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 Declaration as modified, supplemented or amended from time to
time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections and Annexes 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;
(f) a reference to the singular includes the plural and vice
versa; and
(g) a reference to the masculine includes the feminine and
vice versa.
"Additional Interest" means if the Trust is required to pay
any taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other taxing
authority, such amounts as shall be required so that
3
<PAGE> 11
the net amounts received and retained by the Trust after paying such taxes,
duties, assessments and governmental charges will not be less than the amounts
the Trust would have received had no such taxes, duties, assessments or
governmental charges been imposed.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 8.2.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in The City of New York[, the
principal office of the Property Trustee] or in Wilmington, Delaware are
authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section3801 et seq., as it may be amended from time
to time, or any successor legislation.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate
4
<PAGE> 12
and which shall undertake to effect book entry transfers and pledges of the
Preferred Securities.
"Closing Date" means December __, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.1.
"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security substantially in the
form of Exhibit A-2.
"Common Securities Guarantee" means the guarantee agreement
dated as of December __, 1996, of the Sponsor in respect of the Common
Securities.
"Company" means The FINOVA Group Inc., a Delaware corporation,
or any successor entity in a merger, consolidation or amalgamation.
"Company Indemnified Person" means (i) any Regular Trustee;
(ii) any Affiliate of any Regular Trustee; (iii) any officer, director,
shareholder, member, partner, employee, representative or agent of any Regular
Trustee; or (iv) any officer, employee or agent of the Trust or its Affiliates.
"Compounded Interest" means interest compounded quarterly at
the rate specified for the Debentures to the extent permitted by applicable law
upon interest accrued and unpaid (including Additional Interest) at the end of
each Extension Period.
5
<PAGE> 13
"Conversion Agent" has the meaning set forth in Section 7.9.
"Covered Person" means (a) any officer, director, stockholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means the Company in its capacity as issuer
of the Debentures.
"Debenture Trustee" means Fleet National Bank, a national
banking association, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the __% Convertible Subordinated Debentures
due __________ __, 2016, to be issued by the Debenture Issuer under the
Indenture and to be held by the Property Trustee, a specimen certificate for
such Debentures being Exhibit B hereto.
"Definitive Preferred Security Certificates" has the meaning
set forth in Section 7.7.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Depositary" means The Depository Trust Company, the initial
Clearing Agency, until a successor shall be appointed pursuant to Section 7.14,
and thereafter means such successor Depositary.
"Distribution" has the meaning set forth in Section 6.1.
"Event of Default" in respect of the Securities means an Event
of Default (as defined in the Indenture) has occurred and is continuing in
respect of the Debentures.
6
<PAGE> 14
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder,
or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 9.4(b).
"FINOVA Common Stock" has the meaning set forth in the
Indenture.
"Global Certificate" has the meaning set forth in Section
7.4(a).
"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.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of December __, 1996,
between the Debenture Issuer and the Debenture Trustee, as it may be amended
from time to time.
"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, and the rules and regulations promulgated
thereunder, or any successor legislation.
"Legal Action" has the meaning set forth in Section
5.9(d)(vii).
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holders of
7
<PAGE> 15
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Preferred Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms of
the Securities as set forth in Annex I hereto.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(i) a statement that each officer signing the
Certificate has read the covenant or
condition and the definitions relating
thereto;
(ii) 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
(iii) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been
complied with.
"Paying Agent" has the meaning specified in Section 7.9.
8
<PAGE> 16
"Person" means any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning specified in Section
7.1.
"Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Preferred Securities Guarantee" means the Guarantee Agreement
dated as of December __, 1996 of the Sponsor in respect of the Preferred
Securities.
"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 Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in
Section 5.11(c).
"Purchase Agreement" means the Purchase Agreement dated as of
December __, 1996, among the Sponsor, the Trust and the underwriters named
therein, relating to the Preferred Securities.
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both of them.
9
<PAGE> 17
"Registrar" has the meaning set forth in Section 7.9.
"Registration Statement" means the Registration Statement on
Form S-3 (Reg. No. 333-15445), including any amendments thereto relating to,
among other securities, the Preferred Securities.
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
10
<PAGE> 18
"Securities Guarantee" means the Common Securities Guarantee
and the Preferred Securities Guarantee.
"Special Event" has the meaning set forth in Annex I hereto.
"Sponsor" means The FINOVA Group Inc., a Delaware corporation,
or any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holders of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities, voting separately as a class, who are the record
owners of 10% or more of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant 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).
"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
11
<PAGE> 19
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, and the rules and regulations promulgated
thereunder, or any successor legislation.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee that is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Section
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(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.
12
<PAGE> 20
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall furnish or cause to be furnished to the Property Trustee (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 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
any List 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 Section 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
(a) Within 60 days after May 15 of each year, commencing May
15, 1997, the Property Trustee shall transmit by mail to Holders such reports
concerning the Property Trustee and its actions under this Declaration as may be
required pursuant to the Trust Indenture Act in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property
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Trustee with each stock exchange upon which the Securities are listed, with the
Commission and with the Company. The Trust will notify the Property Trustee when
the Securities are listed on any stock exchange.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall file with the Property Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Property Trustee within 15 days after the same is so required to be filed with
the Commission.
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 or determinable from information contained therein, including
the Trust's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.5 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, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
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(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 the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
the Declaration may only be waived by the vote of the Holders of at
least the proportion in liquidation amount of the Preferred Securities
that the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
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
any 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 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.
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(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 below in this
Section 2.6(b), the Event of Default under the 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 the Declaration as
provided below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default 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 with respect to the Preferred
Securities 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 2.6(b) shall be in lieu of
Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such
Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust
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Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such 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 the Preferred Securities
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 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 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with respect
to the Securities actually known to a Responsible Officer; unless such defaults
have been cured before the giving of such notice (the term "defaults" for the
purposes of this Section 2.7(a) being hereby defined to be an Event of Default
as defined in the Indenture, not including any periods of grace provided for
therein and irrespective of the giving of any notice provided therein); provided
that, except for a default in the payment of principal of (or premium, if any)
or interest on any of the Debentures or in the payment of any sinking fund
installment established for 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
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and/or Responsible Officers in good faith determines that the withholding of
such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge
of any default except:
(i) a default under Sections 501(1) and 501(2) of the
Indenture; or
(ii) any default as to which [a Responsible Officer]
the Property Trustee shall have received written notice or of which a
Responsible Officer charged with the administration of the Declaration
shall have actual knowledge.
ARTICLE III
ORGANIZATION OF TRUST
SECTION 3.1 Name.
The Trust is named "FINOVA Finance Trust," as such name may be
modified from time to time by the Regular Trustees following 10 Business Days
written notice to the Holders of 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 3.2 Office.
The address of the principal office of the Trust is c/o The
FINOVA Group Inc., 1850 North Central Avenue, P.O. Box 2209, Phoenix, Arizona
85002-2209, Attention: Treasurer. On 10 Business Days' written notice to the
Holders of Securities, the Regular Trustees may designate another principal
office.
SECTION 3.3 Purpose.
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The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.
SECTION 3.4 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity 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 distribute 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 or incur any indebtedness 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;
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(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities; or
(g) other than as provided in this Declaration or Annex I
hereto, (a) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (b) waive
any past default that is waivable under the Indenture, (c) exercise any right to
rescind or annul any declaration that the principal of all the Debentures shall
be due and payable, or (d) consent to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required unless
the Trust shall have received an opinion of a nationally recognized counsel
experienced in such matters to the effect that such amendment or modification
will not cause more than an insubstantial risk that (i) the Trust will be deemed
an Investment Company required to be registered under the Investment Company Act
or (ii) for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.5 General Authority of the Trustees.
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 3.6 Title to Property of the Trust.
Except as provided in Section 5.11 with respect to the
Debentures and the Property Trustee Account or as 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 an undivided beneficial interest in the assets of the
Trust.
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SECTION 3.7 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 3.8 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Section 3.10 hereof, shall exist until December 1, 2021.
SECTION 3.9 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any Person, except as described in Sections
3.9(b) and 3.9(c).
(b) The Trust may, 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 of the Securities, the Delaware Trustee or the
Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any state of the United States;
provided that:
(i) if the Trust is not the survivor, such
successor entity (the "Successor Entity") either:
(A) expressly assumes all of the
obligations of the Trust under the
Securities; or
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(B) substitutes for the Preferred Securities
other securities having substantially the same terms
as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank
the same as the Preferred Securities with respect to
Distributions, assets and payments upon liquidation,
redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges 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 Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with
another organization on which the Preferred Securities are then listed
or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect (other than with respect
to any dilution of the Holders' interest in the new entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) the Sponsor guarantees the obligations of such
Successor Entity under the Successor Securities
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at least to the extent provided by the Preferred Securities Guarantee;
and
(viii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust reasonably
acceptable to the Property Trustee and experienced in such matters to
the effect that:
(A) such merger, consolidation, amalgamation
or replacement will not adversely affect the rights,
preferences and privileges of the Holders of the Securities
(including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders'
interest in the new entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will be treated as a grantor trust for United States
federal income tax purposes.
(c) Notwithstanding Section 3.9(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, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
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SECTION 3.10 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor or
the Holder of the Common Securities;
(ii) upon the filing of a certificate of dissolution
or its equivalent with respect to the Sponsor or the Holder of the
Common Securities, the filing of a certificate of cancellation with
respect to the Trust after having obtained the consent of at least a
Majority in liquidation amount of the Securities, voting together as a
single class, to file such certificate of cancellation, or the
revocation of the certificate of incorporation of the Sponsor or the
Holder of the Common Securities and the expiration of 90 days after the
date of revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial
dissolution of the Sponsor or the Trust or the Holder
of the Common Securities;
(iv) when all of the Securities shall have been called
for redemption and the amounts necessary for redemption thereof,
including any Additional Interest and Compounded Interest, shall have
been paid to the Holders in accordance with the terms of the
Securities;
(v) upon the occurrence and continuation of a Special
Event pursuant to which the Trust shall have been dissolved in
accordance with the terms of the Securities and all of the Debentures
shall have been distributed to the Holders of Securities in exchange
for all of the Securities;
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(vi) after the distribution of the FINOVA Common Stock
to all Holders upon conversion of all outstanding Preferred Securities;
(vii) the expiration of the term of the Trust on
December 1, 2021; or
(viii) before the issuance of any Securities, with the
consent of all the Regular Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 3.10(a), the Regular Trustees shall pay (or make
provision for the payment of) all claims against the Trust and shall execute and
file a certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Article IX shall survive the termination
of the Trust.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date and on any other date Preferred Securities
and Common Securities are sold pursuant to the over-allotment option granted in
the Purchase Agreement, the Sponsor will purchase all of the Common Securities
issued by the Trust, in an aggregate amount at least equal to 3% of the capital
of the Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issuance and sale of the Preferred
Securities, the Sponsor shall have the exclusive
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right and responsibility to engage in the following activities:
(a) to prepare for filing with the Commission the Registration
Statement, including any amendments thereto;
(b) to determine the states and foreign jurisdictions in which
to take appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than actions that
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable to comply with the applicable
laws of any such states and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to the
New York Stock Exchange, Inc. (the "NYSE") or any other national stock exchange
or the Nasdaq National Market for listing or quotation of the Preferred
Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
(e) to negotiate the terms of the Purchase Agreement and
other agreements, documents and instruments providing for the sale of the
Preferred Securities.
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ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The initial number of Trustees shall initially be
four, and
(a) at any time before the issuance of any Securities, the
Sponsor may, by written instrument, increase or decrease the number of Trustees;
and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a majority in
liquidation amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities;
provided, however, that the number of Trustees shall in no event be less than
two; provided further that (i) there shall be at least one Regular Trustee who
is an employee or officer of, or is affiliated with the Sponsor and (ii) one
Trustee shall be the Property Trustee for so long as this Declaration is
required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements.
SECTION 5.2 Delaware Trustee; Eligibility.
If required by the Business Trust Act, one Trustee
(the "Delaware Trustee") shall be
(a) a natural person who is resident of the State
of Delaware; or
(b) if not a natural person, an entity that has its principal
place of business in the State of Delaware, and otherwise meets the requirements
of applicable law,
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provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee may also be the Delaware Trustee and Section 5.14
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Property Trustee and shall
(i) not be an Affiliate of the Sponsor;
(ii) be a 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 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 Section 5.3(a)(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 means of Rule 3a-5 and to the extent
the Investment Company Act or Trust Indenture Act requires a trustee
having certain qualifications to hold title to the "eligible assets" of
the Trust, the Property Trustee shall possess those qualifications.
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(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(d).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture Act)
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
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SECTION 5.5 Initial Trustees.
(a) The initial Regular Trustees are:
Bruno A. Marszowski
c/o The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
and
Robert J. Fitzsimmons
c/o The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
The initial Delaware Trustee is:
First Union Bank of Delaware
One Rodney Square
1st Floor
920 King Street
Wilmington, Delaware 19801
Attention: Corporate Trust Department
The initial Property Trustee is:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Department
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SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Sections 5.6(b) and 5.6(c), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Securities, by
written instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by
vote of the Holders of a majority in liquidation amount
of the Common Securities voting as a class.
(b) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as a Property Trustee under Section 5.3 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and delivered to the
Trust, the Sponsor and the removed Property Trustee.
(c) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Sponsor and the removed Delaware Trustee.
(d) A Trustee appointed to office shall hold office until his,
hers or its successor shall have been appointed or until his, her or its death,
removal, resignation, dissolution or liquidation. Any Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon
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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:
(A) until a Successor Property Trustee has
been appointed and has accepted such appointment by
instrument executed by such Successor Property
Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(B) 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 Trust, the Sponsor and the resigning Delaware Trustee.
(e) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with Section 5.6(d).
(f) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days after delivery pursuant to this Section 5.6 of an
instrument of resignation or removal, the Property Trustee or Delaware Trustee
resigning or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware
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Trustee. 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.
(g) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees or,
if there are more than two, 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 Section 5.6.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the number
of Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with this Section 5.6, the Regular Trustees
in office, regardless 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 5.8 Merger, Conversion, Consolidation or Succession to Business of
a Trustee.
Any corporation into which the Property Trustee or the
Delaware Trustee, as the case may be, may be merged or converted or with which
either may be consolidated, or any corporation resulting from any merger,
conversion or
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consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Property Trustee or
the Delaware Trustee, as the case may be, hereunder, provided such corporation
shall be otherwise qualified and eligible under this Article V, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
SECTION 5.9 Authority, Powers and Duties of the Regular Trustees.
(a) 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.
Any action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and any 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.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any matter
over which the Regular Trustees have power to act, any power of the Regular
Trustees may be exercised by, or with the consent of, any one such Regular
Trustee.
(c) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to this Section 5.9.
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(d) The Regular Trustees shall have the exclusive power,
duty and authority to cause the Trust to engage in the following
activities:
(i) to issue and sell the Preferred Securities and
the Common Securities 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 simultaneous
issuance of both Preferred Securities and Common Securities on
the Closing Date and any other date Preferred Securities and
Common Securities are sold pursuant to the over-allotment
option granted in the Purchase Agreement;
(ii) in connection with the issue and sale of the
Preferred Securities, at the direction of the Sponsor, to:
(A) execute the Registration Statement prepared by
the Sponsor, including any amendments thereto relating to,
among other securities, the Preferred Securities;
(B) execute and file any documents prepared by
the Sponsor, or take any acts as determined by the
Sponsor to be necessary to qualify or register all or
part of the Preferred Securities in any state or
foreign jurisdiction in which the Sponsor has
determined to qualify or register such Preferred
Securities for sale;
(C) execute and file an application, prepared by
the Sponsor, to the NYSE or any other national stock
exchange or the Nasdaq
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National Market for listing or quotation of the
Preferred Securities, from time to time;
(D) execute and deliver letters, documents, or
instruments to the Depositary relating to the Preferred
Securities;
(E) execute and file with the Commission a
registration statement on Form 8-A, including any
amendments thereto, prepared by the Sponsor relating to
the registration of the Preferred Securities under Section
12(b) of the Exchange Act; and
(F) execute and perform the Purchase Agreement and
other agreements, documents and instruments providing for
the sale of the Preferred Securities;
(iii) to acquire the 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 the
Debentures to be held of record in the name of the Property Trustee for
the benefit of the Holders of the Preferred Securities and the Holders
of Common Securities;
(iv) 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 from taking any Ministerial Action
in relation to a Special Event;
(v) to establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including and with respect to, for the purposes of
Section 316(c) of the Trust Indenture Act, Distributions, voting
rights, redemptions and
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exchanges, and to issue relevant notices to the Holders of Preferred
Securities and Holders of Common Securities as to such actions and
applicable record dates;
(vi) to take all actions and perform such duties as
may be required of the Regular Trustees pursuant to the terms of the
Securities;
(vii) 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 5.11(e), the Property Trustee has the exclusive power
to bring such Legal Action;
(viii) to employ or otherwise engage employees and
agents (who may be designated as officers with titles) and managers,
advisors, and consultants and pay reasonable compensation for such
services;
(ix) to cause the Trust to comply with the
Trust's obligations under the Trust Indenture Act;
(x) to give the certificate required by Section
314(a)(4) of the Trust Indenture Act to the Property Trustee, which
certificate may be executed by any Regular Trustee;
(xi) to incur expenses that are necessary or
incidental to carry out any of the purposes of the
Trust;
(xii) to act as, or appoint another Person to
act as, registrar and transfer agent for the
Securities;
(xiii) to give prompt written notice to the Holders
of the Securities of any notice received from the Debenture Issuer of
its election to defer payments
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of interest on the Debentures by extending the interest payment period
under the Indenture;
(xiv) 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;
(xv) to take all action that 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 Preferred Securities or to
enable the Trust to effect the purposes for which the Trust was
created;
(xvi) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine
in their discretion to be necessary or desirable in carrying out the
activities of the Trust as set out in this Section 5.9, including, but
not limited to:
(A) causing the Trust not to be deemed to be
an Investment Company required to be registered under
the Investment Company Act;
(B) causing the Trust to be classified for
United States federal income tax purposes as a
grantor trust; and
(C) cooperating with the Debenture Issuer to
ensure that the Debentures will be treated as
indebtedness of the Debenture Issuer for United
States federal income tax purposes;
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provided that such action does not adversely affect the interests of
Holders; and
(xvii) to take all action 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.
(e) The Regular Trustees must exercise the powers set forth in
this Section 5.9 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Regular Trustees
shall not take any action that is inconsistent with the purposes and
functions of the Trust set forth in Section 3.3.
(f) Subject to this Section 5.9, the Regular Trustees shall
have none of the powers or the authority of the Property Trustee set
forth in Section 5.11.
(g) Any expenses incurred by the Regular Trustees pursuant to
this Section 5.9 shall be reimbursed by the Debenture Issuer.
SECTION 5.10 Delegation of Powers and Duties of the
Regular Trustees.
The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers, employees or agents 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. 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 documents contemplated in Section 5.9,
including the Registration Statement or any amendment thereto
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or other document filed with the Commission, or making any other
governmental filing.
SECTION 5.11 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 Section 5.6. 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 to the
Delaware Trustee (if the Property Trustee does not also act as Delaware
Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the
name of and under the exclusive control of the Property
Trustee on behalf of the Holders of the Securities and, upon
the receipt of payments of funds made in respect of the
Debentures held by the Property Trustee, deposit such funds
into the Property Trustee Account and make payments to the
Holders of the Preferred Securities and Holders of the Common
Securities from the Property Trustee Account in accordance
with Section 6.1. Funds in the Property Trustee Account shall
be held uninvested until disbursed in accordance with this
Declaration. The Property Trustee Account shall be an account
that is maintained with a banking institution [including,
without limitation, the Property Trustee in its individual
capacity)] the rating on whose long-term
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unsecured indebtedness is at least equal to the rating assigned to
the Preferred Securities by a "nationally recognized statistical
rating organization," as that term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as so directed
and as shall be necessary or appropriate to effect the redemption
of the Preferred Securities and the Common Securities to the extent
the Debentures are redeemed or mature [or the conversion of the
Preferred Securities to the extent the Preferred Securities are
converted into FINOVA Common Stock]; and
(iii) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as so directed as shall be
necessary or appropriate to effect the distribution of the
Debentures to Holders of Securities upon the occurrence of a
Special Event arising from a change in law or a change in legal
interpretation or other specified circumstances pursuant to the
terms of the Securities.
(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.
(e) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of
Debentures under the Indenture and, if an Event of Default actually
known to a Responsible Officer occurs and is continuing, the Property
Trustee shall, for the benefit of Holders of the Securities, but
subject to the rights of the Holders pursuant to the terms of such
Securities, enforce its rights as holder of the Debentures, including
the right to take any Legal Action which arises out of or in connection
with such an Event of Default.
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(f) Subject to this Section 5.11, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the
Regular Trustees set forth in Section 5.9.
(g) The Property Trustee must exercise the powers set forth in
this Section 5.11 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Property Trustee
shall not take any action that is inconsistent with the purposes and
functions of the Trust set out in Section 3.3.
SECTION 5.12 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any 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 and
obligations 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 2.6) of which a
Responsible Officer has actual knowledge, the Property Trustee shall
exercise such rights and powers vested in it by this Declaration, and
use the same degree of care and skill in its exercise, as a prudent
individual 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 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, 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
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opinions furnished to the Property Trustee and conforming to the
requirements of this Declaration; but 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.
(c) The Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Property Trustee was negligent in ascertaining the
pertinent facts.
(d) 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, or exercising any trust or power conferred
upon the Property Trustee under this Declaration.
(e) The Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Property
Trustee be liable for any default or misconduct of the Regular Trustees
or the Sponsor.
(f) 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 indemnity reasonably satisfactory to the Property
Trustee against such risk or liability is not reasonably assured to it.
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(g) The Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Property Trustee Account shall be to deal with such property in a
similar manner as the Property Trustee deals with similar property for
its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Declaration and
the Trust Indenture Act.
(h) The Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in writing
with the Sponsor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 5.11(c)(i) and except to the extent otherwise required by law.
(i) The Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of
the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith.
SECTION 5.13 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 5.12:
(i) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration
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shall be sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration,
the Property Trustee shall deem it desirable that a matter be
proved or established before 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, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the
Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to
any recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration
thereof;
(v) the Property Trustee may consult with counsel of its
choice or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the
scope of such experts' area of expertise 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 accordance
with such advice or opinion; such counsel may be counsel to the
Sponsor or any of its Affiliates, and may include any of its
employees. The Property Trustee shall have the right at any time to
seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction;
(vi) 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 provided to the Property Trustee adequate
security and
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indemnity, reasonably satisfactory to the Property Trustee,
against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Property Trustee's agents,
nominees or custodians) and liabilities that might be incurred
by it in complying with such request or direction, including
such reasonable advances as may be requested by the Property
Trustee; provided that, nothing contained in this Section
5.13(a)(vi) shall be taken to relieve the Property Trustee,
upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this
Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, security, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Property Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit;
(viii) 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 with due care by it hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and 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
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evidenced by the Property Trustee's or its agent's taking such
action;
(x) whenever in the administration of this Declaration
the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or
taking any other action hereunder the Property Trustee (A) may
request instructions from the Holders of the Securities, which
instructions may only be given by the Holders of the same
proportion in liquidation amount of the Securities as would be
entitled to direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or action, (B) may
refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C)
shall be protected in acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation
to take any action that is discretionary under the provisions of
this Declaration; and
(xii) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or
imposed on it, in any jurisdiction in which it shall be illegal, or in
which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts, or to
exercise any such right, power, duty or obligation. No permissive power
or authority available to the Property Trustee shall be construed to be
a duty.
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SECTION 5.14 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, 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 Regular Trustees or the Property
Trustee described in this Declaration. Except as set forth in Section
5.2, the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of Section 3807 of the Business
Trust Act.
SECTION 5.15 Meetings.
If there is more than one Regular Trustee, 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 meetings 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 meetings 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 a 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 provided otherwise 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
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of the Regular Trustees. In the event there is only one Regular
Trustee, any and all action of such Regular Trustee shall be evidenced
by a written consent of such Regular Trustee.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
If and to the extent that the Debenture Issuer makes a payment
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 make a
distribution (a "Distribution") of the Payment Amount to Holders of
Preferred Securities and Common Securities in accordance with the
preferences set forth in the respective terms of such Securities, as
described in Annex I hereto.
ARTICLE VII
THE SECURITIES
SECTION 7.1 Title and Terms.
The Regular Trustees shall on behalf of the Trust issue one
class of convertible preferred securities, representing undivided
beneficial interests in the assets of the Trust (the "Preferred
Securities"), and one class of convertible common securities,
representing undivided beneficial interests in the assets of the Trust
(the "Common Securities"), each having such terms (the "Terms") as are
set forth in Annex I. The Trust shall issue no securities or other
interests in the assets of the Trust other than the Preferred
Securities and the Common Securities. The
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aggregate number of Preferred Securities outstanding at any time shall
not exceed the number set forth in the Terms in Annex I hereto.
The Terms of the Securities set forth in Annex I and the
forms of Certificates set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and to the extent applicable, the Property
Trustee and the Sponsor, by their execution and delivery of this
Declaration, expressly agree to such Terms and to be bound thereby.
SECTION 7.2 General Provisions Regarding the Securities.
(a) 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.
(b) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be validly issued, fully
paid and nonassessable.
(c) 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.
(d) The Securities shall have no preemptive rights.
SECTION 7.3 General Form of Certificates.
The Preferred Security Certificates and the Property
Trustee's certificate of authentication shall be substantially in the
form of Exhibit A-1 and the Common Security Certificates shall be
substantially in the form of Exhibit A-2, each of which is hereby
incorporated in and expressly made a part of this Declaration.
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The Certificates may have letters, numbers, notations or
other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which
the Trust is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Trust).
The Trust at the direction of the Sponsor shall furnish any such legend
not contained in Exhibit A-1 to the Property Trustee in writing.
The definitive Certificates shall be printed, lithographed
or engraved or produced by any combination of these methods on steel
engraved borders or may be produced in any other manner permitted by
the rules of any securities exchange on which the Securities may be
listed, all as determined by the Regular Trustees, as evidenced by
their execution thereof. The Trust shall issue no Securities in bearer
form.
SECTION 7.4 Form of Preferred Securities Certificates;
Global Certificates.
(a) Unless otherwise specified in the terms of the
Preferred Securities, the Preferred Securities 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 The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of, the Trust. 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
7.7.
(b) Unless required by the Depositary, any securities
exchange on which the Preferred Securities may be listed or any rule,
regulation or law, Preferred Securities issued in the form of Global
Certificates need not be printed, lithographed or engraved on steel
engraved borders,
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but shall be in such form as is acceptable to the Depositary.
(c) Every Global Certificate authenticated and delivered
hereunder shall bear a legend in substantially the following form, in
capital letters and bold-face type:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF
THE DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A PREFERRED
SECURITY REGISTERED, AND NO TRANSFER OF THIS PREFERRED
SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION.
(d) If the Depositary is the Depository Trust Company, the
Global Certificate authenticated and delivered hereunder shall also
bear a legend in substantially the following form, in capital letters
and bold-face type:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
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SECTION 7.5 Execution and Dating of Certificates.
The Certificates shall be signed on behalf of the Trust by a Regular
Trustee. In case any Regular Trustee who shall have signed any of the
Certificates shall cease to be such Regular Trustee before the Certificates so
signed shall be delivered by the Trust, such Certificates nevertheless may be
delivered as though the person who signed such Certificates had not ceased to be
such Regular Trustee; and any Certificates may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Certificate, shall
be the Regular Trustees of the Trust, although at the date of the execution and
delivery of the Declaration any such person was not such a Regular Trustee. Each
Preferred Security shall be dated the date of its authentication.
One Regular Trustee shall sign the Preferred Security Certificates
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature shall, in the case of Common Security Certificates, be
a manual signature.
SECTION 7.6 Authentication of Preferred Security Certificates.
Each Global Certificate shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the
Depositary, and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Certificate shall constitute a single Preferred
Security for all purposes of this Declaration.
A Preferred Security Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Preferred Security
Certificate has been authenticated under this Declaration. Upon a written order
of the Trust signed by one Regular Trustee, the Property Trustee shall
authenticate the Preferred Security Certificates for original issue.
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The Property Trustee may appoint an authenticating agent acceptable
to the Trust to authenticate Preferred Security Certificates. An authenticating
agent may authenticate Preferred Security Certificates whenever the Property
Trustee may do so. Each reference in this Declaration to authentication by the
Property Trustee includes authentication by such agent. An authenticating agent
has the same rights as the Property Trustee to deal with the Sponsor or an
Affiliate.
SECTION 7.7 Definitive Preferred Security Certificates.
(a) Upon the occurrence of an event specified in Section 8.2(a),
definitive, fully registered Preferred Security Certificates ("Definitive
Preferred Security Certificates") shall be prepared by the Regular Trustees on
behalf of the Trust with respect to such Preferred Securities.
(b) 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, said instructions of the Clearing Agency.
SECTION 7.8 Temporary Certificates.
Until definitive Certificates are ready for delivery, the Trust may
prepare and, in the case of the Preferred Securities, the Property Trustee shall
authenticate temporary Certificates. Temporary Certificates shall be
substantially in the form of definitive Certificates but may have variations
that the Trust considers appropriate for temporary Certificates. Without
unreasonable delay, the Trust shall prepare and, in the case of the Preferred
Securities, the Property Trustee shall
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authenticate definitive Certificates in exchange for temporary Certificates.
SECTION 7.9 Registrar, Paying Agent and Conversion Agent.
In the event that the Preferred Securities are not in book entry
only form, the Trust shall maintain in the Borough of Manhattan, City of New
York, State of New York, an office or agency where Preferred Securities may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
office or agency where Preferred Securities may be presented for payment
("Paying Agent"). The Trust shall maintain an office or agency where Securities
may be presented for conversion ("Conversion Agent"). The Registrar shall keep a
register of the Preferred Securities and of their transfer and exchange. The
Trust may appoint the Registrar, the Paying Agent and the Conversion Agent and
may appoint one or more coregistrars, one or more additional paying agents and
one or more additional conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent and the
term "Conversion Agent" includes any additional conversion agent. The Trust may
change any Paying Agent, Registrar, co-registrar or Conversion Agent without
prior notice to any Holder. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Regular Trustees. The Trust
shall notify the Property Trustee of the name and address of any Agent not a
party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Conversion Agent. The Trust shall act as Paying Agent, Registrar,
co-registrar, and Conversion Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent and Conversion Agent for the Preferred Securities. The Property
Trustee shall be entitled to the protections of Sections 5.12 and 5.13 and
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Article IX in its capacity as Registrar, Paying Agent and Conversion Agent.
SECTION 7.10 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of principal or Distribution on the Securities, and will notify
the Property Trustee if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require a Paying Agent to pay
all money held by it to the Property Trustee. The Trust at any time may require
a Paying Agent to pay all money held by it to the Property Trustee and to
account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 7.11 Outstanding Preferred Securities.
The Preferred Securities outstanding at any time are all the
Preferred Securities authenticated by the Property Trustee except for those
cancelled by it, those delivered to it for cancellation, and those described in
this Section 7.11 as not outstanding.
If a Preferred Security is replaced or paid pursuant to Section 8.3,
it ceases to be outstanding unless the Property Trustee receives proof
satisfactory to it that the replaced, paid or purchased Preferred Security is
held by a bona fide purchaser.
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If Preferred Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Preferred
Security.
SECTION 7.12 Preferred Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Preferred
Securities which the Property Trustee knows are so owned shall be so
disregarded.
SECTION 7.13 Notices to Clearing Agency.
Whenever a notice or other communication to the Holders of Preferred
Securities is required under this Declaration, the Regular Trustees shall, in
the case of any Global Preferred Security, give all such notices and
communications specified herein to be given to the Holders of Preferred
Securities to the Depositary, and shall have no notice obligations to the
Preferred Security Beneficial Owners.
SECTION 7.14 Appointment of Successor Clearing Agency.
If the Depositary elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
such Preferred Securities.
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SECTION 7.15 Deemed Security Holders.
The Trustees and any Agent 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 Trust shall
have actual or other notice thereof.
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF SECURITIES
SECTION 8.1 General.
(a) Where Preferred Security Certificates are presented to the
Registrar or a co-registrar with a request to register a transfer or to exchange
them for an equal number of Preferred Securities represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Trust shall issue and the Property Trustee shall
authenticate Preferred Security Certificates at the Registrar's request.
(b) 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 set forth in Annex I to this Declaration. Any transfer or purported
transfer of any Security not made in accordance with this Declaration and the
terms set forth in Annex I to this Declaration shall be null and void.
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(c) Subject to this Article VIII, the Sponsor and any Related
Party may only transfer Common Securities to the Sponsor or a Related Party;
provided that any such transfer is subject to the condition precedent that the
transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more than
an insubstantial risk that:
(i) the Trust would not be classified for United States
federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(d) The Regular Trustees shall provide for the registration of
Securities and of transfers of Securities, 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 governmental charges that may be imposed in
relation to it. Upon surrender for registration of transfer of any Certificates,
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 8.2 Transfer Procedures and Restrictions for Global Certificates.
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(a) Notwithstanding any other provision in this
Declaration, no Global Certificate may be exchanged in whole
or in part for Preferred Securities registered, and no
transfer of a Global Certificate in whole or in part may be
registered, in the name of any Person other than the
Depositary for such Global Certificate or a nominee thereof or
a successor Depositary or a nominee of such successor
Depositary, unless [(i) such Depositary (x) has notified the
Sponsor that it is unwilling or unable to continue as
Depositary for such Global Certificate and is not replaced by
a successor Depositary approved by the Sponsor within 90 days
or (y) at any time has ceased to be a clearing agency
registered under the Exchange Act, or (ii) an Event of Default
has occurred and is continuing].
(b) The transfer and exchange of Global
Certificates or beneficial interests therein shall be effected
through the Clearing Agency, in accordance with this
Declaration and the procedures of the Clearing Agency
therefor.
(c) Unless and until Definitive Preferred Security
Certificates have been issued to the Preferred Security
Beneficial Owners pursuant to Section 7.7:
(i) 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 shall have no
obligation to the Preferred Security Beneficial
Owners; and
(ii) 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 and
[ ]
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receive and transmit payments of Distributions on the Global
Certificates to such Clearing Agency Participants. The Depositary will
make book entry transfers among the Clearing Agency Participants.
SECTION 8.3 Mutilated, Destroyed, Lost or Stolen Certificates; Replacement
Securities.
If the Holder of a Security claims that the Certificate
representing such Security has been lost, destroyed or wrongfully taken or if
such Certificate is mutilated and is surrendered to the Trust or, in the case of
the Preferred Securities, to the Property Trustee, the Trust shall issue and the
Property Trustee shall authenticate a replacement Certificate if the Property
Trustee's and the Trust's requirements, as the case may be, are met. If required
by the Property Trustee or the Trust, an indemnity bond must be sufficient in
the judgment of both to protect the Trustees, the Property Trustee, the Sponsor
or any authenticating agent from any loss which any of them may suffer if a
Certificate is replaced. The Company may charge for its expenses in replacing a
Certificate.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Sponsor in its discretion may,
instead of issuing a new Certificate, cause such Security to be redeemed.
Every replacement Certificate is an additional obligation of the
Trust.
SECTION 8.4 Cancellation of Preferred Security Certificates.
The Trust at any time may deliver Preferred Security Certificates
to the Property Trustee for cancellation. The Registrar, Paying Agent and
Conversion Agent shall forward to the Property Trustee any Preferred Securities
surrendered to them for registration of transfer, redemption, conversion,
exchange or payment. The Property
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Trustee shall promptly cancel all Preferred Securities surrendered for
registration of transfer, redemption, conversion, exchange, payment, replacement
or cancellation and shall dispose of cancelled Preferred Securities as the Trust
directs. The Trust may not issue new Preferred Securities to replace Preferred
Securities that it has paid or that have been delivered to the Property Trustee
for cancellation or that any holder has converted.
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to
the Securities) to the extent not satisfied out of the Trust's
assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same
limitation of personal liability as is extended to stockholders of
private corporations for profit organized under the General
Corporation Law of the State of Delaware.
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SECTION 9.2 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 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.
SECTION 9.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and
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liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust Indenture
Act), are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person or
(ii) whenever this Declaration or any other agreement
contemplated herein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to
the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any
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interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
SECTION 9.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Company Indemnified Person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified
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Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the Trust to procure a judgment in its favor by reason of the fact that
he is or was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged to
be liable to the Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 9.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full
extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 9.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person is
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proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (i) and (ii). Such determination
shall be made (1) by the Regular Trustees by a majority vote of a
quorum consisting of such Regular Trustees who were not parties to such
action, suit or proceeding, (2) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested Regular Trustees so
directs, by independent legal counsel in a written opinion, or (3) by
the Holders of the Common Securities of the Trust.
(v) Expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 9.4(a) shall be paid by the Debenture Issuer
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Debenture
Issuer as authorized in this Section 9.4(a). Notwithstanding the
foregoing, no advance shall be made by the Debenture Issuer if a
determination is reasonably and promptly made (i) by the Regular
Trustees by a majority vote of a quorum of disinterested Regular
Trustees, (ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs,
by independent legal counsel in a written opinion or (iii) the Holders
of the Common Securities of the Trust, that, based upon the facts known
to the Regular Trustees, counsel or the Holders of the Common
Securities at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
Trust, or, with respect to any criminal proceeding, that such Company
Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in
instances
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where the Regular Trustees, independent legal counsel or the Holders of
the Common Securities reasonably determine that such person
deliberately breached his duty to the Trust or the Holders of the
Common or Preferred Securities.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 9.4(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Holders of the Preferred
Securities of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office. All rights to indemnification under this Section 9.4(a) shall
be deemed to be provided by a contract between the Debenture Issuer and
each Company Indemnified Person who serves in such capacity at any time
while this Section 9.4(a) is in effect. Any repeal or modification of
this Section 9.4(a) shall not affect any rights or obligations then
existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 9.4(a).
(viii) For purposes of this Section 9.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a constituent)
absorbed in a consolidation or merger, so that any person who is or was
a director, trustee, officer or employee of such constituent entity, or
is or was serving at the request
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of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the
provisions of this Section 9.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a Company Indemnified Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any Affiliate of the Property Trustee and the Delaware
Trustee, and (iv) any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Property
Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being
referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary
Indemnified Person harmless against, any and all loss, liability or expense
including taxes (other than taxes based on the income of such Fiduciary
Indemnified Person) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration or the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in this
Section 9.4(b) shall survive the satisfaction and discharge of this Declaration.
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SECTION 9.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and
the Property Trustee 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 improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Property 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 any Covered Person, the Sponsor, the Delaware
Trustee and the Property 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
Covered Person, the Delaware Trustee and the Property 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 depositary for,
trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Sponsor or its Affiliates.
ARTICLE X
ACCOUNTING
SECTION 10.1 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.
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SECTION 10.2 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. The books of account and the records of
the Trust shall be examined by and reported upon as of the end of each
Fiscal Year by a firm of independent certified public accountants
selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after
the end of each Fiscal Year of the Trust, annual financial statements
of the Trust, including a balance sheet of the Trust as of the end of
such Fiscal Year, and the related statements of income or loss;
(c) The Regular Trustees shall cause to be duly prepared
and delivered to each of the Holders 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.
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(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 a Form 1041 or such other form
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 10.3 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 Trustee Account and no
other funds of the Trust shall be deposited in the Property Trustee
Account. The sole signatories for such accounts shall be designated by
the Regular Trustees; provided, however, that the Property Trustee
shall designate the signatories for the Property Trustee Account.
SECTION 10.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local
law. The Trust 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 Trust
to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Regular Trustees shall file the required
forms with the applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to the 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
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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 required to be withheld was not
withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments.
(a) Except as otherwise provided in this Declaration or by
any applicable terms of the Securities, this Declaration may only be
amended by a written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than
two Regular Trustees, a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee, the
Property Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the
Delaware Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment,
the Property Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
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(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or
immunities of the Property Trustee, the Property Trustee shall
have first received:
(A) an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is permitted by,
and conforms to, the terms of this Declaration (including
the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to
the Sponsor or the Trust) that such amendment is permitted
by, and conforms to, the terms of this Declaration
(including the terms of the Securities); and
(iii) to the extent the result of such amendment
would be to:
(A) cause the Trust to fail to continue to be
classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Property Trustee in contravention of the
Trust Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company that is required to be registered under
the Investment Company Act.
(c) So long as any Securities remain outstanding, any
amendment that 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.
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(d) Section 8.1(c) and this Section 11.1 [and paragraph 8(a)
of Annex I hereto] shall not be amended without the consent of all of
the Holders of the Securities.
(e) Article IV and the rights of the holders of the Common
Securities under Article V to increase or decrease the number of, and
appoint and remove Trustees shall not be amended without the consent of
the Holders of a majority in liquidation amount of the Common
Securities.
(f) Notwithstanding Section 11.1(c), 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; and
(iv) conform to any change in Rule 3a-5 or written
change in interpretation or application of Rule 3a-5 by any
legislative body, court, government agency or regulatory
authority, which amendment does not have a material adverse
effect on the rights, preferences or privileges of the
Holders.
SECTION 11.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of 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
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 on which the Preferred Securities are listed
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or admitted for trading. The Regular Trustees shall call a meeting of
the Holders of such class if directed to do so by the 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 calls in a 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 Securities represented by the Certificates so specified 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 provisions shall apply to meetings of
Holders of Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least
seven days and not more than 60 days before 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 over-the-counter market on which
the Preferred Securities are listed or admitted for trading, 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 if a
consent in writing setting forth the action so taken is signed by
the Holders of Securities owning not less than the minimum amount
of Securities in liquidation amount 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
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entitled to vote who have not consented in writing. The Regular
Trustees may specify that any written ballot submitted to the Security
Holders 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 Securities 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 Securities executing it. Except as otherwise provided herein,
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; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules
of any stock exchange on which the Preferred Securities are then listed
or trading provide otherwise, the Regular Trustees, in their sole
discretion, shall establish all other provisions 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
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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 XII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of Property Trustee.
The Trustee that acts as 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 Property Trustee
that:
(a) The Property Trustee is a national banking association
or a banking corporation organized under state law, as applicable, with
trust powers, duly organized, validly existing and in good standing
under the laws of the United States of America (in the case of a
national banking association) or the laws of the state of its
organization, (in the case of a banking corporation), with power and
authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration.
(b) The execution, delivery and performance by the Property
Trustee of the Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee; and the
Declaration has been duly executed and delivered by the Property
Trustee, and constitutes the 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
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of such remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the
Declaration by the Property Trustee does not conflict with or
constitute a breach of, or constitute any default under, the charter or
by-laws of the Property Trustee or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it or any of its properties may be bound or affected.
(d) The Property Trustee has not created any liens or
encumbrances on the Debentures.
(e) No consent, approval or authorization of, or registration
with or notice to any state or federal banking authority is required
for the execution, delivery or performance by the Property Trustee, of
the Declaration.
SECTION 12.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this
Declaration and at the time of Closing, 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 Delaware Trustee that:
(a) The Delaware Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the
laws of the State of Delaware, with power and authority to execute and
deliver, and to carry out and perform its obligations under the terms
of, the Declaration.
(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration has been duly authorized by all necessary
corporate action on the part of the
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Delaware Trustee; and the 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).
(c) The execution, delivery and performance of the
Declaration by the Delaware Trustee does not conflict with or
constitute a breach of, or constitute any default under, the charter or
by-laws of the Delaware Trustee or the provisions of any indenture,
mortgage, contract or other agreement to which it is a party or by
which it or any of its properties may be bound or affected.
(d) No consent, approval or authorization of, or
registration with or notice to, any state or federal banking authority
is required for the execution, delivery or performance by the Delaware
Trustee of the Declaration.
(e) The Delaware Trustee is an entity which has its
principal place of business in the State of Delaware.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be
delivered, sent by facsimile or mailed by first class mail, as follows:
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(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 Trust may give notice of to the Holders of the Securities):
c/o The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Tel: (602) 207-4900
Telecopy: (602) 207-5543
Attention: Treasurer
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give
notice of to the Holders of the Securities):
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Tel: (860) 986-
Telecopy: (860) 986-7920
Attention: Corporate Trust Administration
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give
notice of to the Holders of the Securities):
First Union Bank of Delaware
One Rodney Square
1st Floor
920 King Street
Wilmington, Delaware 19801
Tel:
Telecopy:
Attention: Corporate Trust Department
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(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 to the Trust):
c/o The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Tel: (602) 207-4900
Telecopy: (602) 207-5543
Attention: Treasurer
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such 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 13.2 Governing Law.
This Declaration 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.
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SECTION 13.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor
trust. The provisions of this Declaration shall be interpreted to
further this intention of the parties.
SECTION 13.4 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 13.5 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 13.6 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 13.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of
the signature of each of the Trustees to one of such counterpart
signature pages. All of
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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.
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the date first above written.
_________________________________
Bruno A. Marszowski, as Trustee
_________________________________
Robert J. Fitzsimmons, as Trustee
FIRST UNION BANK OF DELAWARE,
Delaware Trustee
By:_____________________________
Name:
Title:
FLEET NATIONAL BANK,
Property Trustee
By:_____________________________
Name:
Title:
THE FINOVA GROUP INC., Sponsor
By:_____________________________
Name:
Title:
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ANNEX I
TERMS OF SECURITIES
<PAGE> 94
ANNEX I
TERMS OF
__% CONVERTIBLE PREFERRED SECURITIES
__% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of December __, 1996 (as amended from time to
time, the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Registration Statement referred to below):
1. Designation and Number.
(a) "Preferred Securities." 2,000,000 Preferred Securities of
the Trust with an aggregate liquidation amount with respect to
the assets of the Trust of One Hundred Million Dollars
($100,000,000), plus up to an additional 300,000 Preferred
Securities of the Trust with an aggregate liquidation amount
with respect to the assets of the Trust of Fifteen Million
Dollars ($15,000,000) solely to cover over-allotments, as
provided for in the Purchase Agreement (the "Additional
Preferred Securities"), and a liquidation amount with respect
to the assets of the Trust of $50 per Preferred Security, are
hereby designated for the purposes of identification only as
"__% Convertible Preferred Securities (liquidation amount $50
per Preferred Convertible Security)" (the "Preferred
Securities"). The Preferred Security Certificates evidencing
the Preferred Securities shall be substantially in the form
of Exhibit A-1 to the
<PAGE> 95
Declaration, 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 other organization on which the Preferred Securi-
ties are listed.
(b) "Common Securities." 61,856 Common Securities of the Trust
with an aggregate liquidation amount with respect to the
assets of the Trust of Three Million Ninety-Two Thousand Eight
Hundred Dollars ($3,092,800) plus up to an additional 9,279
Common Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of Four Hundred
Sixty-Three Thousand Nine Hundred Fifty Dollars ($463,950) to
meet the capital requirements of the Trust in the event of
an issuance of Additional Preferred Securities, and a
liquidation amount with respect to the assets of the Trust of
$50 per Common Security, are hereby designated for the
purposes of identification only as "__% Convertible Common
Securities (liquidation amount $50 per Convertible Common
Security)" (the "Common Securities"). The Common Security Cer-
tificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration,
with such changes and additions thereto or deletions therefrom
as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a rate
per annum of __% (the "Coupon Rate") of the stated liquidation
amount of $50 per 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 bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes any such interest
including any Additional Interest and Compounded Interest
payable unless otherwise stat-
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ed. 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 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) Except as otherwise described below, Distributions on the
Securities will be cumulative, will accrue from ___________
__, 1996 and will be payable quarterly in arrears, on the
following dates, which dates correspond to the interest
payment dates on the Debentures: March 31, June 30, September
30 and December 31 of each year, except as otherwise described
below, commencing on ____________ __ ____, when, as and if
available for payment by the Property Trustee, except as
otherwise described below. The Debenture Issuer has the right
at any time during the term of the Debentures to defer
interest payments from time to time by extending the interest
payment period for successive periods not exceeding 20
consecutive quarters (each an "Extension Period") for each
such period; provided, that no Extension Period may extend
beyond the maturity date of the Debentures. As a consequence
of such extension, quarterly Distributions on the Securities
would be deferred (although such Distributions would continue
to accrue with interest thereon, compounded quarterly at the
Coupon Rate, the extent permitted by applicable law) during
any such extended interest payment period. In the event that
the Debenture Issuer exercises this right, then, during such
Extension Period the Debenture Issuer has agreed (a) not to
declare or pay dividends on, or make a distribution with
respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of
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its capital stock (other than (i) purchases or acquisitions of
shares of FINOVA Common Stock (or FINOVA Common Stock
equivalents) in connection with the satisfaction by the
Debenture Issuer of its obligations under any employee benefit
plans or the satisfaction by the Debenture Issuer of its
obligations pursuant to any contract or security requiring the
Debenture Issuer to purchase shares of FINOVA Common Stock (or
FINOVA Common Stock equivalents) (provided that such contract
is in effect or such security is outstanding at least 60 days
prior to the commencement of such Extension Period), (ii)
purchases of shares of FINOVA Common Stock (or FINOVA Common
Stock equivalents) from officers or employees of the Debenture
Issuer or its subsidiaries upon termination of employment or
retirement not pursuant to any obligation under any contract
or security requiring the Debenture Issuer to purchase shares
of Common Stock (or Common Stock equivalents) (provided that
such purchases by the Debenture Issuer upon termination of
employment or retirement shall be made at a price not to
exceed the market value on the date of any such purchase and
shall not exceed $7.5 million in the aggregate for all
officers and employees), (iii) as a result of a
reclassification of the Debenture Issuer's capital stock or
the exchange or conversion of one class or series of the
Debenture Issuer's capital stock for another class or series
of the Debenture Issuer's capital stock, (iv) dividends or
distributions of shares of FINOVA Common Stock on FINOVA
Common Stock or (v) the purchase of fractional interests in
shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the
security being converted or exchanged (or make any guarantee
payments with respect to the foregoing)), (b) not to make any
payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including
guarantees) issued by the Debenture Issuer that rank pari
passu with or junior to the Debentures and (c) not to make any
guarantee payments with respect to the
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foregoing (other than pursuant to the Securities Guarantee).
Prior to the termination of any such Extension Period, the
Debenture Issuer 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 quarters or extend beyond the maturity date of the
Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above
requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust
on the relevant record dates. So long as the Preferred
Securities remain solely in book-entry only form, the relevant
record dates shall be one Business Day prior to the relevant
payment dates. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such
payment in respect of the Preferred Securities being held in
book-entry form through the Depositary will be made as de-
scribed under the heading "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" in the Prospectus dated ___________ __, 1996 (the
"Prospectus"), included in the Registration Statement.
Distributions payable on any Securities that are not
punctually paid on any Distribution payment date as a result
of the Debenture Issuer having failed to make a payment under
the Debentures, will cease to be payable to the Person in
whose name such Securities are registered on the relevant
record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Securities are
registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on
which Distributions are payable on the 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
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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 such date.
(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into FINOVA Common
Stock pursuant to the terms of the Securities as set forth in
this Annex I to the Declaration, accrued Distributions will
not be paid on Securities that are converted, nor will any
payment, allowance or adjustment be made for accumulated and
unpaid Distributions on such Securities, whether or not in
arrears, on converted Preferred Securities except under the
limited circumstances described in paragraph 5(b) and except
that if any Preferred Security is converted on or after a
record date for payment of Distributions thereon, the Holder
of Securities at the close of business on any record date for
the payment of Distributions will be entitled to receive the
Distribution payable on such Securities on the corresponding
payment date notwithstanding the conversion of such Securities
into FINOVA Common Stock following such record date.
(e) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined in
paragraph 9) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary liquidation,
dissolution, winding-up or termination of the Trust (each a "Liquidation") the
then Holders of the Securities on the date of the Liquidation will be entitled
to receive out of the assets of the Trust available for distribution to Holders
of Securities after satisfaction of liabilities to creditors, Distributions in
an amount equal
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to the aggregate of the stated liquidation amount of $50 per Security plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
Liquidation, Debentures in an aggregate principal amount equal to the aggregate
stated liquidation amount of such Securities, with an interest rate identical to
the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid Distributions on, and having the same record dates for
payment as, such Securities, shall be distributed on a Pro Rata basis to the
Holders of the Securities.
If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis in
accordance with paragraph 9 below.
4. Redemption and Distribution.
(a) The Debentures are not redeemable prior to __________ __,
2001, except that:
(i) In the event that at any time following the
Conversion Termination Date (as defined in paragraph
5(h)), if any, the number of outstanding Preferred
Securities is less than 10% of the number of
Preferred Securities originally issued (including any
Additional Preferred Securities), the Debenture
Issuer has the right, at its option, to redeem the
Debentures, in whole but not in part; and
(ii) The Debenture Issuer has the right, at its option, to
redeem the Debentures, in whole but not in part, in
certain circumstances upon the occurrence of a Tax
Event (as described below).
(b) Upon the repayment of the Debentures, whether at maturity or
upon redemption, the Trust shall apply the proceeds from such
repayment or payment to
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redeem the Securities at a redemption price equal to the
redemption price of such repaid or redeemed Debentures,
together with accrued and unpaid Distributions thereon
through the date fixed for redemption, payable in cash (the
"Redemption Price"); provided that the Holders of Securities
shall be given not less than 30 nor more than 60 days notice
of such redemption.
(c) If, at any time, a Tax Event or an Investment Company Event
(each as defined below and each a "Special Event") shall occur
and be continuing, the Regular Trustees shall, unless the
Debentures are redeemed in the limited circumstances in rela-
tion to a Tax Event described in the following paragraph of
this paragraph 4(c), dissolve the Trust and, after
satisfaction of creditors of the Trust, if any, cause
Debentures held by the Property Trustee having an aggregate
principal amount equal to the aggregate stated liquidation
amount of, an interest rate identical to the Coupon Rate of,
accrued and unpaid interest on, and the same record dates for
payment as, the Securities, to be distributed to the Holders
of the Securities in liquidation of such Holders' interest in
the Trust on a Pro Rata basis, within 90 days following the
occurrence of such Special Event (the "90 Day Period");
provided, however, that in the case of the occurrence of a Tax
Event, such dissolution and distribution shall be condi-
tioned on the Regular Trustees' receipt of an opinion of a
nationally recognized independent tax counsel experienced in
such matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal Revenue
Service, to the effect that the Holders of the Preferred
Securities will not recognize any income, gain or loss for
United States federal income tax purposes as a result of such
dissolution and distribution of Debentures, and provided,
further, that if at the time there is available to the Trust
the opportunity to eliminate, within the 90 Day Period, the
Special Event by taking some ministerial action, such as
filing a
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form or making an election, or pursuing some other similar
reasonable measure that in the sole judgment of the Debenture
Issuer has, or will cause, no adverse effect on the Trust, the
Debenture Issuer or the Holders of the Securities and will
involve no material cost ("Ministerial Action"), the Trust
will pursue such Ministerial Action in lieu of dissolution.
If in the case of an occurrence of a Tax Event, (i)
the Regular Trustees have received an opinion (a "Redemption
Tax Opinion") of a nationally recognized independent tax
counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the
Debenture Issuer would be precluded from deducting the
interest on the Debentures for United States federal income
tax purposes even if the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interest
in the Trust as described in this paragraph 4(c), or (ii) the
Regular Trustees shall have been informed by such tax counsel
that a No Recognition Opinion cannot be delivered to the
Trust, the Debenture Issuer shall have the right, upon not
less than 30 nor more than 60 days' notice, to redeem the
Debentures in whole (but not in part) for cash within 90 days
following the occurrence of such Tax Event, and promptly
following such redemption, the Securities shall be redeemed by
the Trust at the Redemption Price on a Pro Rata basis at $50
per Security plus accrued and unpaid distributions; provided,
however, that if at the time there is available to the
Debenture Issuer or the Trust the opportunity to eliminate,
within such 90 Day Period, the Tax Event by taking some
Ministerial Action that in the sole judgment of the Debenture
Issuer has or will cause no adverse effect on the Trust, the
Holders of Securities or the Debenture Issuer, the Trust or
the Debenture Issuer will pursue such Ministerial Action in
lieu of redemption.
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"Tax Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent
tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that, 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 the date of
the Prospectus (collectively, a "Change in Tax Law"), 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 interest 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 other taxes, duties or other governmental
charges, or (iii) interest payable by the Debenture Issuer to
the Trust on the Debentures is not, or within 90 days of the
date thereof will not be, deductible by the Debenture Issuer
for United States federal income tax purposes.
"Investment Company Event" means that the Regular
Trustees shall have received an opinion of nationally
recognized independent counsel experienced in practice under
the Investment
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Company Act (an "Investment Company Event Opinion") that, as a
result 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 that is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes
effective on or after the date of the Prospectus.
On the date fixed for any distribution of Debentures,
upon dissolution of the Trust: (i) the Securities will no
longer be deemed to be outstanding, (ii) the Depositary or its
nominee, as the record Holder of the Global Certificates, will
receive a registered global certificate or certificates
representing the Debentures to be delivered upon such
distribution and (iii) any certificates representing
Securities, except for Global Certificates held by the
Depositary or its nominee, will be deemed to represent
beneficial interests in Debentures having an aggregate
principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the Coupon Rate
of, with accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record dates for
payment as, such Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or
reissuance.
(d) If the Debentures are distributed to the Holders of the
Securities, pursuant to the terms of the Indenture, the
Debenture Issuer will use its best efforts to have the
Debentures listed on the NYSE or on any such other national
securities exchange or similar organization as the Preferred
Securities were listed or quoted immediately prior to the
distribution of the Debentures.
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(e) Redemption or Distribution Procedures.
(i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for, the
Securities (a "Redemption/Distribution Notice") will
be given by the Trust by mail to each Holder of
Securities to be redeemed or exchanged not fewer than
30 nor more than 60 days before the date fixed for
redemption or exchange thereof, which, in the case of
a redemption, will be the date fixed for redemption
of the Debentures. 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 Securities. Each Redemption/Distribution
Notice shall be ad- dressed to the Holders of
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) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice (which notice is
irrevocable), then, provided that the Debenture
Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related
redemption or maturity of the Debentures, (A) with
respect to Preferred Securities held in book-entry
form, by 12:00 noon, New York City time, on the
redemption date, the Trust will deposit irrevocably
with the Depositary or its nominee (or successor
Clearing Agency or its nominee) funds sufficient to
pay the applicable Redemption
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Price with respect to such Preferred Securities and
will give the Depositary irrevocable instructions and
authority to pay the applicable Redemption Price to
the Holders of such Preferred Securities represented
by the Global Certificates, and (B) with respect to
Preferred Securities issued in definitive form and
Common Securities, the Trust will irrevocably deposit
with the Paying Agent funds sufficient to pay the
Redemption Price to the Holders of such Securities,
and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption
Price to the Holders of such Securities, upon
surrender of their certificates. If a
Redemption/Distribution Notice shall have been given
and funds deposited as required, then on the date of
such deposit, all rights of Holders of such
Securities so called for redemption will cease,
except the right of the Holders of such Securities to
receive the Redemption Price, but without interest on
such Redemption Price. Neither the Regular Trustees
nor the Trust shall be required to register or cause
to be registered the transfer of any Securities that
have been so called for redemption. If any date fixed
for redemption of 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 (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 any
Securities is improperly withheld or refused and not
paid either by the Trust or by the Debenture Issuer
as guarantor pursuant to the rele-
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vant Securities Guarantee, Distributions on such
Securities will continue to accrue at the then
applicable rate, 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
payable upon redemption.
(iii) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in the
case of Preferred Securities held in book-entry form,
the Depositary and, in the case of Securities held in
definitive form, the Holders of such certificates and
(B) in respect of the Common Securities, the Holder
thereof.
(iv) Subject to the foregoing and applicable law
(including, without limitation, United States federal
securities laws), the Debenture Issuer or any of its
subsidiaries may at any time and from time to time
purchase outstanding Preferred Securities by tender,
in the open market or by private agreement.
5. Conversion Rights.
The Holders of Securities shall have the right at any time prior to
5:00 p.m. (New York City time) on the earlier of (i) the Business Day
immediately preceding the date of repayment of such Securities, whether
at maturity or upon redemption, and (ii) the Conversion Termination
Date, if any, to cause the Conversion Agent to convert Securities, on
behalf of the converting Holders, into shares of FINOVA Common Stock in
the manner described herein on and subject to the following terms and
conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of
FINOVA Common Stock pursuant to the Holder's direction to the
Conversion Agent to exchange such Securities for a
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portion of the Debentures theretofore held by the Trust on the
basis of one Security per $50 principal amount of
Debentures, and immediately convert such amount of Debentures
into fully paid and nonassessable shares of FINOVA Common
Stock at an initial conversion rate of ___ shares of FINOVA
Common Stock per $50 principal amount of Debentures (which
is equivalent to a conversion price of $____ per share of
FINOVA Common Stock, subject to certain adjustments set forth
in the terms of the Debentures (as so adjusted, the
"Conversion Price")).
(b) To convert Securities into FINOVA Common Stock, the Holder
shall submit to the Conversion Agent at the office referred to
above an irrevocable request to convert Securities on behalf
of such Holder (the "Conversion Request"), together, if the
Securities are in certificated form, with such certificates.
The Conversion Request shall (i) set forth the number of
Securities to be converted and the name or names, if other
than the Holder, in which the shares of FINOVA Common Stock
should be issued and (ii) direct the Conversion Agent (A) to
exchange such Securities for a portion of the Debentures held
by the Trust (at the rate of exchange specified in the
preceding paragraph) and (B) to immediately convert such
Debentures on behalf of such Holder, into FINOVA Common Stock
(at the conversion rate specified in the preceding paragraph).
The Conversion Agent shall notify the Trust of the Holder's
election to exchange Securities for a portion of the
Debentures held by the Trust and the Trust shall, upon receipt
of such notice, deliver to the Conversion Agent the
appropriate principal amount of Debentures for exchange in
accordance with this paragraph 5. The Conversion Agent shall
thereupon notify the Debenture Issuer of the Holder's election
to convert such Debentures into shares of FINOVA Common
Stock. Accrued Distributions will not be paid on Securities
that are converted, nor will any payment, allowance or
adjustment be made for accumulated and unpaid Distributions,
whether or
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not in arrears, accrued on converted Securities (including any
Additional Interest or Compounded Interest accrued thereon)
except that (i) Holders of Securities at the close of business
on a record date will be entitled to receive the Distributions
payable on such Securities on the corresponding payment date
notwithstanding the conversion of such Securities following
such record date but prior to such payment date and (ii) if,
during an Extension Period, notice of any redemption of
Securities is mailed or otherwise given to Holders of
Securities or the Trust issues a press release announcing a
Conversion Termination Date, then, if any Holder of Securities
converts any Securities into FINOVA Common Stock on any date
after the date on which such notice of redemption is mailed or
otherwise given or the date of such press release, as the case
may be, and such date of conversion falls on any day from and
including the first day of an Extension Period through and
including the record date for the payment of the Distributions
on the Securities which have been deferred as a result of such
Extension Period, such holder shall be entitled to receive all
accrued and unpaid Distributions on such Securities to the
most recent payment date prior to the date of such conversion,
whether or not such payment date falls in such Extension
Period (or, if the date of such conversion is (A) during an
Extension Period, (B) on or prior to the payment date upon
which such Extension Period ends and (C) after the record date
for the payment date referred to in clause (B) above, all
accrued and unpaid Distributions on such Securities to such
payment date) shall be distributed to the Holder who converts
such Securities, which distribution shall be made (I) in the
case of conversion of Securities after a notice of any
redemption of Securities, on the redemption date fixed for
redemption and (II) in the case of conversion of Securities
after a Conversion Termination Date is announced, on the
payment date upon which such Extension Period ends. Except as
provided above, neither the Trust nor the Debenture Issuer
will
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make, or be required to make, any payment, allowance or
adjustment upon any conversion on account of any accumulated
and unpaid Distributions on the Securities (including any
Additional Interest or Compounded Interest) surrendered for
conversion. The Debenture Issuer shall make no payment or
allowance for distributions on the shares of FINOVA Common
Stock issued upon such conversion, except to the extent that
such shares of FINOVA Common Stock are held of record on the
record date for any such distributions and except as provided
in Section [1309] of the Indenture. Securities shall be deemed
to have been converted immediately prior to 5:00 p.m. (New
York City time) on the day on which a Conversion Request
relating to such Securities is received by the Trust in
accordance with the foregoing provision (the "Conversion
Date"). The Person or Persons entitled to receive FINOVA
Common Stock issuable upon conversion of the Debentures shall
be treated for all purposes as the record holder or holders of
such FINOVA Common Stock at such time. As promptly as
practicable on or after the Conversion Date, the Debenture
Issuer shall issue and deliver at the office of the Conversion
Agent a certificate or certificates for the number of full
shares of FINOVA Common Stock issuable upon such conversion,
together with the cash payment, if any, in lieu of any
fraction of any share to the Person or Persons entitled to
receive the same, unless otherwise directed by the Holder in
the notice of conversion and the Conversion Agent shall
distribute such certificate or certificates to such Person or
Persons.
(c) Each Holder of a Security by his acceptance thereof appoints
Fleet National Bank (the "Conversion Agent") for the purpose
of effecting the con- version of Securities in accordance with
this paragraph 5. In effecting the conversion and trans-
actions described in this paragraph 5, the Conversion Agent
shall be acting as agent of the Holders of Securities
directing it to effect such conversion transactions. The
Conversion Agent is
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hereby authorized (i) to exchange Securities from time to time
for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this
paragraph 5 and (ii) to convert all or a portion of the
Debentures into FINOVA Common Stock and thereupon to deliver
such shares of FINOVA Common Stock in accordance with the
provisions of this paragraph 5 and to deliver to the Trust a
new Debenture or Debentures for any resulting unconverted
principal amount.
(d) No fractional shares of FINOVA Common Stock will be issued as
a result of conversion, but in lieu thereof, such fractional
interest will be paid in cash (based on the last reported sale
price of FINOVA Common Stock on the Conversion Date) by the
Debenture Issuer to the Trust, which in turn will make such
payment to the Holder or Holders of Securities so converted.
(e) The Debenture Issuer shall at all times reserve and keep
available out of its authorized and unissued FINOVA Common
Stock, solely for issuance upon the conversion of the
Debentures, free from any preemptive or other similar rights,
such number of shares of FINOVA Common Stock as shall from
time to time be issuable upon the conversion of all the
Debentures then outstanding. Notwithstanding the foregoing,
the Debenture Issuer shall be entitled to deliver upon
conversion of Debentures, shares of FINOVA Common Stock reac-
quired and held in the treasury of the Debenture Issuer (in
lieu of the issuance of authorized and unissued shares of
FINOVA Common Stock), so long as any such treasury shares are
free and clear of all liens, charges, security interests or
encumbrances. Any shares of FINOVA Common Stock issued upon
conversion of the Debentures shall be duly authorized, validly
issued, fully paid and nonassessable. The Trust shall deliver
the shares of FINOVA Common Stock received upon conversion of
the Debentures to the converting Holder free and clear of all
liens, charges, security interests and encumbrances, except
for United States
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<PAGE> 112
withholding taxes. Each of the Debenture Issuer and the Trust
shall prepare and shall use its best efforts to obtain and
keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply
with all applicable requirements as to registration or
qualification of the FINOVA Common Stock issuable upon
conversion of Debentures (and all requirements to list on any
national Securities exchange or quotation system such FINOVA
Common Stock that are at the time applicable), to enable the
Debenture Issuer to lawfully issue FINOVA Common Stock to the
Trust upon conversion of the Debentures and the Trust to
lawfully deliver FINOVA Common Stock to each Holder upon
conversion of the Securities.
(f) The Debenture Issuer will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of
FINOVA Common Stock on conversion of Debentures and the
delivery of shares of FINOVA Common Stock by the Trust upon
conversion of the Securities. The Debenture Issuer shall not,
however, be required to pay any tax that may be payable in
respect of any transfer involved in the issue and delivery of
shares of FINOVA Common Stock in a name other than that in
which the Securities so converted were registered, and no such
issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Trust the amount of any
such tax or has established to the satisfaction of the Trust
that such tax has been paid.
(g) Nothing in the preceding paragraph 5(f) shall limit the
requirement of the Trust to withhold taxes pursuant to the
terms of the Securities or as set forth in this Annex I to the
Declaration or the Declaration itself or otherwise require the
Property Trustee or the Trust to pay any amounts on account of
such withholdings.
(h) (i) On and after __________ ___, 1999, the Debenture
Issuer shall have the right, at
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its option, to cause the conversion rights of holders
of the Debentures to convert the Debentures into
FINOVA Common Stock to terminate, in which case the
rights of Holders of the Securities to convert the
Securities into FINOVA Common Stock pursuant to this
paragraph 5 will likewise terminate, if (x) the Trust
is current in the payment of Distributions on the
Securities (except to the extent that the payment of
Distributions may have been deferred as the result of
an Extension Period) and (y) for at least 20 trading
days within any period of 30 consecutive trading days
ending on or after _____________ ___, 1999, including
the last trading day of such period, the Closing
Price of the Common Stock on each of such 20 trading
days shall have exceeded 120% of the Conversion Price
in effect on such trading day.
(ii) To exercise its option to cause the conversion rights
of Holders of the Securities to terminate, the
Debenture Issuer must cause the Trust to issue a
press release for publication on the Dow Jones News
Service or on a comparable news service (the "Press
Release") prior to the opening of business on the
second trading day after any period in which the
conditions in paragraph 5(h)(i) have been met (which
date shall not be prior to ___________ ___, 1999),
which Press Release shall state that the Debenture
Issuer has elected to exercise its right to terminate
the conversion rights of holders of Debentures and
Holders of Securities, specify the Conversion
Termination Date and provide the current Conversion
Price of the Securities and the Closing Price of the
FINOVA Common Stock, in each case as of the close of
business on the trading day next preceding the date
of the Press Release.
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If the Debenture Issuer exercises the option
described in this paragraph 5(h), the "Conversion
Termination Date" shall be the Business Day selected
by the Debenture Issuer which shall not be less than
30 or more than 60 calendar days after the date on
which the Trust issues the Press Release. If the
Debenture Issuer does not exercise the option
described in this paragraph 5(h), and the Securities
are otherwise called for redemption, the Securities
will be convertible until 5:00 p.m. (New York City
time) on the Business Day immediately preceding the
date of such redemption.
(iii) In addition to the Press Release, notice of the
termination of conversion rights of Holders of the
Securities (a "Notice of Conversion Termination")
must be given by the Trust by first-class mail to
each Holder of Securities not more than four Business
Days after the Trust issues the Press Release. Each
such mailed Notice of Conversion Termination shall
state: (1) the Conversion Termination Date; (2) the
Conversion Price of the Securities and the Closing
Price of the FINOVA Common Stock, in each case as of
the close of business on the trading day next
preceding the date of the Notice of Conversion
Termination; (3) that Securities will be convertible
until 5:00 p.m. (New York City time) on the
Conversion Termination Date and the place or places
at which a conversion notice may be given and
Securities (if not in book-entry form) may be
surrendered for conversion into shares of FINOVA
Common Stock; and (4) such other information or
instructions as the Trust deems necessary or
advisable to enable a Holder to exercise its
conversion rights hereunder. For purposes of the
calculation of the Conversion Termination Date and
the dates
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on which notices are given pursuant to this paragraph
5(h)(iii), a Notice of Conversion Termination shall
be deemed to have been given on the day such notice
is first mailed by first-class mail, postage prepaid,
to each Holder of Securities at the address of such
Holder appearing in the books and records of the
Trust (whether or not any such Holder receives the
Notice of Conversion Termination). No defect in the
Notice of Conversion Termination or in the mailing
thereof with respect to any Security shall affect the
validity of such notice with respect to any other
Security. As of 5:00 p.m. (New York City time) on the
Conversion Termination Date, the Securities shall be
deemed to be non-convertible securities.
(iv) The term "Closing Price" of FINOVA Common Stock on
any day means the last reported sale price, regular
way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and
asked prices on such day, regular way, in either case
as reported on the NYSE Composite Tape, or, if FINOVA
Common Stock is not listed or admitted to trading on
the NYSE, on the principal national securities
exchange on which FINOVA Common Stock is listed or
admitted to trading, or, if FINOVA Common Stock is
not listed or admitted to trading on a national
securities exchange, on the National Market System of
the National Association of Securities Dealers, Inc.,
or, if FINOVA Common Stock is not quoted or admitted
to trading on such quotation system, on the principal
quotation system on which FINOVA Common Stock may be
listed or admitted to trading or quoted, or, if not
listed or admitted to trading or quoted on any
national securities exchange or quotation system, the
average of the closing bid and
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asked prices of FINOVA Common Stock in the
over-the-counter market on the day in question as
reported by the National Quotation Bureau
Incorporated, or a similar generally accepted
reporting service, or, if not so available in such
manner, as furnished by any NYSE member firm selected
from time to time by the Board of Directors of the
Sponsor for that purpose or, if not so available in
such manner, as otherwise determined in good faith by
the Board of Directors of the Sponsor.
6. Voting Rights - Preferred Securities.
(a) Except as provided under paragraph 6(b) and paragraph 8, in
the Business Trust Act and as otherwise required by law and
the Declaration, the Holders of the Preferred Securities will
have no voting rights. No vote or consent of the Holders of
the Preferred Securities will be required for the Trust to
redeem and cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration and the terms of
the Securities.
(b) Subject to the requirements set forth in this paragraph 6(b),
the Holders of a majority in liquidation amount of the
Preferred Securities, voting separately as a class, may direct
the time, method, and place of conducting any proceeding for
any remedy available to the Property Trustee and direct the
exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct
the Property Trustee, as holder of the Debentures, to (i)
exercise the remedies available to it under the Indenture as a
holder of the Debentures, (ii) waive any past default and its
consequences that are waivable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the
principal of all the Debentures shall be due and payable, or
(iv) consent to any amendment, modification or termination of
the Indenture or
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the Debentures where such consent shall be required; provided,
however, that where a consent or action under the Indenture
would require the consent or act of the Holders of a Super
Majority of Debentures affected thereby, the Property Trustee
may only give such consent or take such action at the written
direction of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that the
relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding. The Property Trustee
shall [be under no obligation to] revoke any action previously
authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to
the Property Trustee or the Debenture Trustee as set forth
above, the Property Trustee shall be under no obligation to
take any action in accordance with the directions of the
Holders of the Preferred Securities under this paragraph 6
unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that for the purposes of
United States federal income tax the Trust will not be classi-
fied as other than a grantor trust on account of such action
and each Holder will be treated as owning an undivided
beneficial interest in the Debentures. If the Property Trustee
fails to enforce its rights under the Debentures after a
Holder of Preferred Securities has made a written request,
such Holder of Preferred Securities may institute a legal
proceeding directly against the Debenture Issuer to enforce
the Property Trustee's rights under the Debentures without
first instituting any legal proceeding against the Property
Trustee or any other Person. Notwithstanding the foregoing, if
an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer
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 date fixed for redemption), then a
Holder of Preferred
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Securities may directly institute a proceeding for enforcement
of payment to such Holder (a "Direct Action") of the principal
of or interest on Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred
Securities of such Holder on or after the respective due date
specified in the Debentures. Except as provided in the
preceding sentence, the Holders of Preferred Securities will
not be able to exercise directly any other remedy available to
the holders of the Debentures. In connection with such Direct
Action, the Debenture Issuer will be subrogated to the rights
of such Holder of Preferred Securities under the Declaration
to the extent of any payment made by the Debenture Issuer to
such Holder of Preferred Securities in such Direct Action.
(c) 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, or of any matter upon which action by written consent
of such Holders is to be taken, to be mailed to each Holder of
record of Preferred Securities. Each such notice will include
a statement setting forth the following information: (i) the
date of such meeting or the date by which such action is to be
taken, (ii) a description of any resolution pro- posed for
adoption at such meeting on which such Holders are entitled to
vote or of such matter upon which written consent is sought
and (iii) instructions for the delivery of proxies or
consents.
(d) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are
owned at such time by the Debenture Issuer or any Affiliate
of the
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Debenture Issuer shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if
such Preferred Securities were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 7(b) and (c) and paragraph
8, in the Business Trust Act and as otherwise required by law
and the Declaration, the Holders of the Common Securities will
have no voting rights. No vote or consent of the Holders of
the Common Securities will be required for the Trust to redeem
and cancel Common Securities or to distribute the Debentures
in accordance with the Declaration and the terms of the
Securities.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to
appoint, remove or replace any Trustee or to increase or
decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after the
Event of Default with respect to the Preferred Securities has
been cured, waived, or otherwise eliminated and subject to the
requirements of the penultimate sentence of this paragraph
7(c), the Holders of a majority in liquidation amount of the
Common Securities, voting separately as a class, may direct
the time, method, and place of conducting any proceeding for
any remedy available to the Property Trustee, or exercising
any trust or power conferred upon the Property Trustee under
the Declaration, including (i) directing the time, method,
place of con- ducting any proceeding for any remedy available
to the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the
Debentures, (ii) waive any past default and its consequences
that are waivable under Section [513] of the Indenture or
consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be
required, (iii) exercise any right to
I-26
<PAGE> 120
rescind or annul a declaration that the principal of all the
Debentures shall be due and payable; provided that, where a
consent or action under the Indenture would require the
consent or act of the Holders of a Super Majority in principal
amount of Debentures affected thereby, the Property Trustee
may only give such consent or take such action at the written
direction of the Holders of at least the proportion in
liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of
the Debentures outstanding. Pursuant to this paragraph 7(c),
the Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to
the Property Trustee or the Debenture Trustee as set forth
above, the Property Trustee shall be under no obligation to
take any action in accordance with the directions of the
Holders of the Common Securities under this paragraph 7(c)
unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that for the purposes of
United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such
action and each Holder will be treated as owning an undivided
beneficial interest in the Debentures. If the Property Trustee
fails to enforce its rights under the Debentures after a
Holder of Common Securities has made a written request, such
Holder of Common Securities may institute a legal proceeding
directly against the Debenture Issuer or any other Person to
enforce the Property Trustee's rights under the Debentures,
without first instituting any legal proceeding against the
Property Trustee or any other Person.
(d) Any 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
I-27
<PAGE> 121
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, or of any matter
upon which action by written consent of such Holders is to be
taken, 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 or the date by which such
action is to be taken, (ii) a description of any resolution
pro- posed for adoption at such meeting on which such Holders
are entitled to vote or of such matter upon which written
consent is sought and (iii) instructions for the delivery of
proxies or consents.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 11.1 of the
Declaration, 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 or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other
than as described in Section 3.10 of the Declaration, then the
Holders of Securities, voting together as a single class, will
be entitled to vote on such amendment or proposal [(but not on
any other amendment or proposal)] and such amendment or
proposal shall not be effective except with the approval of
the Holders of a [Super] Majority in liquidation amount of the
Securities affected thereby, voting together as a single
class; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only
the Preferred Securities or only the Common Securities, then
only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall
not be effective except with the approval of a [Super]
Majority in liquidation amount of such class of Securities.
I-28
<PAGE> 122
(b) 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 and
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 a consent under the Indenture would
require a Super Majority in aggregate principal amount of the
Debentures, the Property Trustee may only give such consent at
the written direction of the Holders of at least the same
proportion in aggregate stated liquidation preference of the
Securities; provided, further, that the Property Trustee
shall not take any action in accordance with the directions of
the Holders of the Securities under this paragraph 8(b) unless
the Property Trustee has obtained an opinion of tax counsel to
the effect that for the purposes of United States federal
income tax the Trust will not be classified as other than a
grantor trust on account of such action.
9. Pro Rata.
A reference in these terms of the 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, Payments of Distributions on, and amounts payable
upon redemption of, and all other payments in respect of, the Securities shall
be made Pro Rata upon the Securities; provided, however, that if on any
distribution date, Redemption Date or date for any other payment, an Event of
Default under the Declaration 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
I-29
<PAGE> 123
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.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Preferred Securities and, in such case and without limitation to
the foregoing, no payment of any Distribution on, or amount payable upon
redemption of, or other amount payable with respect to, any Common Security and
no other payment on account of the redemption, liquidation or other acquisition
of any Common Security shall be made, unless payment in full in cash of all
accumulated and unpaid Distributions on all outstanding Preferred Securities for
all distribution periods terminating on or prior thereto shall have been paid in
full in cash, and in the case of amounts due upon redemption of the Preferred
Securities, the full Redemption Price in respect of all outstanding Preferred
Securities shall have been paid or provided for in cash, and in the case of any
other payment due in respect of the Preferred Securities, the full amount of
such payment shall have been paid in full in cash.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordina-
I-30
<PAGE> 124
tion provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Debenture Issuer will provide a copy of the Declaration,
the Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request to
the Debenture Issuer at its principal place of business.
I-31
<PAGE> 125
EXHIBIT A-1
FORM OF PREFERRED SECURITY
<PAGE> 126
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FACE OF SECURITY]
[Include if Preferred Security is in global form: THIS SECURITY IS A
GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
PREFERRED SECURITY REGISTERED, AND NO TRANSFER OF THIS PREFERRED
SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION.]
[Include if Preferred Security is in global form and The Depository
Trust Company is the Depositary: UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO
THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.]
<PAGE> 127
Cert. No.: No. of Preferred Securities:
CUSIP NO.
Preferred Securities
of
FINOVA Finance Trust
__% Convertible Preferred Securities
(liquidation amount $50 per Convertible Preferred Security)
FINOVA Finance Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that
____________________________ (the "Holder") is the registered owner of preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the "___% Convertible Preferred Securities
(liquidation amount $50 per Convertible 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 designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Preferred Securities represented hereby are issued and shall in all respects
be subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of December __, 1996, as the same may be amended from time to
time, including the designation of the terms of the Preferred Securities as set
forth in Annex I to the Declaration (the "Declaration"). Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration. The
Holder is entitled to the benefits of the Preferred Securities Guarantee to the
extent provided therein. The Debenture Issuer will provide a copy of the
Declaration, the Preferred Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Trust at its principal place of
business.
A-1-2
<PAGE> 128
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
Unless the Property Trustee's Certificate of Authentication
hereon has been properly executed, these Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
A-1-3
<PAGE> 129
IN WITNESS WHEREOF, the Trust has caused this instrument to be
duly executed.
Dated:
FINOVA FINANCE TRUST
By:________________________
Name:
Title:
Attest:
_______________________
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated:
Fleet National Bank, as
Property Trustee
By: _______________________
Authorized Signatory
A-1-4
<PAGE> 130
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: _______________________
__________________________________________
(Sign exactly as your name appears on the
other side of this Preferred Security
Certificate)
Signature Guarantee:* _______________________________
- --------
* (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or participation
in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as
amended.)
A-1-5
<PAGE> 131
CONVERSION REQUEST
To: Fleet National Bank, as Property Trustee of FINOVA Finance Trust
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Preferred Securities, or the
portion below designated, into Common Stock of The FINOVA Group Inc. (the
"Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of December __, 1996, by
Bruno A. Marszowski and Robert J. Fitzsimmons, as Regular Trustees, First Union
Bank of Delaware, as Delaware Trustee, Fleet National Bank, as Property Trustee,
The FINOVA Group Inc., as Sponsor, and by the Holders, from time to time, of
individual beneficial interests in the Trust to be issued pursuant to the
Declaration. Pursuant to the aforementioned exercise of the option to convert
these Preferred Securities, the undersigned hereby directs the Conversion Agent
(as that term is defined in the Declaration) to (i) exchange such Preferred
Securities for a portion of the Debentures (as that term is defined in the
Declaration) held by the Trust (at the rate of exchange specified in the terms
of the Preferred Securities set forth as Annex I to the Declaration) and (ii)
immediately convert such Debentures on behalf of the undersigned, into Common
Stock (at the conversion rate specified in the terms of the Preferred Securities
set forth as Annex I to the Declaration).
The undersigned also hereby directs the Conversion Agent that
the shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: ________________
Number of Preferred Securities to be converted: ___________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
__________________________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate) (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
__________________________________________
__________________________________________
__________________________________________
__________________________________________
A-1-6
<PAGE> 132
Signature Guarantee:* _______________________________
- --------
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
A-1-7
<PAGE> 133
EXHIBIT A-2
FORM OF COMMON SECURITY
<PAGE> 134
EXHIBIT A-2
FORM OF COMMON SECURITY
[FACE OF SECURITY]
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE REGISTRATION
STATEMENT. OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF THE FINOVA GROUP INC.
Certificate Number Number of Common Securities
Common Securities
of
FINOVA Finance Trust
__% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
FINOVA Finance Trust, a statutory business trust formed 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 undivided beneficial interests in the
assets of the Trust designated the "__% Convertible Common Securities
(liquidation amount $50 per Convertible 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
<PAGE> 135
form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of December __,
1996, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration. Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Common Securities Guarantee to the extent provided therein. The
Debenture Issuer will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Sponsor at its principal place of business.
Reference is hereby made to select provisions of the Common
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Debenture Issuer is
bound by the Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States
federal income tax purposes the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has caused this instrument to be
duly executed.
Dated:
FINOVA FINANCE TRUST
A-2-2
<PAGE> 136
By:________________________
Name:
Title:
[Seal]
Attest:
_______________________
A-2-3
<PAGE> 137
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: _______________________
__________________________________________
(Sign exactly as your name appears on the
other side of this Common Security
Certificate)
Signature Guarantee:* _______________________________
- --------
* (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or participation
in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as
amended.)
A-2-4
<PAGE> 138
CONVERSION REQUEST
To: Fleet National Bank, as Property Trustee of FINOVA Finance Trust
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common Securities, or the
portion below designated, into Common Stock of The FINOVA Group Inc. (the
"Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of December __, 1996, by
Bruno A. Marszowski and Robert J. Fitzsimmons, as Regular Trustees, First Union
Bank of Delaware, as Delaware Trustee, Fleet National Bank, as Property Trustee,
The FINOVA Group Inc., as Sponsor, and by the Holders, from time to time, of
individual beneficial interests in the Trust to be issued pursuant to the
Declaration. Pursuant to the aforementioned exercise of the option to convert
these Common Securities, the undersigned hereby directs the Conversion Agent (as
that term is defined in the Declaration) to (i) exchange such Common Securities
for a portion of the Debentures (as that term is defined in the Declaration)
held by the Trust (at the rate of exchange specified in the terms of the Common
Securities set forth as Annex I to the Declaration) and (ii) immediately convert
such Debentures on behalf of the undersigned, into Common Stock (at the
conversion rate specified in the terms of the Common Securities set forth as
Annex I to the Declaration).
The undersigned also hereby directs the Conversion Agent that
the shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: ________________
Number of Common Securities to be converted: ___________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
__________________________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate) (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
__________________________________________
__________________________________________
__________________________________________
__________________________________________
A-2-5
<PAGE> 139
Signature Guarantee:* _______________________________
- --------
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
A-2-6
<PAGE> 140
EXHIBIT B
SPECIMEN OF DEBENTURE
<PAGE> 1
EXHIBIT 4.7
[FORM OF INDENTURE]
THE FINOVA GROUP INC., as Issuer
and
FLEET NATIONAL BANK, as Trustee
----------------
Indenture
Dated as of December __, 1996
$103,092,800(1)
__% Convertible Subordinated Debentures Due 2016
----------------
- --------
(1) Subject to increase to up to $118,556,750 in the event an
over-allotment option is exercised.
<PAGE> 2
The FINOVA Group Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
Section 310(a)(1) .................................... 609
(a)(2) .................................... 609
(a)(3) .................................... Not Applicable
(a)(4) .................................... Not Applicable
(b) .................................... 608, 610
Section 311(a) .................................... 613
(b) .................................... 613
Section 312(a) .................................... 701
702(a)
(b) .................................... 702(b)
(c) .................................... 702(c)
Section 313(a) .................................... 703(a)
(a)(4) .................................... 101, 1004
(b) .................................... 703(a)
(c) .................................... 703(a)
(d) .................................... 703(b)
Section 314(a) .................................... 704
(b) .................................... Not Applicable
(c)(1) .................................... 102
(c)(2) .................................... 102
(c)(3) .................................... Not Applicable
(d) .................................... Not Applicable
(e) .................................... 102
Section 315(a) .................................... 601
(b) .................................... 602
(c) .................................... 601
(d) .................................... 601
(e) .................................... 514
Section 316(a) .................................... 101
(a)(1)(A) .................................... 502
512
(a)(1)(B) .................................... 513
(a)(2) .................................... Not Applicable
- i -
<PAGE> 3
(b) .................................... 508
(c) .................................... 104(c)
Section 317(a)(1) .................................... 503
(a)(2) .................................... 504
(b) .................................... 1003
Section 318(a) .................................... 107
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
- ii -
<PAGE> 4
TABLE OF CONTENTS
Page
----
Recitals of the Company................................................... 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions............................................... 3
SECTION 102. Compliance Certificates and Opinions......................12
SECTION 103. Form of Documents Delivered to Trustee....................13
SECTION 104. Acts of Holders; Record Dates.............................14
SECTION 105. Notices, Etc., to Trustee and the
Company.................................................16
SECTION 106. Notice to Holders; Waiver.................................16
SECTION 107. Conflict with Trust Indenture Act.........................17
SECTION 108. Effect of Headings and Table of
Contents...............................................17
SECTION 109. Successors and Assigns....................................17
SECTION 110. Separability Clause.......................................17
SECTION 111. Benefits of Indenture.....................................18
SECTION 112. Governing Law.............................................18
SECTION 113. Legal Holidays............................................18
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally...........................................18
SECTION 202. Initial Issuance to Property Trustee......................19
ARTICLE THREE
The Securities
SECTION 301. Title and Terms...........................................19
SECTION 302. Denominations.............................................21
SECTION 303. Execution, Authentication, Delivery and
Dating.................................................21
- iii -
<PAGE> 5
Page
----
SECTION 304. Temporary Securities......................................22
SECTION 305. Registration, Registration of Transfer
and Exchange..............................................23
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities................................................24
SECTION 307. Payment of Interest; Interest Rights
Preserved.................................................25
SECTION 308. Persons Deemed Owners.....................................27
SECTION 309. Cancellation..............................................28
SECTION 310. Right of Set Off..........................................28
SECTION 311. CUSIP Numbers.............................................28
SECTION 312. Option to Extend Interest Payment
Period.................................................29
SECTION 313. Paying Agent, Security Registrar and
Conversion Agent..........................................31
SECTION 314. Global Security...........................................31
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture...................34
SECTION 402. Application of Trust Money................................35
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.........................................36
SECTION 502. Acceleration of Maturity; Rescission and
Annulment..............................................37
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................38
SECTION 504. Trustee May File Proofs of Claim..........................39
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities...............................40
SECTION 506. Application of Money Collected............................40
SECTION 507. Limitation on Suits.......................................41
SECTION 508. Unconditional Right of Holders to
- iv -
<PAGE> 6
Page
----
Receive Principal and Interest
and Convert............................................41
SECTION 509. Restoration of Rights and Remedies........................42
SECTION 510. Rights and Remedies Cumulative............................42
SECTION 511. Delay or Omission Not Waiver..............................42
SECTION 512. Control by Holders........................................43
SECTION 513. Waiver of Past Defaults...................................43
SECTION 514. Undertaking for Costs.....................................44
SECTION 515. Waiver of Stay or Extension Laws..........................44
SECTION 516. Enforcement by Holders of Preferred
Securities..............................................44
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.......................45
SECTION 602. Notice of Defaults........................................45
SECTION 603. Certain Rights of Trustee.................................46
SECTION 604. Not Responsible for Recitals or Issuance
of Securities..........................................47
SECTION 605. May Hold Securities.......................................47
SECTION 606. Money Held in Trust.......................................48
SECTION 607. Compensation and Reimbursement............................48
SECTION 608. Disqualification; Conflicting Interests...................49
SECTION 609. Corporate Trustee Required; Eligibility...................49
SECTION 610. Resignation and Removal; Appointment of
Successor..............................................49
SECTION 611. Acceptance of Appointment by Successor....................51
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business....................................51
SECTION 613. Preferential Collection of Claims
Against Company...........................................52
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
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Addresses of Holders...................................52
SECTION 702. Preservation of Information;
Communications to Holders..............................53
SECTION 703. Reports by Trustee........................................53
SECTION 704. Reports by Company .......................54
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms.............................................54
SECTION 802. Successor Substituted.....................................55
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders.....................................56
SECTION 902. Supplemental Indentures with Consent of
Holders................................................57
SECTION 903. Execution of Supplemental Indentures......................58
SECTION 904. Effect of Supplemental Indentures.........................59
SECTION 905. Conformity with Trust Indenture Act.......................59
SECTION 906. Reference in Securities to Supplemental
Indentures.............................................59
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest.........................60
SECTION 1002. Maintenance of Office or Agency...........................60
SECTION 1003. Money for Security Payments to Be Held
in Trust..................................................60
SECTION 1004. Statement by Officers as to Default.......................62
SECTION 1005. Limitation on Dividends; Transactions
with Affiliates; Covenants as to the
Trust.....................................................62
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SECTION 1006. Payment of Expenses of the Trust..........................64
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Optional Redemption ......................................64
SECTION 1102. Tax Event Optional Redemption.............................65
SECTION 1103. Applicability of Article..................................66
SECTION 1104. Election to Redeem; Notice to
Trustee...................................................66
SECTION 1105. Notice of Redemption .....................................66
SECTION 1106. Deposit and Payment of Redemption Price...................67
SECTION 1107. Securities Payable on Redemption Date.....................67
SECTION 1108. No Sinking Fund...........................................68
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate..................................68
SECTION 1202. Default on Senior Indebtedness............................68
SECTION 1203. Liquidation; Dissolution; Bankruptcy......................69
SECTION 1204. Subrogation...............................................71
SECTION 1205. Trustee to Effectuate Subordination.......................72
SECTION 1206. Notice by the Company.....................................72
SECTION 1207. Rights of the Trustee; Holders of Senior
Indebtedness...........................................74
SECTION 1208. Subordination May Not Be Impaired.........................74
Article XIII
Conversion of Securities
SECTION 1301. Conversion Rights.........................................75
SECTION 1302. Conversion Procedures.....................................76
SECTION 1303. Conversion Price Adjustments..............................79
SECTION 1304. Reclassification, Consolidation,
Merger or Sale of Assets...............................85
SECTION 1305. Notice of Adjustments of
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Conversion Price.......................................86
SECTION 1306. Prior Notice of Certain Events............................86
SECTION 1307. Certain Defined Terms.....................................87
SECTION 1308. Dividend or Interest Reinvestment Plans...................88
SECTION 1309. Certain Additional Rights.................................89
SECTION 1310. Trustee Not Responsible for Determining
Conversion Price or Adjustments........................90
SECTION 1311. Expiration of Conversion Rights...........................90
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 1401. No Recourse...............................................93
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EXHIBIT AND ANNEX
EXHIBIT A Form of Security
ANNEX A Amended and Restated Declaration of Trust of FINOVA Finance
Trust, among the Company, as trust sponsor, Fleet National Bank,
as property trustee, First Union Bank of Delaware, as Delaware
trustee, and Bruno A. Marszowski and Robert J. Fitzsimmons, as
regulars trustees, dated as of December ___, 1996.
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE> 11
INDENTURE, dated as of December __ 1996, between The FINOVA
Group Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
1850 North Central Avenue, P.O. Box 2209, Phoenix, Arizona 85002-2209, and Fleet
National Bank, a national banking association, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
WHEREAS, FINOVA Finance Trust, a Delaware business trust (the
"Trust"), formed under the Amended and Restated Declaration of Trust among the
Company, as trust sponsor, Fleet National Bank, as property trustee (the
"Property Trustee"), First Union Bank of Delaware, as Delaware trustee (the
"Delaware Trustee"), and Bruno A. Marszowski and Robert J. Fitzsimmons, as
regular trustees (the "Regular Trustees"), dated as of December __, 1996 (as the
same may be supplemented or amended from time to time in accordance with its
terms, the "Declaration"), pursuant to the Purchase Agreement (the "Purchase
Agreement") dated December __, 1996, among the Company and the underwriters
named therein, will issue and sell up to 2,000,000 (or 2,300,000 if the
over-allotment option is exercised) of its __% Convertible Trust Originated
Preferred Securities (the "Preferred Securities") with a liquidation amount of
$50 per Preferred Security, having an aggregate liquidation amount with respect
to the assets of the Trust of $100,000,000 (or $115,000,000 if the
over-allotment option is exercised);
WHEREAS, the trustees of the Trust, on behalf of the Trust,
will execute and deliver to the Company __% Convertible Common Securities (the
"Common Securities") of the Trust, registered in the name of the Company, in an
aggregate amount equal to approximately three percent of the capitalization of
the Trust, equivalent to 61,856 Common Securities (or up to 71,135 Common
Securities if the over-allotment option is exercised), with a liquidation amount
of $50 per Common Security, having an aggregate liquidation amount with respect
to the assets of the Trust of $3,092,800
<PAGE> 12
(or $3,556,750 if the over-allotment option is exercised) (the "Common
Securities");
WHEREAS, the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase from the Company __%
Convertible Subordinated Debentures Due 2016 (the "Securities") of the Company
in an aggregate principal amount of $103,092,800 (or up to $118,556,750 if the
over-allotment option is exercised);
WHEREAS, the Company is guaranteeing the payment of
distributions on the Preferred Securities, and payment of the Redemption Price
and payments on liquidation with respect to the Preferred Securities, to the
extent provided in the Preferred Securities Guarantee Agreement (as the same may
be supplemented or amended from time to time in accordance with its terms, the
"Guarantee") dated as of December __, 1996 between the Company and Fleet
National Bank, as guarantee trustee, for the benefit of the holders of the
Preferred Securities from time to time;
WHEREAS, the Company has duly authorized the creation of the
Securities of the tenor and amount herein set forth and to provide therefor the
Company has duly authorized the execution and delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities, and
any Preferred Securities are outstanding, the Declaration provides that the
holders of Preferred Securities may cause the Conversion Agent to (a) exchange
such Preferred Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock of the Company; and
WHEREAS, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
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NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
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"Additional Interest" has the meaning specified in Section 301.
"Additional Payments" means Compounded Interest and Additional
Interest, if any.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Board of Directors" means either the board of directors of the Company
or any committee duly authorized by that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in The City of New York or in Wilmington,
Delaware are authorized or required by law to close.
"Closing Price" has the meaning specified in Section 1307.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
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"Common Securities" has the meaning specified in the recitals to this
Instrument.
"Common Securities Guarantee" means any guarantee that the Company may
enter into that operates directly or indirectly for the benefit of holders of
Common Securities of the Trust.
"Common Stock" includes any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Article XIII, shares issuable on conversion of Securities shall
include only shares of the class designated as Common Stock of the Company at
the date of this instrument or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided, that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable on conversion shall be substantially in the proportion which the
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all such
reclassifications. Until the Rights Distribution Date (as defined in the Rights
Agreement) or the earlier expiration, exchange or redemption of the Rights (as
defined in the Rights Agreement), subject to adjustment, one Right will be
issued with each share of Common Stock issued upon conversion of any of the
Securities.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable
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provisions of this Indenture, and thereafter "Company" shall mean such successor
Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman or a Vice President, and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Compounded Interest" has the meaning specified in Section 312.
"Conversion Agent" means the Person appointed to act on behalf of the
holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 1302
hereof.
"Conversion Date" has the meaning specified in Section 1302.
"Conversion Termination Date of the Securities" and "Conversion
Termination Date" have the respective meanings specified in Section 1311(d).
"Corporate Trust Office" means the principal office of the Trustee, at
which at any particular time its corporate trust business shall be administered
and which at the date of this Indenture is located in Hartford, Connecticut.
"Declaration" has the meaning specified in the
Recitals of this instrument.
"Defaulted Interest" has the meaning specified in
Section 307.
"Delaware Trustee" means the Person named as "Delaware
Trustee" in the Recitals of this instrument until a successor Delaware Trustee
shall have become such pursuant
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to the applicable provisions of the Declaration, and thereafter, "Delaware
Trustee" shall mean such successor Delaware Trustee.
"Depositary" means, with respect to any Securities issued in the form
of one or more Global Securities, a clearing agency registered under the
Exchange Act that is designated to act as Depositary for the Securities.
"Direct Action" means a proceeding directly instituted by a holder of
Preferred Securities for enforcement of payment to such holder of the principal
of or interest on the Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Securities, if an "Event of
Default" under the Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date.)
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration and the Securities held by the Property Trustee are to be
distributed to the holders of Trust Securities issued by the Trust pro rata in
accordance with the Declaration.
"Dissolution Tax Opinion" has the meaning specified in Annex I to the
Declaration.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
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"Extension Period" has the meaning specified in Section 312.
"Global Security" has the meaning specified in Section 314.
"Guarantee" has the meaning specified in the Recitals to this
instrument.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" has the meaning specified in Section 301.
"Investment Company Event" has the meaning specified in Annex I to
the Declaration.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Ministerial Action" has the meaning specified in Section 1102.
"90-Day Period" has the meaning specified in Section 1102.
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"No Recognition Opinion" has the meaning specified in Annex I to the
Declaration.
"Notice of Conversion" means the notice to be given by a holder of
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Securities and to convert such Securities
into Common Stock on behalf of such holder.
"Officers' Certificate" means a certificate signed by the Chairman or a
Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 1004 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except: (i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose
payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and (iii) Securities that have been paid pursuant to Section 307,
converted into Common Stock pursuant to Section 1301, or in exchange for or in
lieu of which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there
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<PAGE> 20
shall have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such Securities are
valid obligations of the Company; provided, however, that in determining whether
the Holders of the requisite principal amount of the Outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Person" means any legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated organization or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen
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Security shall be deemed to evidence the same debt as the mutilated, destroyed,
lost or stolen Security.
"Preferred Securities" has the meaning specified in the Recitals to
this instrument.
"Property Trustee" means the Person named as the "Property Trustee" in
the Recitals to this instrument until a successor Property Trustee shall have
become such pursuant to the applicable provisions of the Declaration, and
thereafter, "Property Trustee" shall mean such successor Property Trustee.
"Purchase Agreement" has the meaning specified in the Recitals to this
instrument.
"Purchased Shares" has the meaning specified in Section 1303(e).
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Redemption Tax Opinion" has the meaning set forth in Annex I to the
Declaration.
"Reference Date" has the meaning specified in Section 1303(c).
"Regular Record Date" has the meaning specified in Section 301.
"Regular Trustees" mean the Persons named as "Regular Trustees" in the
Recitals of this instrument until, in the case of any such Regular Trustee, a
successor Regular Trustee shall have become such pursuant to the applicable
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provisions of the Declaration, and thereafter "Regular Trustees" shall include
such successor Regular Trustee.
"Responsible Officer", when used with respect to the Trustee, means any
vice-president, any assistant vice-president, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer or any other officer in
the Corporate Trust Department of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Rights Agreement" means the Amended and Restated Rights Agreement,
dated as of September 14, 1995, between the Company and Harris Trust and Savings
Bank, as successor rights agent, as amended or supplemented from time to time in
accordance with the applicable provisions thereof.
"Securities" has the meaning specified in the Recitals to this
instrument.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means in respect of the Company (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction,
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(v) all obligations of the type referred to in clauses (i) through (iv) above of
other Persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Securities and (2) any indebtedness
between or among such obligor or its Affiliates, including all other debt
securities and guarantees in respect of those debt securities, issued to any
other trust, or a trustee of such trust, partnership, limited liability company
or other entity affiliated with the Company that is a financing vehicle of the
Company (a "Financing Entity") in connection with the issuance by such Financing
Entity of preferred securities or other securities that rank, or the Company's
guarantee of which ranks, pari passu with, or junior to, the Preferred
Securities or the Guarantee, respectively. Such Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
"Special Event" has the meaning specified in Annex I to the
Declaration.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal, together with any accrued and unpaid
interest (including Compounded Interest), of such Security or such installment
of interest is due and payable.
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"Subsidiary" of any Person means a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof.
"Tax Event" has the meaning specified in Annex I to the Declaration.
"Trading Day" has the meaning specified in Section 1307.
"Trust" means the Person named as the "Trust" in the recitals of this
instrument until a successor Trust shall have become such pursuant to the
applicable provisions of the Declaration, and thereafter "Trust" shall mean such
successor Trust.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
"Trust Securities" means Common Securities and Preferred Securities.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"Voting Stock" of any Person means capital stock of such Person which
ordinarily has voting power for the election of directors (or Persons performing
similar func-
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tions) of such Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act or reasonably requested by the Trustee in connection with such
application or request. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided
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by this Indenture to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section .
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee or the Company, as the case may be, deems
sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders. If not set by the Company prior to the first solicitation of a
Holder made
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by any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders required to
be provided pursuant to Section 701) prior to such first solicitation or vote,
as the case may be. With regard to any record date, only the Holders on such
date (or their duly designated proxies) shall be entitled to give or take, or
vote on, the relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action with regard to any particular Security
may do so with regard to all or any part of the principal amount of such
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of such
principal amount.
Section 105. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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<PAGE> 29
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Department, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.
Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
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In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Preferred
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 112. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the Conversion Termination Date of the Securities
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal or conversion
of the Securities need not be made on such date, but may be made on the next
succeeding Business Day (except that, if such Business Day is in the next
succeeding calendar year, such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, shall be the immediately preceding Business Day)
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, the Stated Maturity or the Conversion Termination Date of the
Securities, provided, that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE II
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<PAGE> 32
SECURITY FORMS
Section 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have letters,
numbers, notations or other marks of identification or designation and such
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). The Company shall
furnish any such legend not contained in Exhibit A to the Trustee in writing.
Each Security shall be dated the date of its authentication. The terms and
provisions of the Securities set forth in Exhibit A are part of the terms of
this Indenture and to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed, lithographed
or engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed, all as determined by
the officers executing such Securities, as evidenced by their execution thereof.
Section 202. Initial Issuance to Property Trustee.
The Securities initially issued to the Property Trustee of the Trust
shall be in the form of one or more individual certificates in definitive, fully
registered form without coupons.
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<PAGE> 33
ARTICLE III
THE SECURITIES
Section 301. Title and Terms.
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is limited to $103,092,800 (or up to
$118,556,750 if the over-allotment option is exercised in accordance with the
terms and provisions of the Purchase Agreement), except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906 or
1302.
The Securities shall be known and designated as the "___% Convertible
Subordinated Debentures Due 2016" of the Company. Their Stated Maturity shall be
__________ __, 2016, and they shall bear interest at the rate of ___% per annum,
from November __, 1996 or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, as the case may be,
payable quarterly (subject to deferral as set forth herein), in arrears, on
March 31, June 30, September 30 and December 31 (each an "Interest Payment
Date") of each year, commencing __________ __, ____, until the principal thereof
is paid or made available for payment, and they shall be paid to the Person in
whose name the Security is registered at 5:00 p.m. (New York City time) on the
regular record date for such interest installment, which shall be [TO COME] (the
"Regular Record Date"). To the extent permitted by applicable law, interest will
compound quarterly and will accrue at the rate of ___% per annum on any interest
installment in arrears for more than one quarter or during an extension of an
interest payment period as set forth in Section 312 hereof.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
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<PAGE> 34
full quarterly period for which interest in computed, will be computed on the
basis of the actual number of days elapsed in such a 30-day month. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then payment of interest payable on such date will 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 such date.
If at any time while the Property Trustee is the Holder of any
Securities, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company will pay as additional interest ("Additional
Interest") on the Securities held by the Property Trustee, such amounts as shall
be required so that the net amounts received and retained by the Trust and the
Property Trustee after paying any such taxes, duties, assessments or other
governmental charges will be not less than the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at the
office or agency of the Company in the United States maintained for such purpose
and at any other office or agency maintained by the Company for such purpose in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register or by wire transfer to an account appropriately designated by
the Holder entitled thereto.
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<PAGE> 35
The Securities shall be redeemable as provided in Article Eleven
hereof.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XII hereof.
The Securities shall be convertible as provided in Article XIII hereof.
Section 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $50 and integral multiples thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman or one of its Vice Presidents, under its corporate seal reproduced
thereon attested by its Secretary or one of its assistant secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and
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<PAGE> 36
make available for delivery such Securities as in this Indenture provided and
not otherwise.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are typewritten, printed, lithographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
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Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
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<PAGE> 38
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1302 not involving any transfer.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and
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<PAGE> 39
payable, the Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section , the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at 5:00 p.m. (New York City time) on the Regular Record Date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at
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its election in each case, as provided in Clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at 5:00 p.m. (New York City time) 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 Security 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 (a) provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than 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 Holder at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at 5:00 p.m. (New York City time) on such Special
Record Date and shall no longer be payable pursuant to the following Clause (b).
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(b) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and, if so listed, 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 (B), such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 307, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue (including in each such case Additional Payments, if
any), which were carried by such other Security.
In the case of any Security which is converted after any Regular Record
Date and on or prior to the next succeeding Interest Payment Date, interest
whose Stated Maturity is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at 5:00 p.m. (New York City time) on such Regular Record Date. Except
as otherwise expressly provided in the immediately preceding sentence and in
Section 1302, interest whose Stated Maturity is after the date of conversion of
such Security shall not be payable, and the Company shall not make nor be
required to make any other payment, adjustment or allowance with respect to
accrued but unpaid interest (including Additional Payments, if any) on the
Securities being converted, which shall be deemed to be paid in full. Subject to
any right of the Holder of such Security or any Predecessor Security to receive
interest as provided in this paragraph and Section 1302, the Company's delivery
upon conversion of the fixed number of shares of Common Stock into which the
Securities are convertible (together with the cash payment, if any, in lieu of
fractional shares)
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<PAGE> 42
shall be deemed to satisfy the Company's obligation to pay the principal amount
at Maturity of the portion of Securities so converted and any unpaid interest
(including Additional Payments, if any) accrued on such Securities at the time
of such conversion. If any Security called for redemption is converted [and any
interest (including Additional Payments, if any) payable in respect of such
Converted Security pursuant to this paragraph and Section 1302 shall have been
paid in full], any money deposited with the Trustee or with any Paying Agent or
so segregated and held in trust for the redemption of such Security shall
(subject to any right of the Holder of such Security or any Predecessor Security
to receive interest as provided in this paragraph and in Section 1302) be paid
to the Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest (including Additional Payments, if any) on such Security
and for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in
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any manner whatsoever, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section , except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of as directed by a Company Order; provided, however,
that the Trustee shall not be required to destroy the certificates representing
such cancelled Securities.
Section 310. Right of Set Off.
Notwithstanding anything to the contrary in this Indenture, the Company
shall have the right to set off any payment it is otherwise required to make
hereunder to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
Section 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
Section 312. Option to Extend Interest Payment Period.
(a) The Company shall have the right at any time during the
term of the Securities to defer interest payments (including Additional
Payments) from time to time by extending the interest payment period for
successive periods (each, an "Extension Period") not exceeding 20 con-
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secutive quarters for each such period; provided, no Extension Period may extend
beyond the stated maturity date of the Securities. As a consequence of any such
extension, quarterly interest payments on the Securities would be deferred,
although interest on the Securities would continue to accrue (with interest
thereon, compounded quarterly, at the rate of interest borne by the Securities,
to the extent permitted by applicable law ("Compounded Interest"). At the end of
each Extension Period, the Company shall pay all interest then accrued and
unpaid (including Additional Interest and Compounded Interest); provided, that
during any Extension Period, the Company (i) shall not declare or pay dividends
on, or make a distribution with respect to, or redeem or purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other than
(A) purchases or acquisitions of shares of Common Stock (or Common Stock
equivalents) in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents) (provided that
such contract is in effect or such security is outstanding at least 60 days
prior to the commencement of such Extension Period), (B) purchases of shares of
Common Stock (or Common Stock equivalents) from officers or employees of the
Company or its subsidiaries upon termination of employment or retirement not
pursuant to any obligation under any contract or security requiring the Company
to purchase shares of Common Stock (or Common Stock equivalents) (provided that
such purchases by the Company upon termination of employment or retirement shall
be made at a price not to exceed the market value on the date of any such
purchase and shall not exceed $7.5 million in the aggregate for all officers and
employees), (C) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (D) dividends
or distributions of shares of Common Stock on Common Stock or (E) the purchase
of fractional interests in shares of the Company's capital
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stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged (or make any guarantee payments with
respect to the foregoing", (ii) shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company that rank pari passu
with or junior to the Securities and (iii) shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Extension Period, the Company 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
quarters or extend beyond the stated maturity date of the Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above requirements. No
interest during an Extension Period shall be due and payable.
(b) If the Property Trustee is the sole Holder of the
Securities at the time the Company selects an Extension Period, the Company
shall give written notice to the Regular Trustees, the Property Trustee and the
Trustee of its selection of such Extension Period at least one Business Day
prior to the earlier of (i) the date the distributions on the Preferred
Securities are payable or (ii) if the Preferred Securities are listed on the New
York Stock Exchange, Inc. (the "NOSE") or other stock exchange or quotation
system, the date the Trust is required to give notice to the NOSE or other
applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distributions are payable, but in
any event not less than 10 Business Days prior to such record date. The Company
shall cause the Trust to give notice of the Company's selection of such
Extension Period to the holders of the Preferred Securities.
(c) If the Property Trustee is not the sole holder of the
Securities at the time the Company selects an
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Extension Period, the Company shall give the Holders of the Securities and the
Property Trustee and the Trustee written notice of its selection of such
Extension Period at least 10 Business Days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) if the Securities are listed on the
NOSE or other stock exchange or quotation system, the date the Company is
required to give notice to the NOSE or other applicable self-regulatory
organization or to holders of the Securities of the record or payment date of
such related interest payment, but in any event not less than two Business Days
prior to such record date.
(d) The quarter in which any notice is given pursuant to
paragraphs (b) and (c) hereof shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under paragraph (a) hereof.
Section 313. Paying Agent, Security Registrar and Conversion Agent.
The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of its
Affiliates may act in any such capacity. The Trustee is entitled to the
protections of Article VI in its capacity as Paying agent, Registrar and
Conversion Agent.
Section 314. Global Security.
(a) If distributed to holders of the Preferred Securities as
the result of a Dissolution Event, the Securities will be issued in the same
form as the Preferred Securities which such Securities replace. Any global
book-entry Preferred Security (a "Global Preferred Security") will be replaced
by one or more Global Securities registered in the name of the Depositary or its
nominee. In connection with a Dissolution Event,
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(i) to the extent that Preferred Securities are in
global book-entry form Securities may be presented to the Trustee by
the Property Trustee in exchange for a Global Security or Global
Securities in an aggregate principal amount equal to the aggregate
principal amount of all outstanding Securities (a "Global Security"),
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
a Global Security or Global Securities in such aggregate principal
amount and deliver the same to the Trustee for authentication and
delivery in accordance with this Indenture. Payments on the Securities
issued as a Global Security will be made to the Depositary; and
(ii) if any Preferred Securities are held in non
book-entry certificated form ("Certificated Preferred Securities"),
then Securities in non-book-entry certificated form having an aggregate
principal amount equal to the aggregate stated liquidation amount of
such Certificated Preferred Securities shall be presented to the
Trustee by the Property Trustee and any outstanding Certificated
Preferred Securities will be deemed to represent beneficial interests
in such
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Securities presented to the Trustee by the Property Trustee having an
aggregate principal amount equal to the aggregate liquidation amount
of, with an interest rate identical to the distribution rate of, with
accrued and unpaid interest equal to accrued and unpaid distributions
on, and having the same record dates for payment as, such Certificated
Preferred Securities until such Certificated Preferred Securities are
presented to the Security Registrar for transfer or reissuance at which
time each such Certificated Preferred Security will be cancelled and a
Security, registered in the name of the holder of the Certificated
Preferred Security or the transferee of the holder of such Certificated
Preferred Security, as the case may be, with an aggregate principal
amount equal to the aggregate liquidation amount of, with an interest
rate identical to the distribution rate of, with accrued and unpaid
interest equal to accrued and unpaid distributions on, and having the
same record dates for payment as, such Certificated Preferred Security,
will be executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with this Indenture. On issue
of such Securities, Securities with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee will
be deemed to have been cancelled.
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(b) A Global Security may be transferred, in whole but not in
part, only to the Depositary or a nominee of the Depositary, or to a successor
Depositary or a nominee of such successor Depositary.
(c) If (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a depositary for the Global Securities or, if
at any time the Depositary ceases to be a clearing agency registered as such
under the Exchange Act, and no successor Depositary shall have been appointed
within 90 days of such notification or of the Company becoming aware of the
Depositary's ceasing to be so registered, as the case may be (ii) the Company in
its sole discretion determines that the Global Securities shall be exchanged for
definitive certificated Securities or (iii) there shall have occurred and be
continuing an Event of Default, the Company will execute, and, subject to
Article III of this Indenture, the Trustee, upon written notice from the Company
and receipt of a Company Order (which the Company hereby agrees to promptly
deliver), will authenticate and deliver the Securities in definitive registered
form without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Security in exchange for such
Global Security. Upon the exchange of the Global Securities for such Securities
in definitive registered form without coupons, in authorized denominations, the
Global Securities shall be cancelled by the Trustee. Such Securities in
definitive registered form issued in exchange for the Global Securities 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 Securities to, or as
instructed by, the Depositary for delivery to the Persons in whose names such
Securities are so registered.
(d) Every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
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THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN
PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER
THAN SUCH DEPOSITARY (OR A SUCCESSOR THERETO) OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
(e) If the Depositary is The Depository Trust Company, each
Global Security authenticated and delivered hereunder shall also bear a legend
in substantially the following form, in capital letters and bold-face type:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and
delivered (other than (A) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 306
and (B) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(ii) all such Securities not theretofore delivered to
the Trustee for cancellation have become due and payable, or will
become due and payable at their Stated Maturity within one year, or are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for the
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giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company and, in any case described in this clause (ii),
the Company has deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and interest
(including Additional Payments, if any) to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be, along with a
certificate from a firm of independent public accountants of nationally
recognized standing stating such funds are sufficient to pay principal
and interest on the Securities when and as due;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (ii) of Clause (a) of
this Section , the obligations of the Trustee under Sec-
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tion 402 and the last paragraph of Section 1003 and the obligations of the
Company under Section 1002 shall survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent (other
than the Company acting as its own Paying Agent) as the Trustee may determine,
to the Persons entitled thereto, of the principal and interest for whose payment
such money has been deposited with the Trustee. All moneys deposited with the
Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the
payment of Securities subsequently converted into Common Stock shall be returned
to the Company upon Company Request.
ARTICLE V
REMEDIES
Section 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article XII or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) failure for 30 days to pay interest on any of the
Securities, including any Additional Payments in respect thereof, when due;
provided that a valid extension of an interest payment period will not
constitute a default
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in the payment of interest (including Additional Payments, if any) for this
purpose;
(b) failure to pay principal of any of the Securities when
due, whether at maturity, upon redemption, by declaration or otherwise;
(c) failure by the Company to deliver shares of its Common
Stock upon an election by a holder of Preferred Securities to convert such
Preferred Securities;
(d) failure to observe or perform any other covenant contained
in the Indenture for 90 days after notice to the Company by the Trustee or by
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities;
(e) entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of the property
of the Company, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such other decree
or order unstated and in effect for a period of 60 consecutive days;
(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of all or any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by the Company or to the
entry of a decree or order for relief in
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respect of itself in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
the Company, or the filing by the Company of a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law, or
the consent by the Company to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of all or substantially
all of the property of the Company, or the making by the Company of an
assignment for the benefit of creditors, or the admission by the Company in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such action; or
(g) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the distribution of
Securities to holders of Preferred Securities in liquidation of the Trust upon
the redemption of all of the outstanding Preferred Securities of the Trust upon
the occurrence of a Special Event or (ii) certain mergers, consolidations or
amalgamation, each as permitted by the Declaration.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities and any
other amounts payable hereunder to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal and all accrued interest (including Additional
Payments, if any) and all such other amounts shall become immediately due and
payable.
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At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as provided in this Article, the Holders of a majority in aggregate
principal amount of the Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest (including Additional
Payments, if any) on all Securities,
(ii) the principal of any Securities which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(iii) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(b) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(a) default is made in the payment of any interest (including
Additional Payments, if any) on any Security when such interest becomes due and
payable and such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest (including Additional Payments, if any)
and, to the extent that payment thereof shall be legally enforceable, interest
on any overdue principal and on any overdue interest (including Additional
Payments, if any), at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and
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empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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Section 506. Application of Money Collected.
Subject to Article XII, any money collected by the Trustee pursuant to
this Article shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such money on account of
principal or interest (including Additional Payments, if any), upon presentation
of the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including Additional Payments, if any) on
the Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities
for principal and interest (including Additional Payments, if any),
respectively.
Section 507. Limitation on Suits.
Subject to Section 516, no Holder of any Security shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(b) if the Trust is not the sole holder of the Securities, the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal and
Interest and Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest
(including Additional Payments, if any) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to
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convert such Security in accordance with Article XIII and to institute suit for
the enforcement of any such payment and right to convert, and such rights shall
not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of
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Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
Subject to Section 902 hereof, the Holders of not less than a majority
in principal amount of the Outstanding Securities may on behalf of the Holders
of all the Securities waive any past default hereunder and its consequences,
except a default
(a) in the payment of the principal of or interest (including
Additional Payments, if any) on any Security (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Trustee); or
(b) in respect of a covenant or provision hereof that under
Article IX cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected; provided, however, that if the Securities
are
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held by the Trust or a trustee of the Trust, such waiver shall not be effective
until the holders of a majority in liquidation amount of Trust Securities shall
have consented to such waiver; provided, further, that if the consent of the
Holder of each outstanding Security is required, such waiver shall not be
effective until each holder of the Trust Securities shall have consented to such
waiver.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment against the Company or the Trustee in any suit instituted by
the Company or the Trustee or in any suit for the enforcement of the right to
receive the principal of and interest (including Additional Payments, if any) on
any Security or to convert any Security in accordance with Article XIII.
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the
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Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 516. Enforcement by Holders of Preferred Securities.
Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Company to
pay interest or principal on the Securities on the date such interest or
principal is otherwise payable, the Company acknowledges that, in such event, a
holder of Preferred Securities may institute a Direct Action for payment on or
after the respective due date specified in the Securities. The Company may not
amend this Indenture to remove the foregoing right to bring a Direct Action (or
to change this Section 516) without the prior written consent of all the holders
of Preferred Securities. Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of and interest on the
Securities (including Additional Payments, if any) held by the Trust or the
Property Trustee and the Company shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. The holders of Preferred Securities [, as such,] will not be
able to exercise directly any other remedy available to the Holders of the
Securities.
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ARTICLE VI
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of 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 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 Indenture or indemnity reasonably
satisfactory to the Trustee against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 601.
Section 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
except (i) in the case of a default of the character specified in Section 501(a)
or (b), 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 in good faith determines that the
withholding of such notice is in the interests of the Holders of the Securities
and (ii) in the case of any default of the character specified in Section
501(d), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section 602, the term "default"
means any event which is, or
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after notice or lapse of time or both would become, an Event of Default.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity
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against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
reasonable examination of the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee 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 Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without negligence or
willful misconduct, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The
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Trustee shall not be accountable for the use or application by the Company of
the Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(a) to pay to the Trustee from time to time such compensation
as the Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder;
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses, fees,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
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(c) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(e) or Section 501(f), 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.
The provisions of this Section shall survive the termination of this
Indenture.
Section 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section , the combined capital and surplus of such Person shall be deemed
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to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section , it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 608
after written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
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(ii) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request therefor by
the Company or by any such Holder, or
(iii) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by Board Resolution may remove the
Trustee, or (B) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide
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Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder 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; provided, that on 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. Upon request of any such successor Trustee, the
Company shall execute any and all instruments required to more fully and
certainly vest in and confirm to such successor Trustee all such rights, powers
and trusts.
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.
Section 612. Merger, Conversion, Consolidation or Succession to
Business.
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Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise 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. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in
each year, a list, in such form as the
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Trustee may reasonably require, of the names and addresses of the Holders as of
a date not more than 15 days prior to the delivery thereof, 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;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
Section 703. Reports by Trustee.
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(a) Within 60 days after May 15 of each year, commencing May
15, 1997, the Trustee shall transmit by mail to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
Section 703. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
The Company shall also provide to the Trustee on a timely basis such
information as the Trustee requires to enable the Trustee to prepare and file
any form required to be submitted by the Company with the Internal Revenue
Ser-
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vice and the Holders of the Securities relating to original issue discount, if
any, including, without limitation, Form 1099-OID or any successor form.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company will not consolidate with or merge with or into any other
Person or, directly or indirectly, convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis to any
Person, unless:
(a) [either (i) the Company is the surviving corporation in
any such merger or (ii)] the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance, transfer or
lease, all or substantially all of the properties and assets of the Company on a
consolidated basis (in any such case, the "Successor Person") shall be a
corporation, partnership or trust, shall be organized and validly existing under
the laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, the due and punctual payment of the principal of and interest
(including Additional Payments, if any) on all the Securities and the
performance or observance of every covenant in this Indenture on the part of the
Company to be performed or observed and shall have provided for conversion
rights in accordance with Article XIII;
(b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or a
Subsidiary [(in the case of a
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merger in which the Company is the surviving corporation) or of the Successor
Person or a Subsidiary (in any other case)] as a result of such transaction as
having been incurred by the Company or such Subsidiary [, or by the Successor
Person or such Subsidiary, as the case may be,] at the time of 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 happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
[This Section shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor.]
Section 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company on a consolidated
basis in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
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 Person had been named as the Company herein,
and thereafter the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XIII; or
(d) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture; provided, that such action pursuant to this Clause (d) shall not
adversely affect the interests of the Holders of the Securities or, so long as
any of the Preferred Securities shall remain outstanding, the holders of the
Preferred Securities;
(e) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the Trust
Indenture Act or to comply
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with the requirements of any national securities exchange or quotation system on
which the Securities may be listed; or
(f) to make provision for all matters required pursuant to
Section 314 or otherwise necessary, desirable or appropriate in connection with
the issuance of Securities to holders of Preferred Securities in the event of a
distribution of Securities by the Trust if a Special Event occurs and is
continuing.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(a) extend the Stated Maturity of the principal of, or any
installment of interest (including Additional Payments, if any) on, any
Security, or reduce the principal amount thereof, or reduce the rate or extend
the time for payment of interest thereon, or extend the Extension Period, or
change the place of payment where, or the coin or currency in which, any
Security or interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or adversely
affect the right to convert any Security as provided in Article XIII [(except as
permitted by Section 901(c))], or modify the provisions of
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this Indenture with respect to the subordination of the Securities in any manner
adverse to the Holders,
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(c) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby;
provided that if the Securities are held by the Trust or a trustee of the Trust,
such supplemental indenture shall not be effective until the holders of a
majority in liquidation amount of [Trust Securities] shall have consented to
such supplemental indenture; provided, further, that if the consent of the
Holder of each Outstanding Security is required, such supplemental indenture
shall not be effective until each holder of the Trust Securities of the Trust
shall have consented to such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided that unless such consent shall have
become
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effective by virtue of the requisite percentage having been obtained prior to
the date which is 90 days after such record date, any such consent previously
given shall automatically and without further action by any Holder be cancelled
and of no further effect.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate, each stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. No such supplemental indenture shall directly or
indirectly modify the provisions of Article XII in any manner which might
terminate or impair the rights of the Senior Indebtedness pursuant to such
subordination provisions.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
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Section 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE X
COVENANTS; REPRESENTATIONS AND WARRANTIES
Section 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and interest
on the Securities and Additional Payments, if any, in accordance with the terms
of the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in the United States an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange, where Securities
may be surrendered for conversion, and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. In the
event that a Dissolution Event shall occur and any Securities shall be issued
that are not in global book-entry form, the Company shall maintain such an
office or agency in the Borough of Manhattan, The City of New York. The Company
will give prompt written notice to the Trustee of the location, and
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any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the United States for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
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The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section , that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on
(including Additional Payments, if any) any Security and remaining unclaimed for
two years after such principal or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of any such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof unless an abandoned property law designates another Person, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
Section 1004. Statement by Officers as to Default.
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The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
Section 1005. Limitation on Dividends; Covenants as to the Trust.
(a) The Company covenants that so long as any Securities are
outstanding, if (x) there shall have occurred and be continuing any event that
constitutes or, with the giving of notice or the lapse of time or both, would
constitute an Event of Default, (y) the Company shall be in default with respect
to its payment of any obligations under the Guarantee, or (z) the Company has
exercised its option to defer interest payments on the Securities by extending
the interest payment period and such period, or any extension thereof, shall be
continuing, then the Company (A) shall not declare or pay dividends on, or make
a distribution with respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock (or Common Stock
equivalents) in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents) (provided that
such contract is in effect or such security is outstanding at least 60 days
prior to the commencement of such Extension Period), (ii) purchases of shares of
Common Stock (or Common Stock equivalents) from officers or employ-
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ees of the Company or its subsidiaries upon termination of employment or
retirement not pursuant to any obligation under any contract or security
requiring the Company to purchase shares of Common Stock (or Common Stock
equivalents) (provided that such purchases by the Company upon termination of
employment or retirement shall be made at a price not to exceed the market value
on the date of any such purchase and shall not exceed $7.5 million in the
aggregate for all officers and employees), (iii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, (iv) dividends or distributions of shares of
Common Stock on Common Stock or (v) 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 make any guarantee payments with respect to the foregoing)), (B) shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with or junior to the Securities and (C) shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common Securities of the
Trust; provided, however, that any permitted successor of the Company hereunder
may succeed to the Company's ownership of such Common Securities, (ii) that it
shall use its reasonable efforts, consistent with the terms and provisions of
the Declaration, to cause the Trust (x) to remain a statutory business trust,
except in connection with the distribution of the Securities to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, (y) to otherwise continue to be classified
as a grantor trust for United States federal income tax purposes and (iii) that
it will
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use its reasonable efforts to cause each holder of Trust Securities to be
treated as owning an undivided beneficial interest in the Securities.
Section 1006. Payment of Expenses of the Trust.
In connection with the offering, sale and issuance of the Securities to
the Property Trustee in connection with the sale of the Trust Securities by the
Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including commissions, discounts
and expenses payable pursuant to the Purchase Agreement and compensation of the
Trustee under the Indenture in accordance with the provisions of Section 607 of
the Indenture;
(b) be responsible for and pay for all debts and obligations
(other than with respect to the Trust Securities) of the Trust, pay for all
costs and expenses of the Trust (including, but not limited to, costs and
expenses relating to the organization of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions, discounts and expenses
in connection therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, 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 acquisition,
financing, and disposition of Trust assets); and
(c) 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.
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ARTICLE XI
REDEMPTION OF SECURITIES
Section 1101. Optional Redemption.
In the event that at any time following the Conversion Termination
Date, if any, the number of Preferred Securities Outstanding is less than 10% of
the number of Preferred Securities originally issued (including any Preferred
Securities issued upon exercise of the over-allotment option granted in the
Purchase Agreement) (or, if the Securities are distributed to holders of
Preferred Securities following the occurrence of a Dissolution Event, the
aggregate principal amount of Outstanding Securities is less than 10% of the
aggregate principal amount of Securities purchased by the Trust with the
proceeds from the sale of the Preferred Securities, including any Preferred
Securities issued upon exercise of such over-allotment option), the Company
shall have the right to redeem the Securities, in whole but not in part, upon
not less than 30 nor more than 60 days' notice to the Holders of the Securities,
in cash at a redemption price equal to 100% of the principal amount of the
Securities to be redeemed plus any accrued and unpaid interest (including
Additional Payments, if any) to the Redemption Date.
Section 1102. Tax Event Optional Redemption.
If, after receiving a Dissolution Tax Opinion to the effect that a Tax
Event has occurred, the Regular Trustees shall either (i) have received a
Redemption Tax Opinion or (ii) have been informed by tax counsel rendering the
Dissolution Tax Opinion that a No Recognition Opinion cannot be delivered to the
Trust,
then the Company shall have the right upon not less than 30 days nor more than
60 days notice to the Holders of the
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Securities to redeem the Securities in whole (but not in part) for cash at a
redemption price equal to 100% of the principal amount of the Securities plus
accrued and unpaid interest (including Additional Payments, if any), to the date
of redemption, within 90 days following the occurrence of such Tax Event (the
"90-Day Period"); provided, however, that if, at the time there is available to
the Company or the Trust the opportunity to eliminate within the 90-Day Period,
the Tax Event by taking some ministerial action ("Ministerial Action"), such as
filing a form or making an election, or pursuing some other similar reasonable
measure which, in the sole judgment of the Company, has or will cause no adverse
effect on the Company, the Trust or the holders of the Trust Securities and will
involve no material cost, the Company or the Trust shall pursue such Ministerial
Action or other measure in lieu of redemption, and provided, further, that the
Company shall have no right to redeem the Securities while the Trust is pursuing
any Ministerial Action or other similar measure pursuant to its obligations
under the Declaration.
Section 1103. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by Sections 1101 and 1102, shall be made in accordance with such provisions and
this Article.
Section 1104. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities pursuant to Section
1101 or 1102 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 45 days and no more
than 90 days prior to the Redemption Date fixed by the Company, notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed and provide a copy of the notice of redemption given
to Holders of Securities to be redeemed pursuant to Section 1105.
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Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if relevant, CUSIP number) and shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(d) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 1106. Deposit and Payment of Redemption Price.
Prior to 10:00 a.m. (New York City time) on the Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, plus (except if the Redemption Date shall be an Interest Payment Date)
accrued and unpaid inter-
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est (including Additional Payments, if any) on all of the Securities which are
to be redeemed on that date. Such redemption payment shall be made to the
Holders prior to 12:00 noon (New York City time) on the Redemption Date or such
earlier time as the Company determines.
If any Security called for redemption is converted [prior to the
Conversion Termination Date for the Securities], any money deposited with the
Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the Holder of such
Security or any Predecessor Security to receive interest as provided in the last
paragraph of Section 307 and in Section 1302) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price herein specified plus accrued and unpaid interest (including
Additional Payments, if any) thereon, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest, including Additional Payments, if any) such Securities shall
cease to bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued and unpaid interest (including
Additional Payments, if any) to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at 5:00 p.m. (New York City time) on
the relevant Record Dates according to the terms and the provisions of Section
307.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by the Security.
Section 1108. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking fund.
ARTICLE XII
SUBORDINATION OF SECURITIES
Section 1201. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities by such
Holder's acceptance thereof likewise covenants and agrees, that all Securities
shall be issued subject to the provisions of this Article XII; and each Holder
of a Security, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. The payment by the
Company of the principal of and interest (including Additional Payments, if any)
on all Securities issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all existing and future Senior Indebtedness, whether
outstanding at the date of this Indenture or thereafter incurred; provided
however, that no provision of this Article XII shall prevent the occurrence of
any default or Event of Default hereunder.
Section 1202. Default on Senior Indebtedness.
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 Indebtedness continuing beyond the period of grace, if any, specified in
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the instrument evidencing such Senior Indebtedness, unless and until such
default shall have been cured or waived or shall have ceased to exist, or in the
event that the maturity of any Senior Indebtedness has been accelerated because
of a default, then no payment shall be made by the Company with respect to the
principal of (including redemption payments, if any) or interest on the
Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 1202, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
Section 1203. 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 dissolution, winding up, liquidation or reorganization of the
Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before any payment is made on account of the principal or interest (including
Additional Payments, if any) on the Securities; and upon any such dissolution,
winding up, liquidation or reorganization, any payment by the Company, or
distribution
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of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee would be
entitled, except for the provisions of this Article XII, 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 Holders of the
Securities or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the Holders of Securities or to the Trustee.
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 or the Holders of the Securities before all Senior Indebtedness is paid
in full, or provision is made for such payment in money 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 Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay such Senior Indebtedness in full in money
in accordance with its terms, after giving effect to
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any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
For purposes of this Article XII, 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 reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XII with respect
to the Securities to the payment of all Senior Indebtedness which may at the
time be outstanding; provided, that (i) such Senior Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of all or substantially all
its properties and assets on a consolidated basis to another Person upon the
terms and conditions provided for in Article VIII hereof shall not be deemed a
dissolution, winding up, liquidation or reorganization for the purposes of this
Section 1203 if such other Person shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the conditions stated in
Article VIII hereof. Nothing in Section 1202 or in this Section 1203 shall apply
to claims of, or payments to, the Trustee under or pursuant to Section 607
hereof.
Section 1204. Subrogation.
Subject to the payment in full of all Senior Indebtedness, the rights
of the Holders of the Securities shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of and interest (including
Additional Payments, if any)
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on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article XII, and no payment over pursuant to the provisions of this Article XII,
to or for the benefit of the holders of such Senior Indebtedness by Holders of
the Securities or the Trustee, shall, as between the Company, its creditors
other than holders of Senior Indebtedness, and the Holders of the Securities, be
deemed to be a payment by the Company to or on account of such Senior
Indebtedness. It is understood that the provisions of this Article XII are and
are intended solely for the purposes of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article XII or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of and interest (including
Additional Payments, if any) on the Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of the Securities and creditors of the
Company, as the case may be, other than the holders of Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by this Indenture or
by applicable law upon default under this Indenture, subject to the rights, if
any, under this Article XII of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company, as the case may be,
received upon the exercise of any such remedy.
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Upon any payment or distribution of assets of the Company referred to
in this Article XII, the Trustee, subject to the provisions of Section 603, and
the Holders of the Securities, shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XII.
Section 1205. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article XII and appoints the Trustee as such Holder's attorney-in-fact for
any and all such purposes.
Section 1206. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company which would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article XII. Notwithstanding the provisions
of this Article XII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provision of this Article XII, unless and until a
Respon-
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sible Officer of the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Section 603
hereof, shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section 1206 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of or interest
(including Additional Payments, if any) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 603, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of such Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XII, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the right of
such Person under this Article XII, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
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Section 1207. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XII in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article XII, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior Indebtedness and, subject
to the provisions of Section 603, the Trustee shall not be liable to any holder
of such Senior Indebtedness if it shall pay over or deliver to Holders of
Securities, the Company or any other Person money or assets to which any holder
of such Senior Indebtedness shall be entitled by virtue of this Article XII or
otherwise.
Section 1208. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness 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 Indebtedness may, at any time and from time to time,
without the consent of or
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notice to the Trustee or the Holders of the Securities, without incurring
responsibility to the holders of the Securities and without impairing or
releasing the subordination provided in this Article XII or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
ARTICLE XIII
CONVERSION OF SECURITIES
Section 1301. Conversion Rights.
Subject to and upon compliance with the provisions of this Article, the
Securities are convertible, at the option of the Holder, at any time on or
before 5:00 p.m. (New York City time) on the earlier of (i) the Business Day
immediately preceding the date of repayment of such Securities, whether at
maturity or upon redemption, and (ii) the Conversion Termination Date of the
Securities, into fully paid and nonassessable shares of Common Stock of the
Company at a conversion rate of ____ shares of Common Stock for each $50 in
aggregate principal amount of Securities (equal to a conversion price of $____
per share of Common Stock), subject to adjustment as described in this Article
XIII. A Holder of Securities may convert any portion of the principal amount of
the Securities into that number of fully paid and nonassessable shares of Common
Stock (calculated as
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to each conversion to the nearest 1/100th of a share) obtained by dividing the
principal amount of the Securities to be converted by such conversion price. In
case a Security or portion thereof is called for redemption, such conversion
right in respect of the Security or portion so called shall expire at 5:00 p.m.
(New York City time) on the Business Day immediately preceding the corresponding
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
Section 1302. Conversion Procedures.
(a) To convert all or a portion of the Securities, the Holder
thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the Holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
Holder of Preferred Securities may exercise its right under the Declaration to
convert such Preferred Securities into Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $50 liquidation amount of Securities
for each Preferred Security) and (ii) to immediately convert such Securities, on
behalf of such Holder, into Common Stock of the Company pursuant to this Article
XIII and, if such Preferred Securities are in definitive form, surrendering such
Preferred Securities, duly endorsed or assigned to the Company or in blank. So
long as any Preferred Securities are outstanding, the Trust shall not convert
any Securities except pursuant to a Notice of Conversion delivered to the
Conversion Agent by a holder of Preferred Securities.
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If a Notice of Conversion is delivered on or after the Regular Record
Date and prior to the subsequent Interest Payment Date, the Holder will be
entitled to receive the interest payable on the subsequent Interest Payment Date
on the portion of Securities to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. If a Notice of Conversion is
delivered (i) during an Extension Period and after the Property Trustee has
mailed a Redemption Distribution Notice with respect to the Securities that are
converted, all accrued and unpaid interest on such Securities (including
Compounded Interest, if any) to the most recent Interest Payment Date prior to
the date of such conversion, whether or not such Interest Payment Date falls in
such Extension Period (or, if the Notice of Conversion is delivered (A) during
an Extension Period, (B) on or prior to an Interest Payment Date as to which the
payment of interest is to be deferred as a result of such Extension Period and
(C) after the Regular Record Date for the Interest Payment Date referred to in
clause (B) above, all accrued and unpaid interest on such Securities (including
Compounded Interest, if any) to such Interest Payment Date) shall be distributed
to the Holder who converts such Securities, which payment shall be made on the
redemption date fixed for redemption or (ii) during an Extension Period and
after the date of issuance of the Press Release (as defined in Section 1311(b)
or (c), as the case may be), all accrued and unpaid interest on such Securities
(including Compounded Interest, if any) to the most recent Interest Payment Date
prior to the date of such conversion, whether or not such Interest Payment Date
falls in such Extension Period (or, if the Notice of Conversion is delivered (A)
during an Extension Period, (B) on or prior to an Interest Payment Date as to
which the payment of interest is to be deferred as a result of such Extension
Period and (C) after the Regular Record Date for the Interest Payment Date
referred to in clause (B) above, all accrued and unpaid interest on such
Securities (including Compounded Interest, if any) to such Interest Payment
Date) shall be distributed to the Holder who converts such Securities, which
payment shall be made on the Interest Payment Date fixed for payment of interest
which has been deferred
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as a result of such Extension Period. Except as otherwise set forth above in
this paragraph, in the case of any Security which is converted, interest whose
Stated Maturity is after the date of conversion of such Security shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest
(including Additional Payments, if any) on the Securities being converted, which
shall be deemed to be paid in full. If any Security called for redemption is
converted, any money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security shall (subject
to any right of the Holder of such Security or any Predecessor Security to
receive interest as provided in the last paragraph of Section 307 and this
paragraph) be paid to the Company upon Company Request or, if then held by the
Company, shall be discharged from such trust.
Each conversion shall be deemed to have been effected immediately prior
to 5:00 p.m. (New York City time) on the day on which the Notice of Conversion
was received (the "Conversion Date") by the Conversion Agent from the Holder or
from a holder of the Preferred Securities effecting a conversion thereof
pursuant to its conversion rights under the Declaration, as the case may be. The
Person or Persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock as of the Conversion Date. As promptly as practicable on or
after the Conversion Date, the Company shall issue and deliver at the office of
the Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.
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(b) Subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph of
Section 307 and the second paragraph of Clause (a) of Section 1302, the
Company's delivery upon conversion of the fixed number of shares of Common Stock
into which the Securities are convertible (together with the cash payment, if
any, in lieu of fractional shares) shall be deemed to satisfy the Company's
obligation to pay the principal amount at Maturity of the portion of Securities
so converted and any unpaid interest (including Additional Payments, if any)
accrued on such Securities at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the last reported sale price of such fractional interest on the date on which
the Securities or Preferred Securities, as the case may be, were duly
surrendered to the Conversion Agent for conversion, or, if such day is not a
Trading Day, on the next Trading Day, and the Conversion Agent in turn will make
such payment, if any, to the Holder of the Securities or the holder of the
Preferred Securities so converted.
(d) In the event of the conversion of any Security in part
only, a new Security or Securities for the unconverted portion thereof will be
issued in the name of the Holder thereof upon the cancellation thereof in
accordance with Section 305.
(e) In effecting the conversion transactions described in this
Section , the Conversion Agent is acting as agent of the holders of Preferred
Securities (in the exchange of Preferred Securities for Securities) and as agent
of the Holders of Securities (in the conversion of Securities into Common
Stock), as the case may be, directing it to effect such conversion transactions.
The Conversion Agent is hereby authorized (i) to exchange Securities held by the
Trust from time to time for Preferred Securities in connec-
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tion with the conversion of such Preferred Securities in accordance with this
Article XIII and (ii) to convert all or a portion of the Securities into Common
Stock and thereupon to deliver such shares of Common Stock in accordance with
the provisions of this Article XIII and to deliver to the Trust a new Security
or Securities for any resulting unconverted principal amount.
Section 1303. Conversion Price Adjustments.
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the conversion price in
effect immediately prior to such action shall be adjusted so that the Holder of
any Securities thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company which he would have
owned immediately following such action had such Securities been converted
immediately prior thereto. An adjustment made pursuant to this Section 1303(a)
shall become effective immediately after the record date in the case of a
dividend or other distribution and shall become effective immediately after the
effective date in case of a subdivision, combination or reclassification (or
immediately after the record date if a record date shall have been established
for such event). If, as a result of an adjustment made pursuant to this Section
1303(a), the Holder of any Security thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes or series of capital
stock of the Company, the Board of Directors (whose determination shall be
conclusive and shall be described in a Board Resolution filed with the Trustee)
shall determine the alloca-
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tion of the adjusted conversion price between or among shares of such classes or
series of capital stock.
(b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its Common Stock
[provide for Rights] entitling them (for a period expiring within 45 days after
the record date mentioned in this Section 1303(b)) to subscribe for or purchase
shares of Common Stock at a price per share less than the current market price
per share of Common Stock (as determined pursuant to 1303(f) below) on such
record date, the conversion price for the Securities shall be adjusted so that
the same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the date of issuance of such rights or warrants by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such current market
price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. For the purposes of this subsection, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not issue any rights or warrants in respect of
shares of Common Stock held in the treasury of the Company. In case any rights
or warrants referred to in this subsection in respect of which an adjustment
shall have been made shall expire unexercised within 45 days after the same
shall have been distributed or issued by the Company, the conversion price shall
be readjusted at the time of such expiration to the conversion price that would
have been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
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(c) Subject to the last sentence of this Section 1303(c), in
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness, shares of any class or series of
capital stock, cash or assets (including securities, but excluding any rights or
warrants referred to in Section 1303(b), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in Section
1303(a)), the conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect immediately prior
to the effectiveness of the conversion price reduction contemplated by Section
1303(c) by a fraction of which the numerator shall be the current market price
per share (determined as provided in Section 1303(f)) of the Common Stock on the
date fixed for the payment of such distribution (the "Reference Date") less the
fair market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of Common Stock and the denominator shall be such current market
price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the Reference
Date. In the event that such dividend or distribution is not so paid or made,
the conversion price shall again be adjusted to be the conversion price which
would then be in effect if such dividend or distribution had not occurred. If
the Board of Directors determines the fair market value of any distribution for
purposes of this Section 1303(c) by reference to the actual or when issued
trading market for any securities comprising such distribution, it must in doing
so consider the prices in such market over the same period used in computing the
current market price per share of Common Stock (determined as provided in
Section 1303(f)). For purposes of this Section 1303(c), any dividend or
distribution that includes shares of Common Stock or rights or warrants to
subscribe
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for or purchase shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, shares of capital
stock, cash or assets other than such shares of Common Stock or such rights or
warrants (making any conversion price reduction required by this Section
1303(c)) immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (making any further conversion price
reduction required by Section 1303(a) or 1303(b)), except (A) the Reference Date
of such dividend or distribution as defined in this 1303(c) shall be substituted
as (a) "the record date in the case of a dividend or other distribution," and
(b) "the record date for the determination of stockholders entitled to receive
such rights or warrants" and (c) "the date fixed for such determination" within
the meaning of Sections 1303(a) and 1303(b) and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed outstanding for
purposes of computing any adjustment of the conversion price in Section 1303(a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding all regular cash
dividends, if the annualized amount thereof per share of Common Stock does not
exceed 15% of the current market price per share determined as provided in
Section 1303(f) of the Common Stock on the Trading Day immediately preceding the
date of declaration of such dividend), the conversion price shall be reduced so
that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the conversion price
reduction contemplated by this Section 1303(d) by a fraction of which the
numerator shall be the current market price per share (determined as provided in
Section 1303(f)) of the Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed and not excluded as provided
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following the
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date fixed for the payment of such distribution; provided, however, that in the
event the portion of the cash so distributed applicable to one share of Common
Stock is equal to or greater than the current market price per share (as defined
in Section 1303(f)) of the Common Stock on the record date mentioned above, in
lieu of the foregoing adjustment, adequate provision shall be made so that each
Holder of shares of Securities shall have the right to receive upon conversion
the amount of cash such Holder would have received had such Holder converted
each share of the Securities immediately prior to the record date for the
distribution of the cash. In the event that such dividend or distribution is not
so paid or made, the conversion price shall again be adjusted to be the
conversion price which would then be in effect if such record date had not been
fixed.
(e) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Company's Common Stock shall expire and such tender or exchange
offer shall involve the payment by the Company or such Subsidiary of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds 110% of
the current market price per share (determined as provided in Section 1303(f))
of the Common Stock on the Trading Day next succeeding the Expiration Time, the
conversion price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the effectiveness of the conversion price reduction contemplated by this
Section 1303(e) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
at the Expiration Time multiplied by the current market price per share
(determined as provided
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in Section 1303(f)) of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the current market price per share
(determined as provided in Section 1303(f)) of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time.
(f) For the purpose of any computation under Section 1303(b),
1303(c), 1303(d) or 1303(e), the current market price per share of Common Stock
on any date in question shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the Company commencing
not more than 20 Trading Days before, and ending not later than, the earlier of
the day in question or, if applicable, the day before the "ex" date with respect
to the issuance or distribution requiring such computation; provided, however,
that if another event occurs that would require an adjustment pursuant to
Section 1303(a) through (e), inclusive, the Board of Directors may make such
adjustments to the Closing Prices during such five Trading Day period as it
deems appropriate to effectuate the intent of the adjustments in this Section
1303, in which case any such determination by the Board of Directors shall be
set forth in a Board Resolution and shall be conclusive. For purposes of this
paragraph, the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the NYSE or on such successor securities exchange as the Common Stock may be
listed or in the relevant market from which the Closing Prices were obtained
without the right to receive
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such issuance or distribution, and (ii) when used with respect to any tender or
exchange offer, means the first date on which the Common Stock trades regular
way on such securities exchange or in such market after the Expiration Time of
such offer.
(g) The Company may make such reductions in the conversion
price, in addition to those required by Sections 1303 (a) through (e), as it
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. The Company from time to time may reduce the
conversion price by any amount for any period of time if the period is at least
20 days, the reduction is irrevocable during the period, and the Board of
Directors of the Company shall have made a determination that such reduction
would be in the best interest of the Company, which determination shall be
conclusive. Whenever the conversion price is reduced pursuant to the preceding
sentence, the Company shall mail to holders of record of the Securities a notice
of the reduction at least 15 days prior to the date the reduced conversion price
takes effect, and such notice shall state the reduced conversion price and the
period it will be in effect.
(h) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the conversion price; provided, however, that any adjustments which by reason of
this Section 1303(h) are not required to be made shall be carried forward and
taken into account in determining whether any subsequent adjustment shall be
required.
(i) If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
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that has the highest absolute value to the Holder of the Securities.
Section 1304. Reclassification, Consolidation, Merger or Sale of
Assets.
In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale, transfer or lease of all or substantially all of the
assets of the Company or (d) any compulsory share exchange) pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms of
such transaction whereby the Holder of each Security then outstanding shall have
the right thereafter to convert such Security only into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock of the Company
into which such Security could have been converted immediately prior to such
transaction.
The Company or the Person formed by such consolidation or resulting
from such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be prac-
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ticable to the adjustments provided for in this Article XIII. The above
provisions shall similarly apply to successive transactions of the foregoing
type.
Section 1305. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted conversion price and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Preferred Securities and the Securities; and
(b) notice stating the conversion price has been adjusted and
setting forth the adjusted conversion price shall as soon as practicable be
mailed by the Company to all record holders of Preferred Securities and the
Securities at their last addresses as they appear upon the stock transfer books
of the Company and the Trust.
Section 1306. Prior Notice of Certain Events.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 1303(c) or 1303(d), or (ii) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 1303(e);
(b) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to sub-
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scribe for or purchase any shares of stock of any class or series or of any
other rights or warrants;
(c) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall (1) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the stock transfer books the Trust or (2)
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least 15 days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to
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mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
Section 1307. Certain Defined Terms.
The following definitions shall apply to terms used in this Article
XIII:
(a) "Closing Price" of any Common Stock on any day shall mean
the last reported sale price, regular way, on such day or, if no sale takes
place on such day, the average of the reported closing bid and asked prices on
such day, regular way, of such Common Stock, in either case as reported on the
NYSE Composite Tape or, if the Common Stock is not listed or admitted to trading
on the NYSE, on the principal national securities exchange on which such Common
Stock is listed or admitted to trading, or, if not listed or admitted to trading
on a national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. or, if such Common Stock is not quoted
or admitted to trading on such quotation system, on the principal quotation
system on which such Common Stock is listed or admitted to trading or quoted,
or, if not listed or admitted to trading or quoted on any national securities
exchange or quotation system, the average of the closing bid and asked prices of
such Common Stock in the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or, if not so available in such manner, as furnished
by any NYSE member firm selected from time to time by the Board of Directors for
that purpose or, if not so available in such manner, as otherwise determined in
good faith by the Board of Directors.
(b) "Trading Day" shall mean a day on which securities are
traded on the national securities exchange or quotation system used to determine
the Closing Price.
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Section 1308. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan, and the issuance
of any shares of Common Stock or options or rights to purchase such shares
pursuant to any employee benefit plan or program of the Company or pursuant to
any option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Securities were first issued, shall not be deemed
to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies. There shall also be no adjustment of the conversion
price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically described in this
Article XIII.
Section 1309. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section 1303(c) or 1303(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 1303(c)), the Holder of the Securities, upon the
conversion thereof subsequent to 5:00 p.m. (New York City time) on the date
fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of Common Stock into which the Securities are converted, the portion of
the shares of Common Stock, rights, warrants, evidences of indebtedness, shares
of capital stock, cash and assets so distributed applicable to one share of
Common Stock; provid-
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ed, however, that, at the election of the Company (whose election shall be
evidenced by a resolution of the Board of Directors) with respect to all Holders
so converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of Securities described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the Holder of Securities so converted is entitled
to receive in accordance with the immediately preceding sentence, the Company
may elect (such election to be evidenced by a resolution of the Board of
Directors) to distribute to such Holder a due bill for the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash or assets to which such Holder is so entitled, provided, that such due bill
(i) meets any applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then traded and (ii)
requires payment or delivery of such shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets no later than
the date of payment or delivery thereof to holders of shares of Common Stock
receiving such distribution.
Section 1310. Trustee Not Responsible for Determining Conversion Price
or Adjustments.
Neither the Trustee nor any Conversion Agent shall at any time be under
any duty or responsibility to any Holder of any Security to determine whether
any facts exist which may require any adjustment of the conversion price, or
with respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Trustee nor any
Conversion Agent shall be accountable with respect to the validity or
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value (or the kind of account) of any shares of Common Stock or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Security; and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Security for the purpose of conversion, or, except as expressly herein provided,
to comply with any of the covenants of the Company contained in Article Ten or
this Article XIII.
Section 1311. Expiration of Conversion Rights.
(a) Right of Company to Terminate Conversion Privilege. On and
after __________ ___, 1999, the Company may, at its option, cause the conversion
rights of Holders of Securities to terminate if (i) the Company is then current
in the payment of interest on the Securities (including Additional Payments, if
any) (except to the extent that the payment of interest may have been deferred
as a result of an Extension Period) and (ii) for at least 20 Trading Days within
any period of 30 consecutive Trading Days, including the last Trading Day of
such period, the Closing Price of the Common Stock shall have exceeded 120% of
the conversion price of the Securities then in effect.
(b) Exercise of Option Prior to a Dissolution Event
Distribution. To exercise its conversion expiration option prior the
distribution of Securities from the Trust to the holders of Preferred Securities
upon the occurrence of a Dissolution Event (a "Dissolution Event Distribution"),
the Company shall give written notice to the Trust directing the Trust to issue
the Press Release referred to in paragraph 5(h) of Annex I of the Declaration,
to cause the conversion rights of the holders of Preferred Securities to expire.
The Company shall also furnish a copy of such notice to the Trustee (and the
Conversion Agent if the
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Trustee is not then serving as the Conversion Agent). If the Trust fails to
issue such press release within two Business Days after its receipt of such
notice, the Company may, on behalf of the Trust, issue such press release in
accordance with the provisions of paragraph 5(h) of Annex I of the Declaration.
The conversion rights of the Holders of the Securities shall terminate
simultaneously with the termination of the conversion rights of the holders of
the Preferred Securities.
(c) Exercise of Option After a Dissolution Event Distribution.
To exercise its conversion expiration option after a Dissolution Event
Distribution, the Company shall issue a press release for publication on the Dow
Jones News Service or on a comparable news service announcing the Conversion
Termination Date of the Securities. Such press release must be issued prior to
the opening of business on the second Trading Day after a period in which the
conditions in Section 1311(a) have been met, but in no event prior to __________
___, 1999. Such press release shall state that the Company has elected to
exercise its right to terminate the conversion privilege, specify the Conversion
Termination Date of the Securities (as determined in the manner set forth below)
and provide the conversion price and the Closing Price of Common Stock, in each
case as of the close of business on the Trading Day next preceding the date of
the press release. Additionally, the Company shall cause a notice of the
expiration of conversion rights (a "Notice of Conversion Termination") to be
given by first-class mail to the Holders of Securities, the Trustee (and the
Conversion Agent if the Trustee is not then serving as the Conversion Agent) not
more than four Business Days after the Company issues the press release. The
Notice of Conversion Termination shall state, as appropriate: (i) the Conversion
Termination Date of the Securities; (ii) the conversion price of the Securities
and the Closing Price of the Common Stock, in each case as of the close of
business on the Trading Day next preceding the date of the Notice of Conversion
Termination; (iii) the place or places at which a conversion notice with respect
to Securities may be given to
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the Conversion Agent in accordance with Section 1302 prior to the Conversion
Termination Date of the Securities; and (iv) such other information or
instructions as the Company deems necessary or advisable to enable a Holder to
exercise its conversion right hereunder. Notice of Conversion Termination shall
be deemed to have been given on the day such notice is first mailed by
first-class mail, postage prepaid, to each Holder of Securities at the address
of the Holder appearing in the Security Register (whether or not the Holder
receives the Notice of Conversion Termination). No defect in the Notice of
Conversion Termination or in the mailing thereof with respect to any Securities
shall affect the validity of the Company's exercise of its conversion expiration
option if the press release referred to above shall have been issued.
(d) Certain Definitions. The term "Conversion Termination
Date" has the meaning assigned to such term in paragraph 5(h) of Annex I of the
Declaration. The "Conversion Termination Date of the Securities" shall be the
close of business on the Business Day selected by the Company which is not less
than 30 nor more than 60 calendar days after (1) the date on which the Trust
issues the press release referred to in Section 1311 (b) announcing the Trust's
intention to terminate the conversion rights of the holders of the Preferred
Securities or (2) the date the Company issues the press release required by
Section 1311 (c) announcing its intention to terminate the conversion rights of
the Holders of the Securities, as the case may be. If the Company does not
exercise its conversion expiration option, the Conversion Termination Date of
the Securities (i) with respect to any principal amount of Securities which is
called for redemption shall be the close of business on the Business Day prior
to the scheduled date for such redemption and (ii) in any other case shall be
the close of business on the Business Day prior to the Maturity Date of the
Securities. As of the close of business on the earlier of the Conversion
Termination Date or the Conversion Termination Date of the Securities, the
Securities shall be deemed to be non-convertible securities.
- 110 -
<PAGE> 121
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 1401. No Recourse.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security, 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 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 Securities 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 Securities 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 Securities.
- 111 -
<PAGE> 122
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
- 112 -
<PAGE> 123
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
THE FINOVA GROUP INC.
By: __________________________________
Name:
Title:
FLEET NATIONAL BANK,
as Trustee
By: __________________________________
Name:
Title:
- 113 -
<PAGE> 124
EXHIBIT A
FORM OF SECURITY
[FACE OF SECURITY]
[Include if Security is in global form: THIS SECURITY IS A GLOBAL
CERTIFICATE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.]
[Include if Security is in global form and The Depository Trust Company
is the Depositary: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE
TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
<PAGE> 125
THE FINOVA GROUP INC.
__% Convertible Subordinated Debenture Due 2016
No._________ $___________
CUSIP No. ____________
THE FINOVA GROUP INC., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ___________, or registered assigns, the
principal sum of __________________ Dollars ($___________) on __________ ___,
2016 and to pay interest thereon (including Additional Payments, if any) from
November __, 1996 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
quarterly (subject to deferral as set forth in the Indenture), in arrears, on
March 31, June 30, September 30 and December 31 (each an "Interest Payment
Date") of each year, commencing __________ ___, ____ until the principal thereof
is paid or made available for payment, and they shall be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at 5:00 p.m. (New York City time) on the regular record date for such interest
installment, which shall be the Business Day next preceding such Interest
Payment Date (each, a "Regular Record Date").
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by manual signature, this Security shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
A-2
<PAGE> 126
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its corporate seal.
Dated:
THE FINOVA GROUP INC.
By:________________________
Name:
Title:
[Seal]
Attest:
_______________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
FLEET NATIONAL BANK,
as Trustee
By:________________________
Authorized Signatory
A-3
<PAGE> 127
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its ___% Convertible Subordinated Debenture Due 2016
(herein called the "Securities"), in aggregate principal amount of $103,092,800
(or up to $118,556,750 if the over-allotment option is exercised by the Trust in
accordance with the terms and provisions of the Purchase Agreement), issued and
to be issued under an Indenture, dated as of December ___, 1996 (as the same may
be amended or supplemented from time to time, the "Indenture"), between the
Company and Fleet National Bank, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) ("TIA") as in effect on the date of the Indenture. The
Securities are subject to, and qualified by, all such terms, certain of which
are summarized hereon, and holders are referred to the Indenture and the TIA for
a statement of such terms. No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest (which term, as used herein, includes all Additional Interest and, to
the extent permitted by applicable law, Compounded Interest, if any) on this
Security at the times, place and rate, and in the coin or currency, herein and
in the Indenture prescribed or to convert this Security as provided in the
Indenture. All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture.
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<PAGE> 128
(a) Interest. Interest on this Security will accrue at the
rate and will be payable as provided on the face of this Security and in the
Indenture. To the extent permitted by applicable law, interest will compound
quarterly and will accrue at the rate of ___% per annum on any interest
installment in arrears for more than one quarter or during an Extension Period
as described below.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed in such a 30-day month. In the event
that any Interest Payment Date is not a Business Day, then payment of interest
payable on such date will 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 such Interest Payment Date.
If at any time while the Property Trustee is the Holder of any
Securities, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company shall pay as additional interest
("Additional Interest") on the Securities held by the Property Trustee, such
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying any such taxes, duties,
assessments or other governmental charges will be not less than the amounts the
Trust and the Property Trustee would have received had no such taxes, duties,
assessments or governmental charges been imposed.
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<PAGE> 129
The principal of and interest on the Securities shall be payable, and
the Securities may be surrendered for conversion, at the office or agency of the
Company in the United States maintained for such purpose and at any other office
or agency maintained by the Company for such purpose in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or by wire transfer to an account appropriately designated by the
Holder entitled thereto.
(b) Option to Extend Interest Payment Period. On the terms and
subject to the conditions set forth in the Indenture, the Company shall have the
right at any time during the term of the Securities to defer interest payments
(including Additional Payments) from time to time by extending the interest
payment period for successive periods (each, an "Extension Period") not
exceeding 20 consecutive quarters for each such Extension Period; provided, no
Extension Period may extend beyond the stated maturity date of the Securities.
At the end of each Extension Period, the Company shall pay all interest then
accrued and unpaid (including Additional Interest, if any) together with
interest thereon compounded quarterly at the rate of interest borne by the
Securities to the extent permitted by applicable law ("Compounded Interest");
provided, that during any Extension Period, the Company shall be required to
comply with certain covenants set forth in the Indenture. Prior to the
termination of any such Extension Period, the Company 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 quarters
or extend beyond the stated maturity date of the Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above require-
A-6
<PAGE> 130
ments. No interest during an Extension Period shall be due and payable.
(c) Paying Agent and Security Registrar. The Trustee will act
as initial Paying Agent, Security Registrar and Conversion Agent. The Company
may change any Paying Agent, Security Registrar, co-registrar or Conversion
Agent without prior notice. The Company or any of its Affiliates may act in any
such capacity.
(d) Redemption. The Securities are redeemable at the option of
the Company, in whole but not in part, at the times and subject to the terms and
conditions set forth in the Indenture, at a redemption price of 100% of the
principal amount thereof, together with accrued unpaid interest thereon
(including Additional Payments, if any, to the extent permitted by applicable
law) to the date of redemption; provided, however, that installments of interest
whose Stated Maturity is on or prior to the date fixed for redemption shall be
payable (together with Additional Payments, if any, to the extent permitted by
applicable law) to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at 5:00 p.m. (New York City time) on the relevant
regular Record Dates according to the terms and provisions of the Securities and
the Indenture.
(e) Sinking Fund. The Securities are not entitled to the
benefit of any sinking fund.
(f) Subordination. The Securities are unsecured general
obligations of the Company. The payment of the principal of and interest
(including Additional Payments, if any) on all Securities is subordinated and
junior in right of payment to the prior payment in full of all existing and
future Senior Indebtedness, whether outstanding at the date of the Indenture or
thereafter incurred. Each holder, by accepting a Security, agrees to such
subordination and authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to
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<PAGE> 131
effectuate the subordination so provided and appoints the Trustee as its
attorney-in-fact for such purpose.
(g) Conversion. On the terms and subject to the conditions set
forth in the Indenture, the Holder of any Security has the right, exercisable at
any time on or before 5:00 p.m. (New York City time) on the earlier of (i) the
Business Day immediately preceding the date of repayment of such Security,
whether at maturity or upon redemption, and (ii) the Conversion Termination Date
of the Securities, if any, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $50) into fully paid and
nonassessable shares of Common Stock of the Company at a conversion rate of ___
shares of Common Stock for each $50 in aggregate principal amount of Securities
(equal to a conversion price of $___ per share of Common Stock), subject to
adjustment under certain circumstances. The number of shares issuable upon
conversion of a Security is determined by dividing the principal amount of the
Security converted by the conversion price in effect on the date of conversion.
No fractional shares will be issued upon conversion but a cash adjustment will
be made for any fractional interest. The outstanding principal amount of any
Security shall be reduced by the portion of the principal amount thereof
converted into shares of Common Stock. The conversion privilege and the
conversion price are subject to adjustment as provided in the Indenture, to
which reference is hereby made. Under certain circumstances specified in the
Indenture, Holders converting Securities may be entitled to accrued and unpaid
interest (including Additional Payments, if any, to the extent permitted by
applicable law) on such Securities.
(h) The conversion rights of the Holders of Securities are
subject to termination at the option of the Company on and after __________ ___,
1999, subject to and upon the satisfaction of certain conditions set forth in
the Indenture.
A-8
<PAGE> 132
(i) Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company maintained for such purpose, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $50 and integral multiples thereof. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Prior to due presentment of this
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. In the event of conversion of this Security
in part only, a new Security or Securities for the unconverted portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
(j) Persons Deemed Owners. Except as provided in the
Indenture, the registered Holder of a Security may be treated as its owner for
all purposes.
(k) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after it has become due, the Trustee
and the Paying Agent shall pay the money back to the Company at its written
request. After that, holders of Securities entitled to the
A-9
<PAGE> 133
money must look to the Company for payment unless an abandoned property law
designates another Person and all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
(l) Defaults and Remedies. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in aggregate principal amount of the then Outstanding Securities by notice to
the Company and the Trustee may declare all the Securities to be due and payable
immediately.
The Holders of a majority in principal amount of the Securities then
Outstanding by written notice to the Company and the Trustee may rescind an
acceleration and its consequences upon the terms and subject to the conditions
set forth in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then Outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Company must furnish annually
compliance certificates to the Trustee.
(m) Amendments, Supplements and Waivers. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of
the Holders of the Securities under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding
A-10
<PAGE> 134
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
(n) Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate of the
Company with the same rights it would have, if it were not Trustee, subject to
certain limitations provided for in the Indenture and in the TIA. Any Agent may
do the same with like rights.
(o) No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
(p) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
A-11
<PAGE> 135
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him or her.
Date: ___________________________
________________________________________
(Sign exactly as your name appears on the other side of this Security)
A-12
<PAGE> 136
Signature Guarantee:(1) _________________________
- ---------------------------------
(1) (Signature must be guaranteed by an "eligible guarantor institution",
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Security Registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Security Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-13
<PAGE> 137
NOTICE OF CONVERSION
To: The FINOVA Group Inc.
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into Common
Stock (the "Common Stock") of The FINOVA Group Inc. (the "Company") in
accordance with the terms of the Indenture referred to in the Security, between
the Company and Fleet National Bank, as Trustee, and directs that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date: ________________
Principal Amount of Securities to be converted ($50 or integral multiples
thereof): ______________
If a name or names other than the undersigned, please indicate in the
spaces below the name or names in which the shares of Common Stock are
to be issued, along with the address or addresses of such person or
persons.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_____________________________________________
(Sign exactly as your name appears on the the Security) (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number.
_____________________________________________
_____________________________________________
_____________________________________________
A-14
<PAGE> 138
Signature Guarantee:(1) _______________________
- -----------------
(1) (Signature must be guaranteed by an "eligible guarantor institution",
that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Security Registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Security Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-15
<PAGE> 1
EXHIBIT 4.10
[FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT]
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
The FINOVA Group Inc.
Dated as of December __, 1996
====================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation...................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.................... 6
SECTION 2.2. List of Holders of Securities....................... 6
SECTION 2.3. Reports by the Preferred Guarantee
Trustee.......................................... 7
SECTION 2.4. Periodic Reports to the Preferred
Guarantee Trustee................................ 7
SECTION 2.5. Evidence of Compliance with Conditions
Precedent........................................ 8
SECTION 2.6. Event of Default; Waiver............................ 8
SECTION 2.7. Event of Default; Notice............................ 8
SECTION 2.8. Conflicting Interests............................... 9
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred
Guarantee Trustee................................ 9
SECTION 3.2. Certain Rights of the Preferred Guarantee
Trustee........................................... 12
SECTION 3.3. Not Responsible for Recitals or Issuance
of Guarantee...................................... 15
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility............ 15
SECTION 4.2. Appointment, Removal and Resignation
of Preferred Guarantee Trustees.................. 16
i
<PAGE> 3
Page
----
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee........................................... 17
SECTION 5.2. Subordination....................................... 17
SECTION 5.3. Waiver of Notice and Demand......................... 18
SECTION 5.4. Obligations Not Affected............................ 18
SECTION 5.5. Rights of Holders................................... 19
SECTION 5.6. Guarantee of Payment................................ 20
SECTION 5.7. Subrogation......................................... 20
SECTION 5.8. Independent Obligations............................. 20
SECTION 5.9. Conversion.......................................... 21
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions.......................... 21
SECTION 6.2. Ranking............................................. 22
ARTICLE VII
TERMINATION
SECTION 7.1. Termination......................................... 23
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation......................................... 23
SECTION 8.2. Indemnification..................................... 24
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns.............................. 24
SECTION 9.2. Amendments.......................................... 25
SECTION 9.3. Notices............................................. 25
SECTION 9.4. Benefit............................................. 26
SECTION 9.5. Governing Law....................................... 26
ii
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of December __, 1996, is executed and delivered
by The FINOVA Group Inc., a Delaware corporation (the "Guarantor"), and Fleet
National Bank, a national banking association, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of FINOVA Finance
Trust, a Delaware statutory business trust (the "Trust");
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of December __, 1996, among the trustees of
the Trust named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof 2,000,000 preferred securities, having an aggregate
liquidation amount of $100,000,000 (plus up to an additional 300,000 preferred
securities, having an aggregate liquidation amount of $15,000,000 to cover
over-allotments), designated the __% Convertible Trust Originated Preferred
Securities(SM) (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Preferred Securities Guarantee, to
guarantee the obligations of the Trust to the Holders on the terms and
conditions set forth herein;
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Preferred Securities Guarantee for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Indenture (as defined herein)), has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments (as defined in the Common Securities Guarantee) under the Common
Securities Guarantee shall be subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments (as
<PAGE> 5
defined herein) under this Preferred Securities Guarantee; and
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation.
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Preferred
Securities Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as
of the date hereof shall have the same meaning when used in this Preferred
Securities Guarantee unless otherwise defined in this Preferred Securities
Guarantee;
(c) a term defined anywhere in this Preferred
Securities Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities
Guarantee" or "this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities
Guarantee to Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture
Act has the same meaning when used in this Preferred Securities Guarantee,
unless otherwise defined in this Preferred Securities Guarantee or unless the
context otherwise requires;
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(g) a reference to the singular includes the plural
and vice versa;
(h) a reference to any Person shall include its
successors and assigns;
(i) a reference to any agreement or instrument shall
mean such agreement or instrument, as supplemented, modified, amended, or
amended and restated, and in effect from time to time; and
(j) a reference to any statute, law, rule or
regulation, shall include any amendments thereto applicable to the relevant
Person, and any successor statute, law, rule or regulation.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Business Day" means any day other than a day on which banking
institutions in New York, New York or in Wilmington, Delaware are authorized or
required by any applicable law or executive order to close.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Agreement is located at
_________________________________________, Attention: Corporate Trust
Department.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debentures" means the __% Convertible Subordinated Debentures
due _______ __, 2016 of the Guarantor held by the Property Trustee (as defined
in the Declaration).
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"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Trust: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
the Preferred Securities to the extent the Trust has funds available therefor,
(ii) the redemption price, with respect to any Preferred Securities called for
redemption by the Trust (the "Redemption Price"), to the extent the Trust has
funds available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Debentures to the Holders or the redemption of all the Preferred
Securities (as provided in the Declaration)), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Preferred
Securities to the date of payment to the extent the Trust has funds available
therefor and (b) the amount of assets of the Trust remaining available for
distribution to Holders upon the liquidation of the Trust (in either case, the
"Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and
records of the Trust 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 Preferred Guarantee Trustee,
any Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture, dated as of December __,
1996, between the Guarantor (the "Convertible Debenture Issuer") and the
Indenture Trustee, as trustee, and any indenture supplemented thereto, pursuant
to which the Debentures are to be issued to the Property Trustee of the Trust.
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"Indenture Trustee" means the Person acting as trustee under
the Indenture, initially Fleet National Bank, a national banking association.
"Majority in liquidation amount of the Preferred Securities"
means, except as provided by the Trust Indenture Act, a vote by Holder(s) of
Preferred Securities, voting separately as a class, of more than 50% of the
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the
Officers' Certificate has read the covenant or condition and the definition
relating thereto;
(b) 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
(c) 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 Guarantee Trustee" means Fleet National Bank, a
national banking association, until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment pursuant to the terms
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of this Preferred Securities Guarantee and thereafter means each such Successor
Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee, including any vice president, any assistant vice
president, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Preferred Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.
(b) If and to the extent that any provision of this
Preferred Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.2. List of Holders of Securities.
(a) The Guarantor shall provide the Preferred
Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee
may reasonably require,
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of the names and addresses of the Holders ("List of Holders") as of such date,
(i) within one Business Day after February 15 and August 15 of each year, 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 15 days before such List
of Holders is given to the Preferred Guarantee Trustee, provided that the
Guarantor shall not be obligated to provide such List of Holders at any time (x)
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor or (y) the Preferred
Securities are represented by one or more Global Securities (as defined in the
Indenture). The Preferred Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with
its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3. Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4. Periodic Reports to the Preferred Guarantee
Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee
such documents, reports and information as required by Section 314, if any, and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
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SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Preferred Securities Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6. Event of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of all 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 Preferred Securities Guarantee,
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 2.7. Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90
days after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders, notices of all Events of Default actually known
to a Responsible Officer, unless such defaults have been cured before the giving
of such notice; provided that the Preferred Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Preferred Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Preferred Guarantee
Trustee shall have received written notice, or of which a Responsible Officer
charged with the administration of the Declaration shall have obtained actual
knowledge.
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SECTION 2.8. Conflicting Interests.
The Declaration shall be deemed to be specifically described
in this Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred Guarantee
Trustee.
(a) This Preferred Securities Guarantee shall be held
by the Preferred Guarantee Trustee for the benefit of the Holders, and the
Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.5(b) or to a Successor Preferred Guarantee Trustee on acceptance by
such Successor Preferred Guarantee Trustee of its appointment to act as
Successor Preferred Guarantee Trustee. The right, title and interest of the
Preferred Guarantee Trustee shall automatically vest in any Successor Preferred
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a
Responsible Officer has occurred and is continuing, the Preferred Guarantee
Trustee shall enforce this Preferred Securities Guarantee for the benefit of the
Holders.
(c) The Preferred Guarantee Trustee, before the
occurrence of any 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 Preferred Securities Guarantee, and no implied
covenants shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.6) and is actually known to a
Responsible
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Officer, the Preferred Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Securities Guarantee, 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.
(d) No provision of this Preferred Securities
Guarantee shall be construed to relieve the Preferred 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 any 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
Preferred Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the Preferred
Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or obligations
shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part
of the Preferred Guarantee Trustee, the Preferred 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 Preferred Guarantee Trustee and conforming to
the requirements of this Preferred Securities Guarantee; but in the
case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;
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(ii) the Preferred Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Preferred Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Preferred 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 not less
than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding for
any remedy available to the Preferred Guarantee Trustee, or exercising
any trust or power conferred upon the Preferred Guarantee Trustee under
this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities
Guarantee shall require the Preferred 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 the Preferred Guarantee Trustee 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
Preferred Securities Guarantee or indemnity, reasonably satisfactory to
the Preferred Guarantee Trustee, against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of the Preferred Guarantee
Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed
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by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(ii) Any direction or act of the Guarantor
contemplated by this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this
Preferred Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with
counsel of its selection, 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 accordance with such
advice or opinion. Such counsel may be counsel to the Guarantor or any
of its Affiliates and may include any of its employees. The Preferred
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Preferred Securities Guarantee
from any court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to
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the Preferred Guarantee 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, including such
reasonable advances as may be requested by the Preferred Guarantee
Trustee; provided that nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Preferred Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee 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.
(ix) Any action taken by the Preferred Guarantee
Trustee or its agents hereunder shall bind the Holders, and the
signature of the Preferred Guarantee Trustee or its agents alone shall
be sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee, both of
which shall be conclusively evidenced by the Preferred Guarantee
Trustee's or its agent's taking such action.
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(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(xi) The Preferred Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in
good faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Preferred
Securities Guarantee.
(b) No provision of this Preferred Secu-
rities Guarantee shall be deemed to impose any duty or obligation on the
Preferred Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any jurisdiction in
which it shall be illegal, or in which the Preferred Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Preferred Guarantee Trustee shall
be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of
Guarantee.
The recitals contained in this Preferred Securities Guarantee
shall be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
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ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a 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 Securities and Exchange 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 million U.S. dollars ($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 Section 4.1(a)(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.
(b) If at any time the Preferred Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Preferred
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
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SECTION 4.2. Appointment, Removal and Resignation of
Preferred Guarantee Trustees.
(a) Subject to Section 4.2(b), the Preferred
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor.
(b) The Preferred Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and delivered
to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to
office shall hold office until a Successor Preferred Guarantee Trustee shall
have been appointed or until its removal or resignation. The Preferred Guarantee
Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing executed by the Preferred Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to the Guarantor of an instrument of removal or
resignation, the resigning or removed Preferred Guarantee Trustee may petition
any court of competent jurisdiction for appointment of a Successor Preferred
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities
Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant
to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee
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all amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert, the Guarantee Payments, without duplication. 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 Trust to pay
such amounts to the Holders.
SECTION 5.2. Subordination.
If an Event of Default has occurred and is continuing, the
rights of holders of Common Securities to receive Guarantee Payments under the
Common Securities Guarantee are subordinate to the rights of Holders to receive
Guarantee Payments under this Preferred Securities
Guarantee.
SECTION 5.3. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Trust 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.
SECTION 5.4. Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Preferred Securities Guarantee shall in no way be affected
or impaired by reason of the happening from time to time of any of the
following:
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(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Trust of any express or
implied agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the
Trust of all or any portion of the Distributions, Redemption Price, Liquidation
Distribution 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, Redemption Price,
Liquidation Distribution or other sums payable that results from the extension
of any interest payment period on the Debentures or any extension of the
maturity date of the Debentures permitted by the Indenture);
(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 Trust granting indulgence or
extension of any kind;
(d) any 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 or other similar proceedings affecting the
Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in,
the Preferred Securities;
(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 5.4 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
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There shall be no obligation of the Holders or any other
Persons to give notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 5.5. Rights of Holders.
(a) The Holders of a Majority in liquidation amount
of the Preferred Securities have the right to direct the time, method and place
of conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or to direct
the exercise of any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee.
(b) Any Holder may directly institute a legal
proceeding against the Guarantor to enforce the obligations of the Guarantor
under this Preferred Securities Guarantee without first instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
Person.
(c) If an Event of Default with respect to the
Debentures (an "Indenture Event of Default"), constituting the failure to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable has occurred and is continuing, then a Holder may directly,
at any time, 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
on or after the respective due date specified in the Debentures. The Holders
will not be able to exercise directly any other remedy available to the holders
of the Debentures unless the Property Trustee (as defined in the Indenture)
fails to do so.
SECTION 5.6. Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.
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SECTION 5.7. Subrogation.
The Guarantor shall be subrogated to all, if any, rights of
the Holders against the Trust in respect of any amounts paid to such Holders by
the Guarantor under this Preferred Securities Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Preferred Securities Guarantee, if, at the
time of any such payment, any amounts are due and unpaid under this Preferred
Securities Guarantee. 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.
SECTION 5.8. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust 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 Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g) inclusive, of Section 5.4 hereof.
SECTION 5.9. Conversion.
The Guarantor agrees that it will honor its obligation to
issue and deliver common stock of the Guarantor upon the conversion of the
Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if
there shall have occurred any Event of Default under this Preferred Securities
Guarantee or any event that, with the giving of notice or the lapse of
20
<PAGE> 24
time or both, would constitute an Event of Default under the Indenture, then the
Guarantor shall (a) not declare or pay dividends on, or make a distribution with
respect to, or redeem or purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of Common Stock (or Common Stock equivalents) in connection with the
satisfaction by the Guarantor of its obligations under any employee benefit
plans or the satisfaction by the Guarantor of its obligations pursuant to any
contract or security requiring the Guarantor to purchase shares of Common Stock
(or Common Stock equivalents) (provided that such contract is in effect or such
security is outstanding at least 60 days prior to the commencement of such
Extension Period), (ii) purchases of shares of Common Stock (or Common Stock
equivalents) from officers or employees of the Guarantor or its subsidiaries
upon termination of employment or retirement not pursuant to any obligation
under any contract or security requiring the Guarantor to purchase shares of
Common Stock (or Common Stock equivalents) (provided that such purchases by the
Guarantor upon termination of employment or retirement shall be made at a price
not to exceed the market value on the date of any such purchase and shall not
exceed $7.5 million in the aggregate for all officers and employees), (iii) as a
result of a reclassification of the Guarantor's capital stock or the exchange or
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock, (iv) dividends or
distributions of shares of Common Stock on Common Stock or (v) 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 make any guarantee payments with respect to the
foregoing)), (b) shall not make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Guarantor that rank pari passu with or junior to the
Debentures and (c) shall not make any guarantee payments with respect to the
foregoing (other than pursuant to this Preferred Securities Guarantee).
21
<PAGE> 25
SECTION 6.2. Ranking.
(a) This Preferred Securities Guarantee
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 except any liabilities that may be pari passu expressly by their
terms, (ii) pari passu with the most senior preferred or preference stock issued
from time to time by the Guarantor and with any guarantee now or hereafter
entered into by the Guarantor in respect of any preferred or preference stock or
preferred securities of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
(b) The holders of any obligations of the
Guarantor that are senior in priority to the obligations under this Preferred
Securities Guarantee will be entitled to all of the rights inuring to the
holders of "Senior Indebtedness" under Article 12 of the Indenture, and the
Holders will be subject to all of the terms and conditions of such Article 12
with respect to any claims or rights hereunder with the same effect as though
fully set forth herein.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination.
This Preferred Securities Guarantee will terminate as to each
Holder upon (i) full payment of the Redemption Price of all Preferred Securities
held by such Holder; or (ii) distribution of all of the Debentures held by the
Trust to the Holders; or (iii) full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Trust, or (iv) upon the
distribution of the Guarantor's common stock to such Holder in respect of
conversion of such Holder's Preferred Securities into common stock of the
Guarantor. The Guarantee also will terminate completely upon full payment of the
amounts payable in accordance with the Declaration. Notwithstanding the
foregoing, this Preferred Securities Guarantee 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 under such Preferred
22
<PAGE> 26
Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation.
(a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Guarantor or any
Covered Person 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 Preferred Securities Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Preferred Securities Guarantee 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 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 of Preferred Securities
might properly be paid.
SECTION 8.2. Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any such
23
<PAGE> 27
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The obligation to indemnify as set forth in this
Section 8.2 shall survive the termination of this Preferred Securities
Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns.
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Guarantor with or into another entity
or any permitted sale, transfer or lease of the Guarantor's assets to another
entity as described in the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Preferred Securities Guarantee without the
prior approval of the Holders of at least a Majority of the aggregate stated
liquidation amount of the Preferred Securities then outstanding.
SECTION 9.2. Amendments.
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no vote will be required),
this Preferred Securities Guarantee may be amended only with the prior approval
of the Holders of at least a Majority in liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all the outstanding Preferred Securities. The provisions of
Section 11.2 of the Declaration with respect to meetings of Holders of the
Preferred Securities apply to the giving of such approval.
SECTION 9.3. Notices.
All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered,
24
<PAGE> 28
sent by facsimile or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee
Trustee, at the Preferred Guarantee Trustee's mailing address set forth below
(or such other address as the Preferred Guarantee Trustee may give notice of to
the Holders of the Preferred Securities):
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Tel:
Telecopy:
Attention: Corporate Trust Department
(b) If given to the Guarantor, at the
Guarantor's mailing address set forth below (or such other address as the
Guarantor may give notice of to the Holders of the Preferred Securities):
The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Tel: (602) 207-4900
Telecopy: (602) 207-5543
Attention: Treasurer
(c) If given to any Holder at the address set forth
on the books and records of the Trust.
All such 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 9.4. Benefit.
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.
25
<PAGE> 29
SECTION 9.5. Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
26
<PAGE> 30
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.
THE FINOVA GROUP INC.,
as Guarantor
By: _____________________________________
Name:
Title:
FLEET NATIONAL BANK,
as Preferred Guarantee
Trustee
By: _____________________________________
Name:
Title:
27
<PAGE> 1
EXHIBIT 5.1
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) LETTERHEAD]
December 3, 1996
FINOVA Finance Trust
The FINOVA Group Inc.
1850 North Central Avenue
Phoenix, Arizona 85002-2209
Re: FINOVA Finance Trust
The FINOVA Group Inc.
Registration Statement on Form S-3
(Registration No. 333-15445 and -01)
------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to FINOVA Finance Trust, a statutory
business trust created under the Business Trust Act of the State of Delaware
(Del. Code Ann., tit. 12, section 3810) (the "Trust"), and The FINOVA Group
Inc., a Delaware corporation (the "Company"), in connection with the preparation
of the Registration Statement (as defined below) for the registration under the
Securities Act of 1933, as amended (the "Act"), of (i) 2,000,000 Convertible
Trust Originated Preferred Securities(SM) (the "Preferred Securities")
(liquidation amount $50 per Preferred Security) of the Trust, (ii) $100,000,000
aggregate principal amount of Convertible Subordinated Debentures due 2016 of
the Company (the "Debentures"), (iii) shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company initially issuable upon conversion of
the Debentures and the Preferred Securities (the "Conversion Shares") and (iv)
the rights of holders of the Preferred Securities under a guarantee (the
"Preferred Securities Guarantee") by the Company.
<PAGE> 2
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 2
The Preferred Securities are to be issued pursuant to an Amended and
Restated Declaration of Trust of the Trust (the "Declaration"), among the
Company, as sponsor and as the issuer of the Debentures to be held by the
Property Trustee (as defined below) of the Trust, First Union Bank of Delaware,
as Delaware Trustee, Fleet National Bank, as property trustee (the "Property
Trustee"), and Robert J. Fitzsimmons and Bruno A. Marszowski, as Regular
Trustees. The Preferred Securities Guarantee will be issued pursuant to a
Preferred Securities Guarantee Agreement (the "Guarantee Agreement") by the
Company, as guarantor. In connection with any conversion of a Preferred Security
by the holder thereof, such Preferred Security will be exchanged for the
appropriate principal amount of Debentures held by the Trust, which will, in
turn, be immediately converted into shares of Common Stock at the then
applicable rate, as further described in the Declaration and the Indenture (as
defined below).
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act. Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in the Registration
Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-3 (Registration No. 333-15445 and -01), filed by the Company
and the Trust with the Securities and Exchange Commission (the "Commission") on
November 4, 1996 under the Act, Amendment No. 1 thereto filed with the
Commission on November 20, 1996, Amendment No. 2 thereto filed with the
Commission on December 2, 1996 and Amendment No. 3 thereto filed with the
Commission on December 4, 1996 (such Registration Statement, including all
documents incorporated or deemed incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act and all information deemed to be a part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A of the
General Rules and Regulations under the Act, as so amended, being hereinafter
referred to as the "Registration Statement"); (ii) the Certificate of Trust of
the Trust (the "Certificate of Trust") filed with the Secretary of State of the
<PAGE> 3
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 3
State of Delaware on November 1, 1996; (iii) the form of the Declaration
(including the designations of the terms of the Preferred Securities annexed
thereto); (iv) the form of the Preferred Securities and specimen certificates
thereof; (v) the form of the Guarantee Agreement; (vi) the form of the indenture
(the "Indenture"), between the Company and Fleet National Bank, as indenture
trustee (the "Indenture Trustee"), pursuant to which the Debentures will be
issued; (vii) a specimen Debenture; (viii) a specimen certificate representing
the Common Stock; (ix) the form of the Purchase Agreement (the "Preferred
Securities Purchase Agreement") proposed to be entered into among the Company,
the Trust and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Montgomery
Securities and Morgan Stanley & Co. Incorporated (collectively, the
"Underwriters") relating to, among other things, the sale of the Preferred
Securities; (x) the form of the Debenture Purchase Agreement (the "Debenture
Purchase Agreement") proposed to be entered into by and between the Company and
the Trust relating to, among other things, the sale of the Debentures; (xi) the
Certificate of Incorporation of the Company, as presently in effect; (xii) the
By-Laws of the Company, as presently in effect; and (xiii) certain resolutions
of the Board of Directors of the Company and drafts of certain resolutions (the
"Draft Resolutions") of the Pricing Committee appointed by the Board of
Directors of the Company (the "Pricing Committee") in each case relating to the
issuance and sale of the Debentures and the Preferred Securities and related
matters. We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such other documents, certificates and
records as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than the Company and the Trust, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by
<PAGE> 4
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 4
all requisite action, corporate or other, and execution and delivery by such
parties of such documents and that, except to the extent set forth in paragraphs
(2) and (3) below, such documents constitute valid and binding obligations of
such parties. In addition, we have assumed that the Declaration, the Preferred
Securities, the Guarantee Agreement, the Indenture, the Debentures, the
Preferred Securities Purchase Agreement and the Debenture Purchase Agreement,
when executed, will be in substantially the forms reviewed by us. As to any
facts material to the opinions expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers, trustees and other representatives of the Company,
the Trust and others.
Members of our firm are admitted to the practice of law in the State of
Illinois, and we do not express any opinion as to the laws of any jurisdiction
other than the General Corporation Law of the State of Delaware, the Delaware
Business Trust Act and the federal laws of the United States to the extent set
forth herein. To the extent that the opinions set forth below relate to matters
under the laws of the State of Delaware other than the General Corporation Law
of the State of Delaware and the Delaware Business Trust Act, we have relied on
the opinion of Skadden, Arps, Slate, Meagher & Flom (Delaware). To the extent
that the opinions set forth below relate to matters under the laws of the State
of New York, we have relied on the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP.
Based on and subject to the foregoing and to the other qualifications
and limitations set forth herein, we are of the opinion that when (i) the
Registration Statement becomes effective; (ii) the Draft Resolutions
establishing, among other things, the price at which the Preferred Securities
are to be sold to the Underwriters pursuant to the Preferred Securities
Purchase Agreement and other matters relating to the issuance and sale of the
Preferred Securities and the Debentures have been duly adopted by the Pricing
Committee; (iii) the Declaration, the Preferred Securities Purchase Agreement,
the Guarantee Agreement, the Debenture Purchase Agreement and the Indenture
have been duly executed and delivered by the parties thereto; (iv) the
Preferred Securities have been duly executed and authenticated in accordance
with
<PAGE> 5
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 5
the terms of the Declaration and delivered to and paid for by the Underwriters
as contemplated by the Preferred Securities Purchase Agreement; and (v) the
Debentures have been duly executed and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Trust as
contemplated by the Debenture Purchase Agreement and the Declaration:
1. The issuance and sale of the Preferred Securities will have been
duly authorized and the Preferred Securities will be validly issued, fully paid
and nonassessable, representing undivided beneficial ownership interests in the
assets of the Trust; and the holders of such Preferred Securities 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. We bring to your attention, however, that the holders
of Preferred Securities may be obligated, pursuant to the Declaration, to (i)
provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers of Preferred Securities and (ii)
provide security and indemnity in connection with the requests of or directions
to the Property Trustee to exercise its rights and powers under the Declaration.
2. The Guarantee Agreement will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
to the extent that (a) enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles
of equity (regardless of whether enforceability is considered in a proceeding
at law or in equity) and (b) the provisions regarding indemnification contained
therein may be limited by state or federal securities laws or the public policy
underlying such laws.
3. The issuance and sale of the Debentures will have been duly
authorized and the Debentures
<PAGE> 6
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 6
will be valid and binding obligations of the Company, entitled to the benefits
of the Indenture and enforceable against the Company in accordance with their
terms, except to the extent that (a) enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and except that the waiver of stay or extension
laws contained in Section 515 of the Indenture may be unenforceable and (b) the
provisions regarding indemnification contained therein may be limited by state
or federal securities laws or the public policy underlying such laws.
4. When certificates representing the Conversion Shares in the form of
the specimen certificates examined by us have been manually signed by an
authorized officer of the transfer agent and registrar for the Common Stock and
registered by such transfer agent and registrar and delivered to the holders of
the Preferred Securities upon conversion thereof in accordance with the terms of
the Declaration and the Indenture, the Conversion Shares will have been duly
authorized and will be validly issued, fully paid and nonassessable.
<PAGE> 7
FINOVA Finance Trust
The FINOVA Group Inc.
December 3, 1996
Page 7
We hereby consent to the use of our name under the heading "Legal
Matters" in the prospectus which forms a part of the Registration Statement. We
also hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission promulgated thereunder. This opinion is expressed as of the date
hereof unless otherwise expressly stated and we disclaim any undertaking to
advise you of the facts stated or assumed herein or any subsequent changes in
applicable law.
Very truly yours,
---------------------------------------------------
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
<PAGE> 1
EXHIBIT 8.1
-----------
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM LETTERHEAD]
December 3, 1996
The FINOVA Group Inc.
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
FINOVA Finance Trust
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Re: Registration Statement on Form S-3
Registration No. 333-15445
----------------------------------
Ladies and gentlemen:
We have acted as counsel for The FINOVA Group Inc., a Delaware
corporation (the "Company"), and FINOVA Finance Trust, a statutory business
trust formed under the laws of the State of Delaware (the "Trust"), in
connection with the above-captioned registration statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") for the purpose of registering (i) Trust Preferred Securities
representing undivided beneficial interests in the assets of the Trust and (ii)
Convertible Subordinated Debentures issued by the Company to the Trust, in
connection with the sale of the Trust Preferred Securities.
<PAGE> 2
The FINOVA Group Inc.
FINOVA Finance Trust
December 3, 1996
Page 2
We hereby confirm that, although the discussion set forth
under the heading "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" in the form of
Prospectus Supplement for an offering of Trust Preferred Securities filed as an
exhibit to the Registration Statement (the "Form of Prospectus Supplement") does
not purport to discuss all possible United States federal income tax
consequences of the purchase, ownership and disposition of Trust Preferred
Securities, in our opinion, such discussion constitutes, in all material
respects, a fair and accurate summary of the United States federal income tax
consequences of the purchase, ownership and disposition of Trust Preferred
Securities, based upon current law. It is possible that contrary positions may
be taken by the Internal Revenue Service and that a court may agree with such
contrary positions.
<PAGE> 3
The FINOVA Group Inc.
FINOVA Finance Trust
December 3, 1996
Page 3
This opinion is furnished to you solely for your benefit in
connection with the filing of the Registration Statement and, except as set
forth below, is not to be used, circulated, quoted or otherwise referred to for
any other purpose or relied upon by any other person for any purpose without our
prior written consent. We hereby consent to the use of our name under the
heading "Legal Matters" in the Form of Prospectus Supplement and the filing of
this opinion with the Commission as Exhibit 8.1 to the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Commission promulgated
thereunder. This opinion is expressed as of the date hereof unless otherwise
expressly stated and applies only to the disclosure under the heading "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS" set forth in the Form of Prospectus
Supplement filed as of the date hereof. We disclaim any undertaking to advise
you of any subsequent changes of the facts stated or assumed herein or any
subsequent changes in applicable law.
Very truly yours,
---------------------------------------------
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Amendment No. 3 to
Registration Statement No. 333-15445 of The FINOVA Group Inc. and FINOVA Finance
Trust on Form S-3 of our report dated February 16, 1996, appearing in the Annual
Report on Form 10-K of The FINOVA Group Inc. and subsidiaries for the year ended
December 31, 1995 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
December 3, 1996
