<PAGE>
Total # of Pages
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
___________
Commission File Number 1-13940
-----------------------------------------------
EVEREN CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-4019175
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive
Chicago, Illinois 60601
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 574-6000
------------------
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. Shares outstanding
as of July 21, 1996:
$.01 par value common stock - 11,532,903
$.01 par value non-voting common stock - 216,150
1
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INDEX
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<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Financial Condition -
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations - Three and six
months ended June 30, 1996 and 1995 4
Consolidated Statement of Changes in Stockholders' Equity -
Six months ended June 30, 1996 5
Consolidated Statements of Cash Flows - Six months
ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis -
Results of Operations
Liquidity and Capital Resources 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
2
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
ASSETS 1996 DECEMBER 31,
(UNAUDITED) 1995
----------- -------------
<S> <C> <C>
Cash and cash equivalents $ 43,195 $ 14,585
Cash and securities segregated under
federal and other regulations 16,139 15,556
Receivables from:
Customers 734,319 648,659
Brokers and dealers 161,007 145,762
Others 44,172 51,496
Securities owned, at market 181,173 141,256
Securities purchased under agreements to resell 382,420 1,308,495
Investment in mortgage-backed certificates
available-for-sale, at fair value 149,069 156,457
Fixed assets, at cost, net 34,771 49,403
Other assets 21,120 18,958
---------- ----------
$1,767,385 $2,550,627
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans payable $ 220,000 $ 297,800
Payables to:
Customers 187,697 223,757
Brokers and dealers 241,190 78,410
Collateralized mortgage obligations 143,723 143,878
Securities sold, not yet purchased, at market 77,057 91,632
Securities sold under agreements to repurchase 389,431 1,282,788
Deferred income taxes 20,612 26,118
Accounts payable, accrued expenses and
other liabilities 260.242 246,328
---------- ----------
1,539,952 2,390,711
---------- ----------
Junior subordinated debentures, 13.5% due 2007 31,542 -
Exchangeable preferred stock, $.01 par value per share;
10,000,000 shares authorized; 1,244,168 shares
issued and outstanding at December 31, 1995, - 28,343
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value per share; 40,000,000
shares authorized, 11,854,579 and 11,496,970 shares issued
and outstanding at June 30, 1996 and
December 31, 1995, respectively 119 115
Nonvoting common stock, $.01 par value per share;
400,000 shares authorized, 216,150 and 107,400 shares issued
and outstanding at June 30, 1996 and December 31, 1995, respectively 2 1
Additional paid-in capital 168,638 449,396
Unrealized gain (loss) on available-for-sale securities, net of
income taxes (4,698) 11,497
Unearned KSOP shares (13,611) (22,875)
Unearned restricted stock (1,444) -
Treasury stock, at cost, 20,690 and 3,239 shares at June 30, 1996 and
December 31, 1995, respectively (210) (22)
Accumulated deficit - (306,539)
Retained earnings (since January 1, 1996) 47,095 -
---------- ----------
195,891 131,573
---------- ----------
$1,767,385 $2,550,627
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three Six
Months Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
--------------------- ---------------------
<S> <C> <C> <C> <C>
Revenue:
Commissions $ 60,277 $ 47,189 $117,709 $ 89,525
Principal transactions 34,469 30,180 65,345 57,595
Investment banking 16,540 11,807 26,983 23,353
Asset management 13,231 13,031 27,712 25,790
Other 13,486 12,112 25,209 23,090
Interest and dividends 19,278 20,460 37,469 41,228
------- ------- ------- -------
Total revenue 157,281 134,779 300,427 260,581
Interest expense 9,203 13,368 18,457 27,019
------- ------- ------- -------
Net revenue 148,078 121,411 281,970 233,562
------- ------- ------- -------
Expenses:
Compensation and benefits 88,893 80,193 175,619 153,994
Brokerage and clearance 3,899 2,729 6,849 5,502
Communications 9,567 10,703 19,888 21,368
Occupancy and equipment 10,052 10,929 20,276 22,083
Promotional 4,375 3,269 8,357 6,486
Other 10,881 12,568 19,930 28,255
------- ------- ------- -------
Total expenses 127,667 120,391 250,919 237,688
Gain on sale of subsidiary 50,181 - 50,181 -
------- ------- ------- -------
Income (loss) before income taxes 70,592 1,020 81,232 (4,126)
Income tax (benefit) expense 28,173 517 32,007 (1,413)
------- ------- ------- -------
Net income (loss) $ 42,419 $ 503 $ 49,225 $ (2,713)
======= ======= ======= =======
Dividends on exchangeable preferred stock $ 1,085 $ 2,130
======= =======
Net earnings applicable to common shares $ 41,334 $ 47,095
======= =======
Weighted average common shares 10,082,787 9,454,163
outstanding ========== =========
Net earnings per common share $ 4.10 $ 4.98
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
consolidated statements of changes in stockholders' equity
six months ended june 30, 1996
(unaudited)
(in thousands)
<TABLE>
Common Stock Additional Unrealized gain Unearned
--------------------- Paid-In Unearned (loss) on available ESOP
Voting Non-voting Capital restricted stock for sale securities shares
------ ---------- ------- ---------------- -------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,1995 $ 115 $ 1 $449,396 $ - $ 11,497 $ (22,875)
Quasi-reorganization
adjustments at January
1,1996:
Restatement of assets and
liabilities to estimated
fair value (3,675)
Transfer of deficit and
unrealized gain at January
1, 1996 to additional paid
in capital (295,042) (11,497)
Amount received from former
parent under indemnification
agreement 2,811
Release of KSOP shares 7,368 9,264
Issuance of additional non-voting
restricted stock 1 1,515 (1,444)
Issuance of additional common
stock 4 4,179
Dividends on exchangeable
preferred stock
Unrealized gain (loss) for
the period (4,698)
Accretion of exchangeable preferred
stock (14)
Tax benefit related to stock
options 2,100
Purchase of treaury stock
Net income
------ --------- -------- ------------ ------- ---------
Balances at June 30, 1996 $ 119 $ 2 $168,638 $ (1,444) $(4,698) $ (13,611)
====== ========= ======== ============ ======= =========
</TABLE>
<TABLE>
<CAPTION>
Retained Total
Treasury Accumulated Earnings Stockholders'
Stock Deficit (Since 1/1/96) Equity
--------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
Balances at December 31,1995 $ (22) $(306,539) $ - $ 131,573
Quasi-reorganization
adjustments at January
1,1996:
Restatement of assets and
liabilities to estimated
fair value (3,675)
Transfer of deficit and
unrealized gain at January
1, 1996 to additional paid
in capital 306,539 -
Amount received from former
parent under indemnification
agreement 2,811
Release of KSOP shares 16,632
Issuance of additional non-voting
restricted stock 72
Issuance of additional common
stock 4,183
Dividends on exchangeable
preferred stock (2,130) (2,130)
Unrealized gain (loss) for
the period (4,698)
Accretion of exchangeable preferred
stock (14)
Tax benefit related to stock
options 2,100
Purchase of treaury stock (188) (188)
Net income 49,225 49,225
-------- -------- -------- ---------
Balances at June 30, 1996 $ (210) $ - $ 47,095 $ 195,891
======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 49,225 $ (2,713)
Adjustments to reconcile income (loss) to net cash flows
from operating activities:
Gain on sale of subsidiary (50,181) -
Release of KSOP shares 7,368 -
Amortization of restricted stock 72 -
Depreciation and amortization 6,922 8,432
Deferred income taxes 1,414 -
Change in assets and liabilities:
Cash and securities segregated under federal
and other regulations (583) (1,520)
Receivables from/payables to:
Customers (121,720) 20,309
Brokers and dealers 145,623 56,891
Affiliates - (4,222)
Others (2,957) (4,973)
Securities owned (39,917) 33,129
Securities purchased under agreements to resell 926,075 (243,400)
Other assets 383 6,199
Securities sold, not yet purchased (14,575) (5,487)
Securities sold under agreements to repurchase (893,357) 222,622
Accounts payable, accrued expenses,
and other liabilities 13,909 (23,293)
--------- ---------
Net cash flows from operating activities 27,701 61,974
--------- ---------
Cash flows from investing activities:
Net proceeds from sale of subsidiary 59,346 -
Purchase of investments in mortgage-backed securities (9,505) (35,123)
Collections of principal on investments in mortgage-
backed securities 9,665 8,747
Proceeds from sale of fixed assets 2,120 -
Acquisition of fixed assets, net (3,998) (3,613)
--------- ---------
Net cash flows from investing activities 57,628 (29,989)
--------- ---------
Cash flows from financing activities:
Release of shares related to KSOP loan 9,264 -
Amount collected under indemnification agreement 9,061 -
Proceeds from the issuance of collateralized mortgage obligations 9,422 34,080
Repayment of collateralized mortgage obligations (9,577) (7,448)
Decrease in bank loans payable (77,800) (62,053)
Proceeds from issuance of common stock 4,183 -
Dividend on exchangeable preferred stock (1,084) -
Purchase of treasury stock (188) -
--------- ---------
Net cash flows from financing activities (56,719) (35,421)
--------- ---------
Increase (decrease) in cash and cash equivalents 28,610 (3,436)
Cash and cash equivalents at beginning of the period 14,585 10,522
--------- ---------
Cash and cash equivalents at end of period $ 43,195 $ 7,086
========= =========
Supplemental disclosure of cash flow information-
interest paid $ 17,978 $ 23,008
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
- -------------------------------------------------------------------------------
(1) GENERAL INFORMATION
-------------------
The consolidated financial statements, prepared in accordance with
generally accepted accounting principles, include the accounts of EVEREN
Capital Corporation and its subsidiaries (the "Company"). The consolidated
financial statements are unaudited. However, in the opinion of management,
such financial statements include all adjustments, consisting of normal
recurring accruals, necessary for the fair presentation of the accompanying
consolidated financial statements.
Certain information and footnotes normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted pursuant to Securities and Exchange Commission ("SEC") rules
and regulations. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1995 Annual Report on Form 10-K.
All material intercompany balances and transactions have been eliminated.
Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. Actual results could differ from
those estimates. The results of operations for interim periods are not
necessarily indicative of results for the entire year.
(2) RECLASSIFICATIONS
-----------------
Certain reclassifications have been made in prior period financial
statements to conform to the current period financial statement
presentation.
(3) NET CAPITAL RULE
----------------
EVEREN Securities, Inc. ("ESI") and EVEREN Clearing Corp. ("ECC"), the
Company's broker-dealer subsidiaries, are subject to the Uniform Net
Capital Rule of the SEC. Both ESI and ECC operate under the alternative
method, as defined, of computing minimum net capital. At June 30, 1996 ESI
had net capital of approximately $108.1 million which was approximately
$107.1 million in excess of its required minimum net capital. At June 30,
1996 ECC had net capital of approximately $58.7 million which was
approximately $44.1 million in excess of its required minimum net capital.
Such net capital requirements could restrict the ability of these
subsidiaries to make dividend distributions to their respective parents.
7
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EVERN CAPITAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
- -------------------------------------------------------------------------------
(4) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company has been named as a defendant in various legal actions in
connection with its securities and commodities business. Some of these
lawsuits involve claims for substantial amounts. Although the ultimate
outcome of these suits cannot be ascertained at this time, it is the
opinion of management, after consultation with outside counsel, that the
resolution of such suits will not have a material adverse effect on the
consolidated financial position of the Company, but may be material to the
Company's operating results for any particular period, depending upon the
level of the Company's income for such period.
In the normal course of business, the Company enters into various
contractual commitments involving future settlement. These include
futures, forwards, options and securities sold, not yet purchased. These
transactions are executed either over-the-counter or are exchange-traded,
and are used primarily to hedge the Company's securities inventory. Many
of these products have maturities that do not extend beyond one year.
Transactions relating to such commitments which were open at June 30, 1996
and subsequently settled had no material effect on the consolidated
financial position of the Company.
(5) QUASI - REORGANIZATION
----------------------
The Company, with approval from its Board of Directors, implemented a
quasi-reorganization effective January 1, 1996 and revalued certain assets
and liabilities to fair value as of that date. This revaluation resulted
in a reduction of net assets of $3.7 million. The quasi-reorganization
also resulted in the transfer of the accumulated deficit as of January 1,
1996 of $306.5 million to additional paid-in capital. The balance in
retained earnings at June 30, 1996 represents the accumulated net earnings
available to common stockholders arising subsequent to the date of the
quasi-reorganization.
(6) SALE OF SUBSIDIARY
------------------
On April 30, 1996 the Company completed the sale of BETA Systems Inc., a
wholly-owned data processing and quote services subsidiary, for $63.5
million. The sale, which resulted in an after-tax gain of approximately
$30.2 million, is included in the Company's second quarter results.
(7) EXCHANGE OF PREFERRED STOCK
---------------------------
On June 17, 1996 the Company exchanged all of its outstanding shares of
Exchangeable Preferred Stock for 13.5 percent Junior Subordinated
Debentures due 2007 (the "Debentures").
(8) SUBSEQUENT EVENTS
-----------------
8
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1996
- -------------------------------------------------------------------------------
On July 22, 1996 the Board of Directors authorized the Company to pay a
cash dividend of $1.18 per share on August 5, 1996 to holders of record as
of July 23, 1996. This will allow the KSOP to repay the balance of its loan
to the Company, thereby releasing substantially all remaining unallocated
shares to employee participant accounts.
On July 25, 1996 the Company entered into a joint venture agreement ("JVA")
pursuant to which it will acquire an initial 20% ownership interest in
Mentor Investment Group, Inc. ("Mentor"), an asset management firm, for no
direct cash consideration. The JVA calls for the Company to transfer money
market mutual fund assets held in client accounts to Mentor-sponsored funds
by December 31, 1996. The JVA also entitles the Company to earn an
additional equity interest in Mentor, up to a maximum 50% ownership
interest, based on revenues generated by assets attributable to the
Company's clients. The Company will account for the joint venture as an
equity investment.
On July 30, 1996 the Company issued a notice calling all of the outstanding
Debentures for redemption on September 16, 1996 at a price of 112% of
principal, plus accrued interest. This redemption will result in an after-
tax extraordinary charge of approximately $3.0 million due to the early
extinguishment of debt which will be included in the Company's third
quarter results of operations.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto, contained in Item 1 of this
report. In addition to historical information, the following Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from those anticipated in
these forward-looking statements as a result of certain factors.
BUSINESS ENVIRONMENT
The Company's principal business activity, retail broker-dealer operations,
as well as its investment banking, institutional sales, investment advisory,
clearing and other services, are highly competitive and subject to various
risks, volatile trading markets and fluctuations in the volume of market
activity. As a result, the Company's revenue and earnings have been, and may
continue to be, subject to wide fluctuations including economic and securities
market conditions, changes in interest rates, competitive conditions within the
industry, and regulatory developments. Consequently, the results of operations
for a particular period may not be indicative of results to be expected for
other periods.
Industry market conditions were generally favorable during 1995 and the
first six months of 1996. Prior to the second quarter of 1995, fixed income
securities markets were volatile which, in turn, adversely impacted revenues in
fixed income securities. In mid-1995, interest rates stabilized and began to
trend downward, positively impacting fixed income securities prices and both the
institutional and the retail sectors of the securities industry. In addition,
favorable economic conditions created a stronger retail demand for equity
securities and related products beginning in mid-1995 and continuing through the
first six months of 1996.
COMPANY DEVELOPMENTS
Management believes that, until its separation from Kemper Corporation
("Kemper"), ownership uncertainty adversely impacted the Company in a number of
areas, most notably the Company's ability to recruit and retain qualified
revenue-producing personnel, the productivity of the Company's retail branch
network and the Company's participation in investment banking transactions. As
a result of these ownership uncertainties and increased market volatility,
management implemented a defensive strategy focusing on the retention of the
Company's existing workforce, a resizing of its operations and general cost
containment. Management believes all of the aforementioned factors depressed
the Company's performance, despite generally favorable market conditions during
much of this time period. Upon its separation from Kemper in the third quarter
of 1995, the ownership uncertainty was resolved. Management believes
ownership resolution has contributed to a significant turnaround in the
Company's profitability, aided in the retention and recruitment of quality
employees and enabled the Company to undertake certain strategic initiatives.
Effective January 1, 1996 the Company implemented a quasi-reorganization
and revalued certain assets and liabilities to fair value as of that date. This
revaluation resulted in a reduction of net assets of $3.7 million. The quasi-
reorganization also resulted in the transfer of the accumulated deficit as of
January 1, 1996 of $306.5 million to additional paid-in capital. Such
revaluation will not have a significant impact on the future operating results
of the Company. The balance in retained earnings at June 30, 1996 represents
the accumulated net earnings available to common stockholders arising subsequent
to the date of the quasi-reorganization. Management believes that effecting the
quasi-reorganization as of January 1, 1996 was appropriate in order to
10
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reflect the emergence of the Company as a new organization and signal the end of
its transition from a wholly-owned subsidiary to a fully independent company.
Consistent with its strategy to focus on core retail and capital markets
businesses, on April 30, 1996 the Company completed the sale of BETA Systems,
Inc. ("BETA"), a wholly-owned data processing and quote service subsidiary, for
$63.5 million. The sale, which resulted in a pre-tax gain of approximately
$50.2 million and an after-tax gain of approximately $30.2 million, is reflected
in the Company's second quarter results. Management believes that the loss of
BETA's net income will be more than offset by increased net interest income as
well as by reduced data processing and quote service expenses resulting from new
five-year operating agreements executed in connection with the sale.
On June 17, 1996 the Company exchanged all of its outstanding Exchangeble
Preferred Stock for an aggregate $32.2 million principal amount of the
Debentures. On July 30, 1996 the Company issued a notice calling all of the
outstanding Debentures for redemption on September 16, 1996 at a price of 112%
of principal or $36.0 million, plus accrued interest. This redemption will be
funded principally through $36.0 million of new bank borrowings anticipated by
the Company and will result in an after-tax extraordinary charge of
approximately $3.0 million in the quarter ending September 30, 1996 due to the
early extinguishment of debt.
On July 25, 1996 the Company entered into a joint venture agreement ("JVA")
pursuant to which it will acquire an initial 20% ownership interest in Mentor
Investment Group, Inc. ("Mentor"), the asset management subsidiary of Wheat
First Butcher Singer, Inc., a Mid-Atlantic based regional securities brokerage
firm, for no direct cash consideration. Under the terms of the JVA, the
Company's ownership interest may increase to as much as 50%. This joint venture
will be accounted for as an equity investment, and future operating results will
include the Company's proportionate share of the earnings or losses of Mentor.
On August 5, 1996 the Company will pay a cash dividend of $1.18 per share
on shares outstanding as of July 23, 1996. This dividend will allow the KSOP to
repay its remaining loan balance to the Company, incurred in connection with its
separation from Kemper, and will allow the release of the remaining KSOP shares
to employee participant accounts. This dividend and release of shares required
the recording of compensation expense of approximately $3.4 million (after-tax)
which is included in the Company's results of operations for the period ended
June 30, 1996.
In order to provide additional ownership opportunities to employees, in the
second quarter of 1996 the Company instituted three new employee benefit plans
to provide current and future employees the opportunity to acquire the Company's
common stock outside of the KSOP. In connection with these plans, the Company
recognizes additional compensation expense equal to the difference between the
fair value of the common stock issued and the amount of cash compensation
otherwise payable or cash paid under each respective plan. In the absence of a
public market, fair value, as used in all of the equity participation plans, is
based upon periodic valuation analyses prepared by an independent investment
banking firm.
COMPONENTS OF REVENUES AND EXPENSES
11
<PAGE>
Revenues. Commissions include revenues generated by executing listed and
over-the-counter transactions as agent, as well as commissions earned on the
sales of mutual funds, insurance, annuities and certain other products.
Principal transactions consist of gains and losses from the trading of
securities by the Company as principal, including principal sales credits.
Investment banking revenues primarily include underwriting revenues, which are
comprised of underwriting selling concessions, management fees and underwriting
fees, as well as merger and acquisition and other advisory fees. Asset
management revenues primarily include managed account fees and 12b-1
distribution fees. Other revenues include transaction and account fees,
correspondent clearing and execution income and miscellaneous income. Interest
income primarily includes interest earned on customer margin accounts and
interest income on securities owned and investments in mortgage-backed
certificates. Net revenues equal total revenues less interest expense. Interest
expense includes interest paid on bank borrowings, collateralized securities
transactions with brokers and dealers and collateralized mortgage obligations.
Expenses. Compensation and benefits expense includes sales, trading and
incentive compensation, which are primarily variable based on revenue
production, and salaries, payroll taxes, and employee benefits, which are
relatively fixed in nature. Brokerage and clearance expense include the cost of
securities clearance, floor brokerage and exchange fees. Communications expense
includes charges for telecommunications, news and market data services, customer
statements and depreciation on data processing and telecommunications equipment.
Occupancy and equipment expense includes rent and operating expenses for
facilities, expenditures for repairs and maintenance, and depreciation of
furniture, fixtures and leasehold improvements. Promotional expense includes
travel, entertainment and advertising. Other expenses include general and
administrative expenses, including professional services, litigation expenses,
dues and assessments, and other miscellaneous expenses.
THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1995
The Company experienced strong operating results for the three and six
months ended June 30, 1996 compared to the three and six months ended June 30,
1995. Revenues increased in all of the Company's businesses, expenses declined
as percentages of net revenues, and net income (without giving effect to the
gain realized from the sale of BETA) improved significantly. Management
attributes these results to two principal factors. First, favorable conditions
prevailed in the equity markets during the first half of 1996, reflecting
continued investor optimism concerning inflation and interest rate stability.
Second, this period reflects the continued benefits of ownership resolution,
which management believes has enhanced employee motivation, confidence,
commitment and productivity, and has allowed management to concentrate on its
key strategic initiatives.
Total revenues increased $22.5 million (17%) and $39.9 million (15%) to
$157.3 million and $300.5 million for the three and six months ended June 30,
1996, respectively, from $134.8 million and $260.6 million for the three and six
months ended June 30, 1995, respectively. Revenues increased in all of the
Company's major product areas during the first six months of 1996. Net revenues
increased $26.7 million (22%) and $48.4 million (21%) to $148.1 million and
$282.0 million for the three and six months ended June 30, 1996, respectively,
from and $121.4 million and $233.6 million for the three and six months ended
June 30, 1995, respectively.
Commission revenues increased $13.1 million (28%) and $28.2 million (32%)
to $60.3 million and $117.7 million for the three and six months ended June 30,
1996, respectively, from $47.2 million and $89.5 million for the three and six
months ended June 30, 1995, respectively, due to increased business in both the
retail and
12
<PAGE>
institutional areas, consistent with the overall growth in listed share volume
on all the major equity exchanges. During the current six month period, the
Company benefited from a 26% increase in average production per investment
consultant (commissions, principal sales credits, and 12b-1 and managed account
fees credited to the production of an investment consultant divided by the
average number of investment consultants during the period) when compared to the
same period in 1995.
Principal transaction revenues increased $4.3 million (14%) and $7.7
million (13%) to $34.5 million and $65.3 million for the three and six months
ended June 30, 1996, respectively, from $30.2 million and $57.6 million for the
three and six months ended June 30, 1995, respectively, due to the strong
trading volumes generated in the Company's retail sector throughout the first
half of 1996 and a significant increase in trading gains and principal sales
credits from over-the-counter equity transactions, consistent with improved
market conditions.
Investment banking revenues increased $4.7 million (40%) and $3.6 million
(15%) to $16.5 million and $27.0 million for the three and six months ended June
30, 1996, respectively, from $11.8 million and $23.4 million for the three and
six months ended June 30, 1995, respectively. The increase in investment banking
revenues was indicative of the increased underwriting activity seen throughout
the industry and the Company's participation in a larger number of transactions.
In addition, management believes that resolution of the Company's past ownership
uncertainties has increased the Company's ability to participate in this type of
business.
Asset management revenues increased $0.2 million (2%) and $1.9 million (7%)
to $13.2 million and $27.7 million for the three and six months ended June 30,
1996, respectively, from $13.0 million and $25.8 million for the three and six
months ended June 30, 1995, respectively, due primarily to increased managed
account fees and increased 12b-1 distribution fees in 1996, consistent with the
strong mutual fund inflows seen throughout the industry.
Other income increased $1.4 million (12%) and $2.2 million (10%) to $13.5
million and $25.3 million for the three and six months ended June 30, 1996,
respectively, from $12.1 million and $23.1 million for the three and six months
ended June 30, 1995, respectively. This resulted primarily from increased
transactional fee income and a license fee earned by BETA prior to its sale.
Interest and dividend income decreased $1.2 million (6%) and $3.7 million
(9%) to $19.3 million and $37.5 million for the three and six months ended June
30, 1996, respectively, from $20.5 million and $41.2 million for the three and
six months ended June 30, 1995, respectively, due to lower average inventory
balances and a lower average rate of interest earnings on margin accounts. The
decline in interest and dividend income was more than offset by a decrease in
interest expense of $4.2 million (31%) and $8.5 million (31%) to $9.2 million
and $18.5 million for the three and six months ended June 30, 1996,
respectively, from $13.4 million and $27.0 million for the three and six months
ended June 30, 1995, respectively. This decrease in interest expense was the net
result of reduced costs of financing lower levels of securities inventories and
customer margin accounts, and reduced levels of long-term debt which resulted
from the separation from Kemper and the early repayment of the KSOP debt.
Total non-interest expenses increased $7.3 million (6%) and $13.3 million
(6%) to $127.7 million and $251.0 million for the three and six months ended
June 30, 1996, respectively, from $120.4 million and $237.7 million for the
three and six months ended June 30, 1995, respectively. This increase was the
net result of an increase in
13
<PAGE>
production-related compensation attributable to higher revenue, partially offset
by reduced operating expenses resulting from the Company's continued focus on
cost containment.
Compensation and benefits expense increased $8.7 million (11%) and $21.6
million (14%) to $88.9 million and $175.6 million for the three and six months
ended June 30, 1996, respectively, from $80.2 million and $154.0 million for the
three and six months ended June 30, 1995, respectively, primarily due to
increased incentive and production-related compensation. However, compensation
and benefits as a percentage of net revenues declined to 60% and 62% in the
three and six month periods in 1996, respectively, from 66% and 65% in the
comparable periods of 1995, respectively. This percentage decrease was due in
part to a decrease in production-based payout to retail investment consultants
that was implemented in the third quarter of 1995.
Brokerage and clearance expense increased $1.2 million (44%) and $1.3
million (24%) to $3.9 million and $6.8 million for the three and six months
ended June 30, 1996, respectively, from $2.7 million and $5.5 million for the
three and six months ended June 30, 1995, respectively. This increase was
directly related to the increased transaction volume in the current periods and
was consistent with the increases in commission and principal transaction
revenues in the current periods when compared with the 1995 periods.
All other operating expenses decreased an aggregate $2.6 million (7%) and
$9.6 million (12%) to $34.9 million and $68.6 million for the three and six
months ended June 30, 1996, respectively, from $37.5 million and $78.2 million
for the three and six months ended June 30, 1995, respectively, primarily due to
the continued realization of benefits from cost containment programs initiated
in previous years. All other operating expenses as a percentage of net revenues
declined to 24% for the six months ended June 30, 1996 from 34% for the six
months ended June 30, 1995. Specifically, when comparing the six month periods
ended June 30, 1996 and 1995, communications expense decreased $1.5 million or
7%; occupancy and equipment expense decreased $1.8 million or 8%; promotional
expense increased $1.9 million or 29%; and other expenses decreased $8.2 million
or 29%. After excluding from first quarter 1995 expenses a $3.7 million pre-tax
charge related to the failure of a correspondent firm of ECC in March 1995,
other expenses decreased $4.5 million or 18% for the six months ended June 30,
1996 when compared to the six months ended June 30, 1995. The increase in
promotional expense during this period was due to increased advertising expenses
incurred to promote the Company.
The Company's income tax expense (benefit) for the six months ended June
30, 1996 and 1995 was $32.0 million and $(1.4) million, respectively, which
represented a 39% effective tax rate on income before taxes for the six months
ended June 30, 1996 and a 34% effective benefit rate for the six months ended
June 30, 1995. The effective rate increase for 1996 is due primarily to certain
non-deductible compensation expenses related to appreciation on the shares of
common stock released to the KSOP (and subsequently allocated to participants)
and higher state and local income taxes.
Net income increased $41.9 million and $51.9 million to $42.4 million and
$49.2 million for the three and six months ended June 30, 1996, respectively,
from net income of $0.5 million and a net loss of $2.7 million for the three and
six months ended June 30, 1995, respectively. Excluding the $30.2 million after-
tax gain on the sale of BETA, net income increased $11.7 million and $21.7
million to $12.2 million and $19.0 million for the three and six months ended
June 30, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Holding Company
14
<PAGE>
EVEREN Capital Corporation ("EVEREN Capital") is the parent holding company
for ESHI, the holding company for the organization's operating subsidiaries. As
the parent, EVEREN Capital expects to receive dividends, interest on any loans
and payments for federal income tax from its subsidiaries. Dividends and other
distributions, as well as certain interest payments, to EVEREN Capital from its
registered broker-dealer subsidiaries, which are expected to be EVEREN Capital's
primary sources of liquidity, are restricted as to amounts which may be paid by
applicable law and regulations. The "net capital" rules are the primary
regulatory restrictions. EVEREN Capital's rights (and the rights of its
stockholders and creditors) to participate in the assets of any subsidiary are
also subject to prior claims of the subsidiaries' creditors, including customers
of the broker-dealer subsidiaries (except to the extent the Company itself may
be a creditor with recognized claims). Since the separation from Kemper, the
Company has also generated funds from loans for the KSOP Purchase, the sale of
BETA and the issuance of the Company's common stock to employees.
The Company believes that its current level of equity capital, combined
with funds anticipated to be generated from operations will be adequate to fund
its operations for the foreseeable future.
Operating Subsidiaries
The assets of ESI and ECC, the Company's primary operating subsidiaries
(the "Subsidiaries") are highly liquid with the majority consisting of
securities inventories and collateralized receivables, both of which fluctuate
depending on the levels of customer business. Collateralized receivables
consist primarily of securities purchased under agreements to resell ("resale
agreements") and securities borrowed, both of which are secured by U.S.
government and agency securities and highly marketable corporate debt
securities. In addition, the Subsidiaries have significant receivables from
customers, brokers and dealers which turn over rapidly. The Subsidiaries' total
assets or the individual components of total assets vary significantly from
period to period because of changes relating to customer needs and economic and
market conditions. A relatively small percentage of total assets is fixed or
held for a period of longer than one year. The Company's total assets at June
30, 1996 were $1.8 billion.
The majority of the Subsidiaries' assets are financed through daily
operations by securities sold under repurchase agreements, securities sold not
yet purchased, securities loaned, bank loans, and through payables to customers,
brokers and dealers. Short-term funding is generally obtained at rates related
to Federal funds, LIBOR and money market rates. Other borrowing costs are
negotiated depending upon prevailing market conditions. The Company monitors
overall liquidity by tracking the extent to which unencumbered marketable assets
exceed short-term unsecured borrowings. The Company maintains borrowing
relationships with a broad range of banks, financial institutions,
counterparties and others. At June 30, 1996, the Subsidiaries had $585 million
in uncommitted and committed bank credit lines with seven banks.
The Subsidiaries are capital intensive. In addition to normal operating
requirements, capital is required to cover financing and regulatory charges on
securities inventories, investment banking and investments in fixed assets. The
Company's overall capital needs are continually reviewed to ensure that its
capital base can appropriately support the anticipated needs of the
Subsidiaries. Management believes that existing capital, funds from operations
and current credit facilities will be sufficient to finance the operating
subsidiaries ongoing business, including its current recruitment programs.
There are no known trends or uncertainties that management believes are likely
to cause a material change in the Company's capital structure. The majority of
the Subsidiaries' assets are funded with liabilities that reprice on a matched
basis, generally producing a positive spread. As a result, the Company has
modest exposure to fluctuations in interest rates (other than the effect of
15
<PAGE>
interest rate volatility on market conditions and prices of fixed income
securities and the resulting impact on the Company's revenues).
CASH FLOWS
The Company's statements of consolidated cash flows classify cash flow into
three broad categories: cash flows from operating activities, investing
activities and financing activities. The Company's net cash flows are
principally associated with operating and financing activities, which support
the Company's trading, customer and banking activities.
Cash and cash equivalents at June 30, 1996 and 1995 totaled $43.2 million
and $7.1 million, respectively, representing an increase of $28.6 million for
the six months ended June 30, 1996 and a decrease of $3.4 million for the
comparable period of 1995.
For the first half of 1996 and 1995, cash provided from operating
activities was used primarily in financing activities to reduce bank loans
payable. Cash flows from investing activities for the first six months of 1996
were further bolstered by the $59.3 million in net proceeds ($63.5 million of
gross proceeds less costs of sale) from the sale of BETA.
Cash provided by operating activities totaled $27.7 million and $62.0
million in the first six months of 1996 and 1995, respectively. In 1996, the
net change in receivables from and payables to customers, dealers, affiliates
and others of $20.9 million and the decrease in securities purchased under
agreements to resell in excess of the decrease in securities sold under
agreements to repurchase of $32.7 million were primary sources of operating cash
flow. An increase in securities owned of $39.9 million and a decrease in
securities owned, not yet purchased of $14.6 million used operating cash flow.
In 1995, the net change in receivables from and payables to customers, dealers,
affiliates and others of $68.0 million, a decrease in securities owned of $33.1
million and a decrease in other assets of $6.2 million generated operating cash
flow. An increase in securities purchased under agreements to resell in excess
of the increase in securities sold under agreements to repurchase of $20.8
million, a decrease in securities sold, not yet purchased of $5.5 million and a
decrease in accounts payable, accrued expenses and other liabilities of $23.3
million used operating cash flow.
In the first six months of 1996, cash provided from investing activities of
$57.6 million resulted from the $59.3 million of net proceeds from the sale of
BETA and $2.1 million of cash proceeds from the sale of fixed assets which were
partially offset by $4.0 million of fixed asset purchases. In the first six
months of 1995, the Company used $30.0 million for investing activities, which
was comprised of the $26.4 million net cash flows used in its mortgage-backed
securities investing activities and the $3.6 million used for the purchase of
fixed assets.
In the first six months of 1996, the Company's financing activities used
$56.7 million primarily as a result of the collection of $9.1 million under the
Kemper indemnification, $9.3 million related to repayment of the KSOP loan,
repayment of $77.8 million of bank loans, receipt of $4.2 million in proceeds
from the issuance of additional shares of Common Stock under the Company stock
programs and a cash dividend payment of $1.1 million during the second quarter
on the Exchangeable Preferred Stock. In 1995, financing activities consisted of
$34.1 million of proceeds from the issuance in excess of repayments of
collateralized mortgage obligations and the repayment of $62.1 million of bank
loans.
Derivative Financial Instruments
16
<PAGE>
Derivatives are financial instruments the payments on which are linked to
the prices, or relationships between prices, of securities or commodities,
interest rates, currency exchange rates or other financial measures
(collectively referred to as "cash market instruments"). Derivatives enable the
Company and its clients to manage their exposure to interest rates and currency
exchange rates, and security and other price risks. Derivatives include
structured notes, swaps, futures or forward contracts and options. Certain
types of derivatives, including forwards and certain options, are traded in the
OTC markets. Other types of derivatives, including futures contracts and listed
options, are traded on regulated exchanges.
The Company's derivative activities are not as extensive as many of its
competitors. The Company does not engage in the speculative trading of
derivatives. Instead, the Company has focused its derivative activities on
trading in forward and futures contracts in U.S. government and agency issued or
guaranteed securities, as hedges against the Company's securities positions.
The Company also executes transactions in exchange-traded futures contracts and
listed options on behalf of its clients.
The Company has entered into certain futures and options contracts on a
limited basis in the ordinary course of its business to hedge or modify
exposures to interest rate fluctuations related to its unit investment trust
product originations and interest-sensitive securities in its inventory. Given
the limited use of such derivatives, the Company does not expect any losses
relating to its derivative investments that would not be substantially offset
with corresponding gains on the securities hedged. Both the securities hedged
and the derivative instruments are carried on the statement of financial
condition at their market values. Gains and losses, both realized and
unrealized, from both the hedged securities and the derivative instruments are
included in income currently.
17
<PAGE>
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
On May 8, 1996 the Board of Directors approved the exchange of all the
Company's outstanding shares of Exchangeable Preferred Stock for 13.5 percent
Junior Subordinated Debentures due 2007. The exchange was effected as of June
17, 1996.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual Meeting of stockholders of the Company was held on May 8,
1996.
(b) At the annual meeting, the following directors, constituting the entire
board of directors, were elected until the 1997 annual meeting of stockholders
of the Company, or until their respective successors have been elected and
qualified: James R. Boris, William M. Daley, William T. Esrey, Homer J.
Livingston, Jr., Stephen G. McConahey and William C. Springer.
(c) The number of votes cast for and withheld for each of the nominees for
director were as follows:
<TABLE>
<CAPTION>
BOARD MEMBER FOR WITHHELD
------------ ---------- --------
<S> <C> <C>
James R. Boris 11,421,507 77,124
William M. Daley 11,493,281 5,350
William T. Esrey 11,493,902 4,729
Homer J. Livingston, Jr. 11,461,520 37,111
Stephen G. McConahey 11,418,997 79,634
William C. Springer 11,492,111 6,520
</TABLE>
In addition to the election of directors, the following matters were
voted upon by the holders of the Company's Common Stock:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- --------- -------
<S> <C> <C> <C>
Ratification of the
approval of certain
amendments to the
Company's 1996 Non-
Employee Directors
Plan 10,091,079 1,146,009 261,543
Approval of the
Company's 1996 New
Employee Restricted
Stock Purchase Plan 10,851,476 553,969 93,186
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Approval of the
Company's 1996
Employee Periodic
Payroll Stock
Purchase Plan 11,043,898 369,016 85,717
Approval of the
Company's 1996
Restricted Stock
Incentive Plan 10,425,648 771,901 301,082
Approval of
amendments to the
Company's 1995
Stock Plan 10,724,083 542,502 232,046
Ratification of
Deloitte & Touche
LLP as the
Company's
independent
accountants for 1996 11,073,385 291,143 134,103
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4 Indenture relating to 13.5% Junior Subordinated Debentures due
2007
10.1 Joint Venture Agreement dated July 25, 1996 among the Company,
Mentor and certain of their respective affiliates
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, EVEREN
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
EVEREN CAPITAL CORPORATION
Date: July 30, 1996 By: /s/ Daniel D. Williams
-------------------------------------
Daniel D. Williams
Senior Executive Vice President
Treasurer and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Thomas M. Mansheim
---------------------------------------
Thomas M. Mansheim
Senior Vice President
Controller and Chief Accounting Officer
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
4 Indenture relating to 13.5% Junior Subordinated 22
Debentures due 2007
10.1 Joint Venture Agreement dated July 25, 1996 among
the Company, Mentor and certain of their respective
affiliates
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
21
<PAGE>
EVEREN CAPITAL CORPORATION
13 1/2% Junior Subordinated Debentures due 2007
____________
INDENTURE
____________
Dated as of June 17, 1996
THE BANK OF NEW YORK
Trustee
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310(a)(1)..................................................................... 7.10
(a)(2)........................................................................ 7.10
(a)(3)........................................................................ N.A
(a)(4)........................................................................ N.A
(b)........................................................................... 7.08;7.10;11.02
(c)........................................................................... N.A
311(a)........................................................................ 7.11
(b)........................................................................... 7.11
(c)........................................................................... N.A
312(a)........................................................................ 2.05
(b)........................................................................... 11.03
(c)........................................................................... 11.03
313(a)........................................................................ 7.06
(b)(1)........................................................................ N.A
(b)(2)........................................................................ 7.06
(c)........................................................................... 7.06;11.02
(d)........................................................................... 7.06
314(a)........................................................................ 4.03;11.02
(b)........................................................................... N.A
(c)(l)........................................................................ 11.04
(c)(2)........................................................................ 11.04
(c)(3)........................................................................ N.A
(d)........................................................................... N.A
(e)........................................................................... 11.05
(f)........................................................................... N.A
315(a)........................................................................ 7.01(b)
(b)........................................................................... 7.05;11.02
(c)........................................................................... 7.01(a)
(d)........................................................................... 7.01(c)
(e)........................................................................... 6.11
316(a)(last sentence)......................................................... 2.09
(a)(l)(A)..................................................................... 6.05
(a)(l)(B)..................................................................... 6.04
(a)(2)........................................................................ N.A
(b)........................................................................... 6.07
(c)........................................................................... 9.04
317(a)(1)..................................................................... 6.08
(a)(2)........................................................................ 6.09
(b)........................................................................... 2.04
318(a)........................................................................ 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE......................................1
SECTION 1.01 DEFINITIONS..............................................1
SECTION 1.02 OTHER DEFINITIONS........................................9
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........9
SECTION 1.04 RULES OF CONSTRUCTION....................................9
ARTICLE 2
THE DEBENTURES...................................10
SECTION 2.01 FORM AND DATING.........................................10
SECTION 2.02 EXECUTION AND AUTHENTICATION............................10
SECTION 2.03 REGISTRAR AND PAYING AGENT..............................11
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.....................12
SECTION 2.05 HOLDER LIST.............................................12
SECTION 2.06 TRANSFER AND EXCHANGE...................................12
SECTION 2.07 REPLACEMENT DEBENTURES..................................13
SECTION 2.08 OUTSTANDING DEBENTURES..................................14
SECTION 2.09 TREASURY DEBENTURES.....................................14
SECTION 2.10 TEMPORARY DEBENTURES....................................15
SECTION 2.11 CANCELLATION............................................15
SECTION 2.12 DEFAULTED INTEREST......................................15
SECTION 2.13 CUSIP NUMBERS...........................................16
ARTICLE 3
OPTIONAL REDEMPTION..............................16
SECTION 3.01 NOTICES TO TRUSTEE......................................16
SECTION 3.02 SELECTION OF DEBENTURES TO BE REDEEMED..................16
SECTION 3.03 NOTICE TO HOLDERS.......................................17
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION..........................18
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE.............................18
SECTION 3.06 DEBENTURES REDEEMED IN PART.............................18
SECTION 3.07 OPTIONAL REDEMPTION.....................................18
ARTICLE 4
COVENANTS........................................19
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.01 PAYMENT OF DEBENTURES.............................................19
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY...................................19
SECTION 4.03 SEC REPORTS; FINANCIAL STATEMENTS.................................20
SECTION 4.04 COMPLIANCE CERTIFICATE............................................21
SECTION 4.05 COMPLIANCE WITH LAWS, TAXES.......................................21
SECTION 4.06 STAY, EXTENSION AND USURY LAWS....................................22
SECTION 4.07 LIMITATIONS ON RESTRICTED PAYMENTS................................22
SECTION 4.08 LIMITATIONS ON INDEBTEDNESS.......................................23
SECTION 4.09 CHANGE OF CONTROL.................................................23
SECTION 4.10 CORPORATE EXISTENCE...............................................25
SECTION 4.11 CALCULATION OF ORIGINAL ISSUE DISCOUNT............................26
SECTION 4.12 O.I.D. ALTERNATIVE................................................26
ARTICLE 5
SUCCESSORS.............................................26
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS..........................26
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.................................27
ARTICLE 6
DEFAULTS AND REMEDIES..................................27
SECTION 6.01 EVENTS OF DEFAULT.................................................27
SECTION 6.02 ACCELERATION......................................................29
SECTION 6.03 OTHER REMEDIES....................................................29
SECTION 6.04 WAIVER OF PAST DEFAULTS...........................................29
SECTION 6.05 CONTROL BY MAJORITY...............................................30
SECTION 6.06 LIMITATIONS ON SUITS..............................................30
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT..............................30
SECTION 6.08 COLLECTION SUIT BY TRUSTEE........................................31
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM..................................31
SECTION 6.10 PRIORITIES........................................................32
SECTION 6.11 UNDERTAKING FOR COSTS.............................................32
ARTICLE 7
TRUSTEE................................................32
SECTION 7.01 DUTIES OF TRUSTEE.................................................32
SECTION 7.02 RIGHTS OF TRUSTEE.................................................34
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE......................................35
SECTION 7.04 TRUSTEE'S DISCLAIMER..............................................35
SECTION 7.05 NOTICE OF DEFAULTS................................................35
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS.....................................36
SECTION 7.07 COMPENSATION AND INDEMNITY........................................36
SECTION 7.08 REPLACEMENT OF TRUSTEE............................................37
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC..................................38
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION...................... 38
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.. 39
SECTION 7.12 MONEY HELD IN TRUST................................ 39
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE..................... 39
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE....................................... 39
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE..................... 39
SECTION 8.03 COVENANT DEFEASANCE................................ 40
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE......... 40
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.... 42
SECTION 8.06 REPAYMENT TO COMPANY............................... 43
SECTION 8.07 REINSTATEMENT...................................... 43
ARTICLE 9
AMENDMENTS................................. 43
SECTION 9.01 WITHOUT CONSENT OF HOLDERS......................... 43
SECTION 9.02 WITH CONSENT OF HOLDERS............................ 44
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT................ 46
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.................. 46
SECTION 9.05 NOTATION ON OR EXCHANGE OF DEBENTURES.............. 47
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.................... 47
ARTICLE 10
SUBORDINATION............................... 47
SECTION 10.01 AGREEMENT TO SUBORDINATE........................... 47
SECTION 10.02 CERTAIN DEFINITIONS................................ 48
SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY............... 48
SECTION 10.04 DEFAULT ON SENIOR DEBT............................. 49
SECTION 10.05 ACCELERATION OF DEBENTURES......................... 50
SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER................ 50
SECTION 10.07 NOTICE BY COMPANY.................................. 52
SECTION 10.08 SUBROGATION........................................ 52
SECTION 10.09 RELATIVE RIGHTS.................................... 53
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY....... 53
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE........... 54
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT................. 54
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION.............. 55
ARTICLE 11
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MISCELLANEOUS............................... 55
SECTION 11.01 TRUST INDENTURE ACT CONTROLS....................... 55
SECTION 11.02 NOTICES............................................ 55
SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS........ 57
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT 57
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION...... 57
SECTION 11.06 RULES BY TRUSTEE AND AGENTS........................ 58
SECTION 11.07 NO RECOURSE AGAINST OTHERS......................... 58
SECTION 11.08 GOVERNING LAW...................................... 58
SECTION 11.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS...... 58
SECTION 11.10 SUCCESSORS......................................... 58
SECTION 11.11 SEVERABILITY....................................... 58
SECTION 11.12 COUNTERPART ORIGINALS.............................. 59
SECTION 11.13 TRUSTEE AS PAYING AGENT AND REGISTRAR.............. 59
SECTION 11.14 TABLE OF CONTENTS, HEADINGS, ETC................... 59
</TABLE>
SIGNATURES.............................................................. 60
Exhibit A Form of Debentures.........................................A-1
v
<PAGE>
INDENTURE dated as of June 17, 1996 between EVEREN Capital Corporation, a
Delaware corporation ("EVEREN"), and The Bank of New York (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders (as defined below) of EVEREN's 13 1/2%
Junior Subordinated Debentures due 2007 (the "Debentures"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting stock, by agreement or otherwise.
"Agent" means any Registrar or Paying Agent.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company or any
authorized committee of the board of directors of the Company.
"Business Day" means any day other than a Legal Holiday.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease of a
Person that would at such time be required to be capitalized on a balance sheet
of such person in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock including, without
limitation, partnership interests.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit of any domestic commercial bank of recognized standing
having capital and surplus in excess of $500,000,000 with a maturity date not
more than one year from the date of acquisition, (iii) repurchase obligations
with a term of not more than 7 days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
the parent corporation of any domestic commercial bank of recognized standing
having capital and surplus in excess of $500,000,000 and commercial paper issued
by others rated at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within one year after the date of
acquisition and (v) investments in money market funds substantially all of whose
assets comprise securities of the types described in clauses (i) through (iv)
above.
"Cash Flow" means, for any Person for any period, the operating income
before depreciation and amortization and corporate general and administrative
expenses of such Person for such period.
"Change of Control" means such time as (i) all or substantially all of the
assets of the Company are sold as an entirety to any person or group (within the
meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the
Exchange Act), (ii) the stockholders of the Company approve a plan of
liquidation or dissolution or (iii) any person or group (within the meaning of
Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange
Act) other than the EVEREN Capital Corporation 401(k) and Employee Stock
Ownership Plan (the "ESOP") becomes, directly or indirectly, the "beneficial
owner," as defined in Rule 13d-3 under the Exchange Act (in a single transaction
or in a related series of transactions, by way of merger, consolidation or other
business combination or otherwise), of greater than 50% of the total voting
power entitled to vote in the election of directors, managers or trustees of the
Company or such other Person surviving the transaction (other than the voting
power to elect directors upon the (a) failure of the Company to pay dividends on
any series of its Preferred Stock or (b) the occurrence of certain events
described in the terms of any series of its preferred stock)).
"Closing Date" means the date on which the Transactions were consummated.
"Common Stock" means the Common Stock, $.01 par value, of the Company.
"Company" means (i) EVEREN and (ii) any successor of EVEREN pursuant to
Article 5 hereof.
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"Consolidated Net Worth" means, for any Person, the sum of (i) the
consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
Person's most recent balance sheet with respect to (a) any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash and the fair market value of any property received upon
issuance of such preferred stock plus, without duplication, any increase in
stockholders' equity attributable to such preferred stock and the amount of any
Indebtedness of such Person that is canceled or forgiven upon issuance of such
preferred stock, and (b) with respect to the Company, the Preferred Stock, each
as determined on a consolidated basis, less (x) all write-ups (other than write-
ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to the date of this Indenture in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries and (z) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be the address of the Trustee
specified in Section 11.02 or such other address as the Trustee may give notice
to the Company.
"Credit Agent" means The Bank of New York, in its capacity as agent for the
lenders party to the Senior Credit Documents, and any successor to The Bank of
New York in such capacity, and other agent under any other agreement
constituting a Senior Credit Document.
"Credit Agreement" means that certain term loan agreement, dated as of
September 13, 1995, among EVEREN Securities Holdings, Inc. f/k/a Kemper
Securities Holdings, Inc. ("ESHI"), the lenders party thereto and The Bank of
New York, as agent.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, whether pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or prior
to September 15, 2007.
"Equity Interests" means Capital Stock or partnership interests or other
equity participation units or warrants, options or other rights to acquire
Capital Stock or partnership interests or other equity participation units (but
excluding any debt security that is convertible into, or exchangeable for, any
of the foregoing).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Existing Indebtedness" means all Indebtedness of the Company or its
Subsidiaries (other than Indebtedness outstanding under the Senior Credit
Documents) outstanding on the date of this Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of, and are applicable, at any
relevant date of determination; provided, however, that for purposes of
determining compliance with Articles 4 and 5 hereof, GAAP shall mean such
generally accepted accounting principles as in effect on June 30, 1995.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligation the full faith and credit of the United States is pledged.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" of any Person means (i) indebtedness for borrowed money owed
by such Person, (ii) notes payable and drafts accepted, in each case
representing extensions of credit to such Person (including, without limitation,
matured reimbursement obligations in respect of letters of credit), (iii) any
obligation owed by such Person for all or any part of a deferred purchase price
of property or services, (iv) indebtedness evidenced by a note or similar
written instrument or liabilities secured by any lien existing on property owned
or acquired by such Person or a Subsidiary thereof, whether or not the liability
secured thereby shall have been assumed by such Person or any of its
Subsidiaries, (v) all Capital Lease Obligations, (vi) all net obligations of
such Person under Hedging Obligations, in each case, if and to the extent any of
the foregoing Indebtedness would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP, (vii) the maximum fixed repurchase
price of Disqualified Stock issued by such Person, (viii) the liquidation
preference of preferred stock issued by any Subsidiary of such Person and held
by any Person other than the Company or one of its wholly owned Subsidiaries,
(ix) to the extent not otherwise included herein, the guarantee of items
described in clauses (i), (ii), (iii), (iv), (v), (vi) and (x) hereof and (x)
each amendment, modification, deferral, renewal, extension or refunding of any
liability of the type referred to in clauses (i) through (ix) inclusive hereof;
provided that Indebtedness shall not include any balance that constitutes a
trade payable or an accrued liability in the ordinary course of business,
including, without limitation, any liability for federal, state, local or other
taxes, collateralized bank borrowings of the company's clearing subsidiary and
obligations under repurchase agreements.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Interest Payment Date" has the meaning assigned to such term in the
Debentures.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind with respect to such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give any security
interest in and any filing or other agreement to give any financing statement)
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness (including, in the case of
Indebtedness under the Senior Credit Documents, interest accruing subsequent to
the filing of a petition for bankruptcy whether or not such interest is an
allowed claim).
"Officers" means the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Senior
or Executive Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the Company's Chief Executive Officer, Chief Financial Officer or
Controller, that meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means a written opinion prepared in accordance with
Section 11.05 hereof, from legal counsel who is acceptable to the Trustee. Such
legal counsel may be an employee of or counsel to the Company or the Trustee or
any other legal counsel.
"Permitted Indebtedness" means, without duplication, all of the following
Indebtedness incurred by the Company: (i) Indebtedness outstanding pursuant to
the Senior Credit Documents in an aggregate amount outstanding at any one time
not to exceed $30 million, (ii) Indebtedness under the Debentures, (iii)
Existing Indebtedness, (iv) Indebtedness incurred by the Company in
consideration for the repurchase of shares of Common Stock pursuant to "put
options" required to be issued under Section 13.2 of the EVEREN Capital
Corporation 401(k) and Employee Stock Ownership Plan, (v) Indebtedness of the
Company to a Wholly Owned Subsidiary, (vi) Indebtedness of a Wholly Owned
Subsidiary and (vii) Indebtedness issued in exchange for, or the proceeds of
which are used to extend, refinance, renew, replace, or refund the Indebtedness
referred to in clauses (i) through (vi) above (the "Refinancing Indebtedness"),
provided (a) the principal amount of such Refinancing Indebtedness does not
exceed the principal amount of Indebtedness so extended, refinanced, renewed,
replaced, substituted or refunded (plus the amount of reasonable expenses
incurred in connection therewith) and (b) the Refinancing Indebtedness has an
Average Life equal to or greater than the Average Life of the Indebtedness being
extended, refinanced, renewed, replaced or refunded.
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"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or any other entity of any kind.
"Preferred Stock" means, the Series A Exchangeable Preferred Stock,
liquidation preference of $25.00 per share, of the Company.
"Prospectus" means the Prospectus, dated September 13, 1995, relating to
the offering of the Debentures.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Documents" means (i) the Credit Agreement, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as any of the foregoing has been or may from
time to time be amended, renewed, supplemented or otherwise modified at the
option of the parties thereto and any other agreement pursuant to which any of
the Indebtedness, commitments, Obligations, costs, expenses, fees,
reimbursements and other indemnities payable or owing thereunder may be
refinanced, restructured, renewed, extended, refunded or increased, as any such
other agreement may from time to time at the option of the parties thereto be
amended, renewed, supplemented or otherwise modified; and (ii) after the Credit
Agent has acknowledged in writing that the Credit Agreement or any facility
thereunder (or portion thereof) in effect immediately prior to such
acknowledgement has been terminated and all then outstanding Indebtedness and
Obligations thereunder or with respect thereto have been repaid in full and
discharged, any successors to or replacements of such Credit Agreement or
facility thereunder (or portion thereof), as such successors or replacements may
from time to time be amended, renewed, supplemented, modified or replaced.
"Significant Subsidiary" means, with respect to the Company, any Subsidiary
of the Company whose Cash Flow for any of the three fiscal years preceding any
date of determination constituted 10% or more of the consolidated Cash Flow of
the Company for such fiscal year.
"Subsidiary" of a Person means any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. (S)(S)
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
thereunder.
"Transactions" means the transactions contemplated by the Transactions
Agreement.
"Transactions Agreement" means the Transaction Agreement, dated as of
September 13, 1995, among Kemper Corporation, Kemper Financial Companies, Inc.
and the Company.
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"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- ----------
<S> <C>
"Affiliate Transaction" 4.11
"Change of Control Date" 4.09
"Change of Control Offer" 4.09
"Change of Control Payment Date" 4.09
"Covenant Defeasance" 8.03
"Event of Default" 6.01
"Legal Defeasance" 8.02
"Payment Agent" 2.03
"Proceeding" 10.03
"Registrar" 2.03
"Representative" 10.02
"Restricted Payments" 4.07
"Senior Debt" 10.02
"Successor" 5.02
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Debentures;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Debentures means the Company, any other obligor upon the
Debentures or any successor obligor upon the Debentures.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
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1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or rules adopted
by the SEC from time to time
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ARTICLE 2
THE DEBENTURES
2.01 FORM AND DATING
The Debentures and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A to this Indenture. The Debentures may
have notations, legends or endorsements required by law, stock exchange rules or
usage. Each Debenture shall be dated the date of its authentication. The
Debentures shall be in denominations of $25.00 and integral multiples thereof;
provided, however, that in connection with the original issuance of Debentures
hereunder in exchange for shares of the Company's Preferred Stock, the Company
may elect to pay any amount remaining after issuance of Debentures in
denominations of $25.00 and/or integral multiples thereof, in cash or in
additional Debentures in denominations of less than $25.00.
The terms and provisions contained in the Debentures shall constitute, and
are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Debentures for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Debentures
and may be in facsimile form.
If an Officer whose signature is on a Debenture no longer holds that office
at the time the Debenture is authenticated, the Debenture shall nevertheless be
valid.
A Debenture shall not be valid until authenticated by the manual signature
of the Trustee. Such signature shall be conclusive evidence that the Debenture
has been authenticated under this Indenture.
The Trustee shall authenticate Debentures for original issue up to the
aggregate principal amount stated in paragraph 4 of the Debentures, upon a
written order of the Company signed by two Officers to a Trust Officer of the
Trustee. The aggregate principal amount of Debentures outstanding at any time
may not exceed such amount except as provided in Section 2.07 hereof.
In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive and shall be fully protected in relying
upon:
(a) an executed supplemental indenture, if any;
(b) an Officer's Certificate delivered in accordance with Section 11.04;
and
(c) an Opinion of Counsel delivered in accordance with Section 11.05.
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The Trustee shall have the right to decline to authenticate and deliver any
Debentures under this Section if the Trustee, being advised by counsel, deter-
mines that such action may not lawfully be taken or if the Trustee in good
faith shall determine that such action would expose the Trustee to personal
liability to existing Holders.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Debentures. An authenticating agent may authenticate Debentures
whenever the Trustee may do so. Each reference in this Indenture to authen-
tication by the Trustee includes authentication by such agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate
of the Company.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Debentures may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Debentures may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Debentures and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any coregistrar and the
term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Trustee to agree
in writing that such Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by such Paying Agent for the payment of principal
or interest on the Debentures, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company or a Subsidiary) shall have no further liability for the money.
If the Company or a Subsidiary 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. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Debentures.
SECTION 2.05 HOLDER LIST
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and, at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably
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require of the names and addresses of Holders, and the Company shall otherwise
comply with TIA (S) 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
(a) Transfer and Exchange of Debentures. When Debentures are presented by
a Holder to the Registrar with a request to either (x) register the transfer of
such Debentures or (y) exchange such Debentures for an equal principal amount of
Debentures of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided, however, that the Debentures presented or
surrendered for register of transfer or exchange shall be duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney, duly authorized in
writing;
(b) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall from time to time execute and the Trustee shall authenticate
Debentures at the Company's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Section 9.05
hereof).
(iii) The Registrar shall not be required to register the transfer
or exchange of any Debenture selected for redemption in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part.
(iv) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange Debentures during
a period beginning at the opening of business 15 days before the day of any
selection of Debentures for redemption under Section 3.02 hereof and ending at
the close of business on the day of selection; or
(B) to register the transfer of or to exchange any Debenture so selected
for redemption in whole or in part, except the unredeemed portion of any
Debenture being redeemed in part; or
(C) to register the transfer of or to exchange a Debenture between a record
date and the next succeeding interest payment date.
(v) Prior to due presentment for the registration of a transfer of
any Debenture, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Debenture is registered as the absolute owner of such
Debenture for the purpose of receiving payment of principal of and interest on
such Debenture, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
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(vi) The Trustee shall authenticate Debentures in accordance with the
provisions of Section 2.02 hereof.
SECTION 2.07 REPLACEMENT DEBENTURES
If any mutilated Debenture is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Debenture, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers, shall authenticate a
replacement Debenture if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Debenture is replaced. The Company may charge for
its expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation of the Company and
shall be entitled to all benefits of this Indenture equally and proportionately
with all other Debentures duly issued hereunder.
SECTION 2.08 OUTSTANDING DEBENTURES
The Debentures outstanding at any time are all the Debentures authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding.
If a Debenture is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.
If the principal amount of any Debenture is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary of the Company or
an Affiliate of any of them) holds, on a redemption date, repurchase date or
maturity date, money sufficient to pay Debentures payable on that date, then on
and after that date such Debentures shall be deemed to be no longer outstanding
and shall cease to accrue interest.
Except as set forth in Section 2.09 hereof, a Debenture does not cease to
be outstanding because the Company or an Affiliate holds the Debenture.
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SECTION 2.09 TREASURY DEBENTURES
In determining whether the Holders of the required principal amount of
Debentures have concurred in any direction, waiver or consent, Debentures owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Debentures which a Trustee knows are so owned
shall be so disregarded.
SECTION 2.10 TEMPORARY DEBENTURES
Until definitive Debentures are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Debentures upon a written order of
the Company signed by two Officers and delivered or caused to be delivered to a
Trust Officer. Temporary Debentures shall be substantially in the form of
definitive Debentures but may have variations that the Company considers
appropriate for temporary Debentures and as shall be reasonably acceptable to
the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Debentures in exchange for temporary
Debentures.
Holders of temporary Debentures shall be entitled to all benefits of this
Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Debentures surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Debentures surrendered for
registration of transfer, exchange, payment, replacement or cancellation, and
the Company shall, by a written order, signed by two Officers, direct that
cancelled Debentures be returned to it. The Company may not issue new Debentures
to replace Debentures that it has paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Debentures, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Debentures and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Debenture and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon written request of the Company, the Trustee
in the name and at the expense of the Company) shall mail or cause to be mailed
to Holders a notice that states the special record date, the-related payment
date and the amount of such interest to be paid.
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SECTION 2.13 CUSIP NUMBERS
The Company in issuing the Debentures 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 Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE 3
OPTIONAL REDEMPTION
SECTION 3.01 NOTICES TO TRUSTEE
If the Company elects to redeem Debentures pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate stating that such redemption shall occur pursuant to
Section 3.07 hereof and stating the redemption date, the principal amount of
Debentures to be redeemed and the redemption price.
SECTION 3.02 SELECTION OF DEBENTURES TO BE REDEEMED
If less than all of the Debentures are to be redeemed at any time,
selection of the Debentures will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
Debentures are listed or, if the Debentures are not so listed, on a pro rata
basis, by lot or by such method as the Trustee deems fair and appropriate;
provided that no Debentures in denominations of $25.00 or less shall be redeemed
in part. The Trustee may select for redemption any portion (equal to $25.00 or
any integral multiple thereof) of the principal of Debentures that have
denominations larger than $25,00, except that if all of the Debentures of a
Holder are redeemed, the entire outstanding amount of Debentures held by such
Holder, even if not a multiple of $25.00, will be redeemed. Except as provided
in the preceding sentence, provisions of this Indenture that apply to Debentures
called for redemption also apply to portions of Debentures called for
redemption.
The Trustee shall promptly notify the Company in writing of the Debentures
selected for redemption and, in the case of any Debenture selected for partial
redemption, the principal amount thereof to be redeemed. The particular
Debentures to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Debentures not previously called for redemption.
SECTION 3.03 NOTICE TO HOLDERS
(a) If the Company elects to redeem Debentures pursuant to Section 3.07
hereof, at least 30 days but not more than 60 days before a redemption date, the
Company shall mail, or cause to be mailed, by first class mail a notice to each
Holder whose Debentures are to be redeemed at its registered address.
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The notice shall identify the Debentures, including CUSIP numbers, if any,
to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Debenture is being redeemed in part, the portion of the
principal amount of such Debenture to be redeemed and that, after the redemption
date, upon cancellation of such Debenture, a new Debenture or Debentures in
principal amount equal to the unredeemed portion shall be issued;
(4) the name and address of the Paying Agent;
(5) that Debentures called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the redemption
price;
(6) that, unless the Company defaults in making such redemption payment,
interest on Debentures or portions of them called for redemption ceases to
accrue on and after the redemption date;
(7) the paragraph of the Debentures and/or Section of this Indenture
pursuant to which the Debentures are being called for redemption; and
(8) the aggregate principal amount of Debentures that are being redeemed.
(b) At the Company's request, the Trustee shall give the notice required
in Section 3.03(a) hereof in the Company's name and at its expense; provided,
however, that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in Section 3.03(a) hereof.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section 3.03 hereof
(after the Trustee has received the notice provided for in Section 3.01 hereof,
Debentures called for redemption become irrevocably due and payable on the
redemption date and at the redemption price stated in such notice and shall
cease to bear interest from and after the redemption date (unless the Company
shall fail to make payment of the redemption price or accrued interest on the
redemption date). Upon surrender to the Paying Agent, such Debentures shall be
paid at the redemption price, and interest to the redemption date, but interest
installments whose maturity is on or prior to the redemption date will be
payable to the Holder of record at the close of business on the relevant record
dates referred to in the Debentures. A notice of redemption may not be
conditional.
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SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money (in next-day funds) sufficient
to pay the redemption price of, and interest on, all Debentures to be redeemed
on that date other than Debentures or portions thereof called for redemption on
that date which have been delivered by the Company to the Trustee for
cancellation at least 1 Business Day prior to the redemption date. The Trustee
or the Paying Agent shall return to the Company any such money that is so
deposited and that is not required for such purpose.
If the Company complies with the preceding paragraph, interest on the
Debentures or portions thereof to be redeemed, whether or not such Debentures
are presented for payment, will cease to accrue on the applicable redemption
date. If any Debenture called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, then interest will be paid on the unpaid principal from
the redemption date until such principal is paid and on any interest not paid on
such unpaid principal, in each case, at the rate provided in the Debentures and
in Section 4.01 hereof.
SECTION 3.06 DEBENTURES REDEEMED IN PART
Upon cancellation of a Debenture that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Debenture equal in principal amount to the unredeemed portion
of the Debenture surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
The Debentures may be redeemed, at the option of the Company, in whole or
in part, at the redemption prices (expressed as a percentage of the principal
amount) set forth in the table below, plus accrued and unpaid interest
(including an amount equal to prorated interest from the most recent Interest
Payment Date to the redemption date), if any, if redeemed during the 12-month
periods beginning on September 15 indicated in the table below:
<TABLE>
<CAPTION>
If Redeemed During The 12 Month Period Beginning Percentage
------------
September 15
- ------------
<S> <C>
1995 114%
1996 112%
1997 110%
1998 108%
1999 and thereafter 100%
</TABLE>
Any redemption pursuant to this Section 3.07 shall be made, to the extent
applicable, pursuant to the provisions of Sections 3.01 through 3.06 hereof.
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ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF DEBENTURES
The Company shall pay the principal of and interest on the Debentures on
the dates and in the manner provided in the Debentures. Principal and interest
shall be considered paid on the date due if the Paying Agent, other than the
Company or a Subsidiary of the Company, holds on that date either (i) money
deposited by the Company in immediately available funds designated for and
sufficient to pay all principal and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the rate per annum equal to the then applicable interest rate on the
Debentures to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain, in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or the
Registrar) where Debentures may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Debentures and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Debentures 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 Borough of
Manhattan, The City of New York for such purposes. The Company shall 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.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
SECTION 4.03 SEC REPORTS; FINANCIAL STATEMENTS
(a) The Company shall file with the Trustee and mail, or cause the Trustee
to mail, copies to the Holders at their addresses appearing in the register of
Debentures maintained by the Registrar, within 15 days after filing with the
SEC, copies of all quarterly and annual financial reports and the information,
documents and other reports (or copies of such portions of any of the foregoing
that the SEC may by rules and regulations prescribe) which are required to be
filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In
addition, whether or not
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required by the rules and regulations of the SEC, the Company shall file with
the SEC for public availability a copy of all such information, documents and
reports and shall promptly make such information, documents and reports
available to investors who request them in writing. The Company shall also
comply with the provisions of TIA (S) 314(a).
(b) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to the Holders of Debentures under this Section 4.03.
The delivery of such reports, documents and information shall be at the sole
expense of the Company.
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).
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his knowledge the Company has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest on the Debentures are
prohibited or, if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 hereof shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Articles 4 or 5 of this Indenture or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Debentures are outstanding,
(i) deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto and (ii) promptly notify the
Trustee of any Change of Control.
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SECTION 4.05 COMPLIANCE WITH LAWS, TAXES
The Company shall, and shall cause each of its Subsidiaries to, comply with
all statutes, laws, ordinances, or government rules and regulations to which it
is subject, noncompliance with which would materially adversely affect the
business, earnings, properties, assets or condition, financial or otherwise, of
the Company and its Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, pay prior
to delinquency all taxes, assessments, and governmental levies except such as
are contested in good faith and by appropriate proceedings.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the Company's
obligation to pay the Debentures or comply with and perform its obligations
under this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law insofar as such
law applies to the Debentures, and covenants that it shall not, by resort to any
such law, 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 has been enacted.
SECTION 4.07 LIMITATIONS ON RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly (i) declare or pay any dividend or make any distribution
on account of the Company's or any of its Subsidiaries' Capital Stock (other
than (a) dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or (b) dividends or distributions payable to
the Company or any of its Subsidiaries) or (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any of its
Subsidiaries (other than any such Equity Interests owned by the Company or any
of its Subsidiaries); provided, however, that the Company may repurchase shares
of Common Stock pursuant to "put options" required to be issued under Section
13.2 of the EVEREN Capital Corporation 401(k) and Employee Stock Ownership Plan
(the foregoing actions set forth in clauses (i) and (ii) being referred to as
"Restricted Payments"). Notwithstanding the foregoing, if at the time of a
proposed Restricted Payment and immediately after giving effect thereto, (y) no
Default or Event of Default shall have occurred and be continuing and (z) the
Company shall not have failed to make a Change of Control Offer within 120 days
after the Change of Control Date relating thereto, the Company shall be
permitted to after September 15, 2000, pay dividends with respect to its Capital
Stock in cash.
SECTION 4.08 LIMITATIONS ON INDEBTEDNESS
EVEREN Capital Corporation will not create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) other than Permitted
Indebtedness.
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SECTION 4.09 CHANGE OF CONTROL
Upon the occurrence of a Change of Control (the time of such Change of
Control being referred to herein as the "Change of Control Date"), the Company
will notify the Holders in writing of such occurrence and will make an offer to
purchase (as the same may be extended in accordance with applicable law, the
"Change of Control Offer") all then outstanding Debentures at a price equal to
the redemption prices specified under Section 3.07 on the Change of Control
Date, plus accrued and unpaid interest, if any, thereon to the Change of Control
Payment Date. Prior to the Change of Control Payment Date (as defined below),
the Company will either repay, or cause to be repaid, all outstanding Senior
Debt or obtain the requisite consents, if any, under all agreements governing
all such outstanding Senior Debt, to permit the repurchase of the Debentures.
Within 120 days following each Change of Control Date, the Company shall
mail the Change of Control Offer to Holders, with a copy to the Trustee and
Registrar, at their last registered address with a copy to the Trustee and the
Paying Agent setting forth:
(1) notice that a Change of Control has occurred and that each Holder of
Debentures then outstanding has the right to require the Company to repurchase,
for cash, such Holder's Debentures at a price equal to the then applicable
optional redemption price of the Debentures plus accrued and unpaid interest, if
any, thereon to the Change of Control Payment Date;
(2) the fact that the Company has the right to redeem the Debentures at the
specified redemption price and a statement as to whether the Company intends to
exercise such right;
(3) the purchase date, which shall be no earlier than 30 but no more than
60 days after the Change of Control Offer is mailed (the "Change of Control
Payment Date");
(4) a description of the Change of Control;
(5) a description of the procedure to be followed by such Holder in order
to have its Debentures repurchased, including that Holders electing to have any
of their Debentures purchased pursuant to a Change of Control Offer will be
required to surrender the Debentures, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Debenture completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date;
(6) the circumstances and relevant facts regarding such Change of Control
(including, but not limited to, pro forma historical financial information after
giving effect to such Change of Control, information regarding the Person or
Persons acquiring control and such Person's or Persons' business plans going
forward);
(7) the type and maximum number of securities whose holders have the right
to require the Company to repurchase such securities or which must otherwise be
redeemed as a result of such Change of Control and the estimated maximum
repurchase price of such securities (based on the then current market price of
such securities as of a recent date prior to the commencement of the Change of
Control Offer):
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(8) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Debentures delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Debentures purchased; and
(9) that Holders whose Debentures are being purchased only in part will be
issued new Debentures equal in principal amount to the unpurchased portion of
the Debentures surrendered; provided that each Debenture purchased and each such
new Debenture issued by the Company shall be in a principal amount of $25.00 or
integral multiples thereof.
Notwithstanding the foregoing, the Company will not be required to make or
consummate a Change of Control Offer until it has either repaid, caused to be
repaid or otherwise satisfied all Obligations under or in connection with the
then outstanding Senior Credit Documents or obtained the requisite consents, if
any, under all such outstanding Senior Credit Documents to permit the repurchase
of Debentures pursuant to such Change of Control Offer.
The Change of Control Offer shall be deemed to have commenced upon mailing
of the notice described in this Section 4.09 and shall remain open until the
fifth Business Day preceding the Change of Control Payment Date, unless a longer
offering period is required by law. If the Change of Control Payment Date is on
or after an interest payment record date and on or before the related Interest
Payment Date, any accrued interest will be paid to the person in whose name a
Debenture is registered at the close of business on such record date, and no
additional interest will be payable to Holders who tender Debentures pursuant to
the Change of Control Offer.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment Debentures or portions thereof tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Debentures or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee, the
Debentures so accepted together with an Officers' Certificate stating the
Debentures or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to each holder of Debentures so accepted, payment in an amount
equal to the purchase price for such Debentures, and the Trustee shall promptly
authenticate and mail to such holder a new Debenture equal in principal amount
to any unpurchased portion of the Debentures surrendered; provided that each
such new Debenture shall be in a principal amount of $25.00 or integral
multiples thereof. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to repurchase the Debentures as described above.
SECTION 4.10 CORPORATE EXISTENCE
Subject to Article 5 hereof, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Subsidiaries in accordance with the respective organizational
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documents of each Subsidiary and the rights (charter and statutory), licenses
and franchises of the Company and such Subsidiaries; provided that the Company
will not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.11 CALCULATION OF ORIGINAL ISSUE DISCOUNT
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year.
SECTION 4.12 O.I.D. ALTERNATIVE
The Company shall 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 Service and
the Holders of the Notes relating to original issue discount, including, without
limitation, Form 1099-OID or any successor form.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another Person unless:
(1) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
has been made is a corporation organized or existing under the laws of the
United States, any State thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made assumes all the obligations of the
Company under the Debentures and this Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default has
occurred and is continuing;
(4) the Company or the corporation formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made, as applicable, has Consolidated
Net Worth (immediately after the transaction but prior
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to any purchase accounting adjustments resulting from the transaction) equal to
or greater than the Consolidated Net Worth of the Company immediately preceding
the transaction; and
(5) the Company delivers to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate and an Opinion of Counsel to the
combined effect that such sale, assignment, transfer, lease, conveyance or other
disposition and, if applicable, such supplemental indenture, comply with the
terms of this Indenture and that all conditions precedent to such sale,
assignment, transfer, lease, conveyance or other disposition have been
satisfied.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company or any
assignment of its obligations under this Indenture or the Debentures in
accordance with Section 5.01 hereof, the successor formed by such consolidation
or into or with which the Company is merged or to which such sale, lease,
conveyance or other disposition or assignment is made (the "Successor") 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 had
been named as the Company herein and the predecessor Company, in the case of a
sale, lease, conveyance or other disposition or assignment, shall be released
from all obligations under this Indenture and the Debentures.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) a default in the payment when due of interest on the Debentures and
such Default continues for a period of 30 days;
(2) a default by the Company in the payment of principal with respect to
any Debenture when the same becomes due and payable, whether at maturity, upon
redemption or otherwise, whether or not such payment is prohibited by Article 10
hereof;
(3) the failure by the Company to comply with any of its other agreements
or covenants in, or provisions of, the Debentures or this Indenture and the
Default continues for the period and after the notice specified below;
(4) the occurrence of an event of default with respect to any Indebtedness
of the Company or any of its Subsidiaries that (a) has caused the acceleration
of such Indebtedness or (b) constitutes a default (beyond any applicable grace
periods) in the payment of such Indebtedness at final maturity of such
Indebtedness if such Indebtedness is not repaid within 60 days of such
acceleration or default in payment;
(5) the Company and any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
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(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) the admission by the Company or any of its Significant
Subsidiaries in writing of its inability to pay its debts as they become due; or
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against the Company or any of its Significant
Subsidiaries as debtor in an involuntary case,
(b) appoints a Custodian of the Company or any of its Significant
Subsidiaries or a Custodian for all or substantially all of the property of the
Company, or any of its Significant Subsidiaries, or
(c) orders the liquidation of the Company or any of its Significant
Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days.
A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least a majority in principal amount of the
Debentures then outstanding notify the Company and the Trustee of the Default
and such Default is not cured within 60 days of such notice. All notices of
Default must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default."
SECTION 6.02 ACCELERATION
If an Event of Default occurs and is continuing (other than an Event of
Default with respect to the Company specified in clause (5) or (6) of Section
6.01), the Trustee by notice to the Company or the Holders of at least a
majority in principal amount of the Debentures then outstanding, by written
notice to the Company (and to the Trustee if such notice is given by the Holders
of the Debentures) may, and the Trustee at the request of such Holders must,
declare all unpaid principal of, and interest on the Debentures to be due and
payable immediately; provided, however, that so long as the Senior Credit
Documents shall be in full force and effect, if an Event of Default shall have
occurred and be continuing (other than an Event of Default specified in clause
(5) or (6) of Section 6.01 with respect to the Company) any such acceleration
shall not be effective until the earlier to occur of (a) five Business Days
following delivery of a notice of such acceleration to the Credit Agent under
the Senior Credit Documents and (b) the acceleration of any Indebtedness under
the Senior Credit Documents. In case an Event of Default with respect to the
Company specified in clause (5) or (6) of Section 6.01 hereof occurs, principal
of and interest
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on the Debentures will become immediately due and payable without any
declaration of acceleration.
SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal and interest then due on
the Debentures or to enforce the performance of any provision of the Debentures
in this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Debentures or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
The Holders of a majority in aggregate principal amount of the Debentures
then outstanding by notice to the Trustee may on behalf of Holders of all of the
Debentures waive any existing Default or Event of Default and its consequences
hereunder except a continuing Default or Event of Default in the payment of
principal of, or interest on any Debenture held by a non-consenting Holder.
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 6.05 CONTROL BY MAJORITY
The Holders of a majority in aggregate principal amount of the then
outstanding Debentures may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that the Trustee determines
may be unduly prejudicial to the rights of other Holders, or that may involve
the Trustee in personal liability.
SECTION 6.06 LIMITATIONS ON SUITS
A Holder may not pursue a remedy with respect to this Indenture or the
Debentures unless:
(1) the Holder gives to the Trustee written notice of a continuing Event of
Default;
(2) the Holders of a majority in aggregate principal amount of the then
outstanding Debentures make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee an indemnity satisfactory
to the Trustee against any loss, liability or expense (including, without
limitation, fees of counsel);
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(4) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer of indemnity; and
(5) during such 30-day period the Holders of a majority in aggregate
principal amount of the then outstanding Debentures do not give the Trustee a
direction which is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Debenture to receive payment of principal of, and interest on its
Debenture, on or after the respective due dates expressed in such Debenture
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(1) or (2) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the amount of
principal and interest remaining unpaid on the Debentures, determined in
accordance with Section 6.02 hereof and interest on overdue principal and 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.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor on the Debentures), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian 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 to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders of the
Debentures may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or
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otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
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 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to holders of Senior Debt to the extent required by Article 10
hereof;
Third: subject to Article 10 hereof, to Holders for amounts due and unpaid
on the Debentures for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Debentures
for principal and interest, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Article 6.
SECTION 6.11 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 or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 hereof or a suit by Holders of more than 10% in principal amount of the
then outstanding Debentures.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in such exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon Officers' Certificates or Opinions of Counsel
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine such certificates and opinions to determine
whether or not, on their face, they appear to conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.05 hereof; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee is not obligated to
perform any duty or exercise any right or power under this Indenture at the
request of any Holder unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
(including, without limitation, fees of counsel).
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer.
(f) the Trustee may consult with counsel of its selection and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(g) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(i) 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.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the owner or
pledgee of Debentures and may otherwise deal with the Company or any of its
Affiliates with the same rights it would have if it were not Trustee. However,
if and to the extent required by the TIA, in the event that the Trustee acquires
any conflicting interest it must eliminate such conflict within 90 days, apply
to the SEC for permission to continue as trustee or resign. Any Agent may do the
same with like rights and duties. The Trustee is also subject to Sections 7.10
and 7.11 hereof.
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SECTION 7.04 TRUSTEE'S DISCLAIMER
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Debentures; it shall not be accountable for the Company's use
of the proceeds from the Debentures or any money paid to the Company or upon the
Company's direction under any provision hereof; it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee; and it shall not be responsible for any statement or recital herein or
any statement in the Debentures other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Holder a notice of the
Default or Event of Default within 90 days after it occurs, or if later, within
ten days after such Default or Event of Default becomes known to the Trustee
unless such Default or Event of Default has been cured. Except in the case of a
Default or Event of Default in payment of principal of, or interest on any
Debenture or that resulted from a failure to comply with Section 4.09 hereof,
the Trustee may withhold the notice if and so long as a committee of its Trust
Officers determines in good faith that withholding the notice is in the
interests of Holders. The Trustee shall not be deemed to have knowledge of any
Default or Event of Default unless a Trust Officer shall have actual knowledge
thereof.
The Company shall file with the Trustee written notice of the occurrence of
any Default or Event of Default within five Business Days of its becoming aware
of any such Default or Event of Default. SECTION 7.06 REPORTS BY TRUSTEE TO
HOLDERS Within 60 days after each September 13, beginning with the first
September 13 to occur after the first issuance of the Debentures, and for so
long as the Debentures remain outstanding, the Trustee shall mail to Holders a
brief report dated as of such reporting date that complies with TIA (S) 313(a)
(but if no event described in TIA (S) 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
shall also transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each stock exchange on which the Debentures are listed. The
Company shall promptly notify the Trustee when the Debentures are listed on any
stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee such compensation as the Trustee and
the Company shall from time to time agree in writing for its acceptance of this
Indenture and services hereunder. The Trustee's compensation shall not be
limited by any law relating to compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
disbursements, advances and expenses incurred by it. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
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The Company shall indemnify and hold harmless the Trustee and its
directors, officers, employees and agents against any loss, liability or
expense, including taxes (other than taxes based upon, measured by or determined
by the income of the Trustee) (including, without limitation, fees and expenses
of counsel) incurred by it arising out of or in connection with the acceptance
or administration of its duties under this Indenture including, without
limitation, costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of its powers and
duties hereunder, except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Debentures on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Debentures. Such Lien shall survive the satisfaction and
discharge of the Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(5) or (6) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 7.08 REPLACEMENT OF TRUSTEE
The Trustee may resign and be discharged from the trust hereby created by
so notifying the Company. The Holders of a majority in principal amount of the
then outstanding Debentures may remove the Trustee by so notifying the Trustee
and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
Notwithstanding the foregoing, a resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this Section 7.08.
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If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Debentures
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the benefit
of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
Subject to Section 7.10 hereof, if the Trustee consolidates, merges or
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation or national banking association, the successor
entity without any further act shall be the successor Trustee. In case any
Debentures have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation of such
authenticating trustee may adopt such authentication and deliver the Debentures
so authenticated with the same effect as if such successor trustee had itself
authenticated such Debentures.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that shall be a corporation
organized and doing business under the laws of the United States of America, any
state thereof or the District of Columbia authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
Federal or state (or the District of Columbia) authority and shall have a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to TIA (S) 311(a), excluding therefrom any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
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SECTION 7.12 MONEY HELD IN TRUST
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
--------------------------------------------------------
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Debentures
upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE
------------------------------
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Debentures on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Debentures, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Debentures and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Debentures to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Debentures
when such payments are due, (b) the Company's obligations with respect to such
Debentures under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
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SECTION 8.03 COVENANT DEFEASANCE
-------------------
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, and 4.09 and 4.11 hereof with respect to the outstanding Debentures on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Debentures shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Debentures shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Debentures, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01 hereof, but, except as specified above, the
remainder of this Indenture and such Debentures shall be unaffected thereby.
In addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, Section 6.01(4) hereof and non-compliance with
Sections 5.01(4) and (6) shall not constitute an Event of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
------------------------------------------
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Debentures:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and interest on the outstanding Debentures
on the stated maturity or on the applicable redemption date, as the case may be,
of such principal or installment of principal of, or interest on the outstanding
Debentures;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
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(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Debentures pursuant to this Article 8 concurrently
with such incurrence) or insofar as Sections 6.01(5) or 6.01(6) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
-------------------------------------------------------
TRUST; OTHER MISCELLANEOUS PROVISIONS.
- -------------------------------------
Subject to Section 8.06 hereof, all money and Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 hereof in respect of the outstanding Debentures shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Debentures of all sums due and to become due
thereon in respect of principal and interest, but such money need not be
segregated from other funds except to the extent-required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section
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8.04 hereof or the principal and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Debentures.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or Government Securities held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
--------------------
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
any Debenture and remaining unclaimed for two years after such principal and
interest have become due and payable shall be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Debenture shall thereafter, as a secured creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, shall at
the expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT.
-------------
If the Trustee or Paying Agent is unable to apply any money or Government
Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be,
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Debentures shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.02 or
8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 8.02 or 8.03 hereof, as the case may
be; provided, however, that, if the Company makes any payment of principal of,
or interest on any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Debentures to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS
--------------------------
Without the consent of any Holder of Debentures, the Company and the
Trustee may amend or supplement this Indenture or the Debentures:
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(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Debentures;
(3) to provide for the assumption of the Company's obligations to Holders
in the case of a merger or consolidation pursuant to Article 5 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under this Indenture of any such Holder; or
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA if required by law to be so
qualified.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company in the execution of any
such amended or supplemental indenture authorized or permitted by the terms of
this Indenture and make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
any such amended or supplemental indenture that affects its own rights, duties
or immunities under this Indenture or otherwise. After an amendment or waiver
under this Section 9.01 becomes effective, the Company shall mail to the Holders
of each Debenture affected thereby a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental indenture.
SECTION 9.02 WITH CONSENT OF HOLDERS
-----------------------
Except as provided below in this Section 9.02, this Indenture and the
Debentures may be amended or supplemented with the written consent of the
Holders of at least a majority in principal amount of the Debentures then
outstanding (including consents obtained in connection with a tender offer
or exchange offer for Debentures).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
the Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Company in
the execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
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Subject to Sections 6.04 and 6.07 hereof, any existing default or
compliance with any provision of the Indenture or the Debentures may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Debentures (including consents obtained in connection with a tender
offer or an exchange offer for Debentures). However, without the consent of
each Holder affected, an amendment or waiver under this Section may not (with
respect to any Debenture held by a non-consenting Holder):
(a) reduce the principal amount of Debentures whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Debenture
or alter or waive any of the provisions with respect to the redemption or
repurchase of the Debentures:
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Debenture;
(d) waive a Default or Event of Default in the payment of principal of,
or interest on the Debentures (except a rescission of acceleration of the
Debentures by the Holders of at least a majority in aggregate principal amount
of the then outstanding Debentures and a waiver of the payment default that
resulted from such acceleration);
(e) make any Debenture payable in money other than that stated in such
Debenture;
(f) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions;
(g) waive a redemption or repurchase payment with respect to any
Debenture;
(h) make any change in this sentence of this Section 9.02; or
(i) make any change in Article 10 that adversely affects the rights of
any Holders.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of this Indenture (and the obligation of the Company
to obtain any such consent otherwise required from such Holder) may be subject
to the requirement that such Holder shall have been the Holder of record of any
Debentures with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of this Indenture.
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 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.
38
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9.03 COMPLIANCE WITH TRUST INDENTURE ACT
-----------------------------------
Every amendment or supplement to this Indenture or the Debentures shall
comply in form and substance with the TIA as then in effect.
9.04 REVOCATION AND EFFECT OF CONSENTS
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Debenture is a continuing consent by the Holder and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture, even if notation of the consent
is not made on any Debenture. However, any such Holder or subsequent Holder may
revoke the consent as to his or her Security or portion of a Debenture if the
Trustee receives written notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Debentures required hereunder for such amendment or waiver
to be effective shall have also been given and not revoked within such 90-day
period.
After an amendment, supplement or waiver becomes effective it shall bind
every Holder, unless it is of the type described in any of clauses (a) through
(i) of Section 9.02 hereof. In such case, the amendment, supplement or waiver
shall bind each Holder of a Debenture who has consented to it and every
subsequent Holder of a Debenture that evidences the same Indebtedness as the
consenting Holder's Debenture.
SECTION 9.05 NOTATION ON OR EXCHANGE OF DEBENTURES
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Debenture, the
Trustee may require the Holder of the Debenture to deliver it to the Trustee.
The Trustee may place an appropriate notation about the changed terms and return
it to the Holder and the Trustee may place an appropriate notation on any
Debenture thereafter authenticated. Alternatively, if the Company or Trustee so
determines, the Company in exchange for all the Debentures shall issue and the
Trustee shall authenticate new Debentures that reflect the changed terms.
Failure to make the appropriate notation or issue a new Debenture shall not
affect the validity and effect of such amendment, supplement or waiver.
39
<PAGE>
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
--------------------------------
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing or refusing to sign such
amended or supplemental indenture, the Trustee shall be entitled to receive and,
subject to Section 7.01 hereof, shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amended or supplemental indenture is authorized or permitted by this Indenture,
that it is not inconsistent herewith, and that it will be valid and binding upon
the Company in accordance with its terms.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE
------------------------
The Company agrees, and each Holder by accepting a Debenture agrees,
that the Indebtedness evidenced by the Debenture is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt (including
all Obligations in respect thereof). The subordination provisions of this
Article 10 are made for the benefit of the holders of all Senior Debt (whether
outstanding on the date hereof or issued hereafter), such holders of Senior Debt
are made obligees under this Article 10 and such holders of Senior Debt or any
of them may enforce the provisions of this Article 10.
SECTION 10.02 CERTAIN DEFINITIONS
-------------------
"Representative" means (i) with respect to the Senior Credit Documents,
the Credit Agent and (ii) with respect to any other Senior Debt, the indenture
trustee or other trustee, agent or representative for such Senior Debt.
"Senior Debt" means (i) all Existing Indebtedness of the Company, (ii)
Indebtedness of the Company pursuant to the Senior Credit Documents, (iii) all
Indebtedness of the Company that is permitted to be incurred under this
Indenture that is not by its terms subordinated to the Debentures, (iv) all
Obligations of the Company with respect to the foregoing clauses (i), (ii) and
(iii), and (v) all (including all subsequent) renewals, extensions, amendments,
refinancing, repurchases or redemptions, modifications, replacements or
refundings thereof, in whole or in part (whether or not coincident therewith),
that are permitted by this Indenture. Without limiting the generality of the
foregoing, (a) "Senior Debt" shall include the principal of, and interest on all
Obligations of every nature of the Company from time to time owed to the lenders
under the Senior Credit Documents, including, without limitation, principal of
and interest on, and all fees, expenses and other Obligations payable under the
Senior Credit Documents and (b) in the case of Indebtedness under the Senior
Credit Documents, "Senior Debt" shall include interest accruing thereon
subsequent to the filing of a petition for bankruptcy, whether or not the claim
for such interest is an allowed claim. Notwithstanding anything to the contrary
in the foregoing, "Senior Debt" will not include (A) any Indebtedness between or
among the Company and any of
40
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its Subsidiaries, (B) any Indebtedness incurred for the purchase of goods or
materials or for services obtained in the ordinary course of business (other
than with the proceeds of borrowings under the Senior Credit Documents or
revolving credit borrowings), (C) any Indebtedness issued in violation of this
Indenture or (D) any liability for federal, state, local or other taxes owed or
owing by the Company or any Subsidiary of the Company.
A distribution may consist of cash, securities or other property, by set-
off or otherwise.
SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY
------------------------------------
Upon any payment or other distribution to creditors of the Company in any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relating to the Company, its creditors, as such, or the Company's assets, or any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary and whether or not involving any insolvency or bankruptcy, or any
assignment for the benefit of creditors or other marshalling of the assets or
liabilities of the Company (any such event, a "Proceeding"):
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash or Cash Equivalents of all Obligations with respect to the Senior
Debt (including, in the case of the Senior Credit Documents, any interest
accruing subsequent to the filing of a petition for bankruptcy at the rate
specified in the Senior Credit Documents, whether or not such interest is an
allowed claim) before Holders shall be entitled to receive any payment of any
Obligations with respect to the Debentures; and
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) of this Section 10.03) are paid in full in cash or Cash
Equivalents, any payment or distribution to which Holders would be entitled but
for this Article 10 shall be made to holders of Senior Debt, pro rata;
except that, in the case of clauses (1) and (2), Holders may receive securities
that are subordinated to at least the same extent as the Debentures are
subordinated to (y) Senior Debt and (z) any securities issued in exchange for
Senior Debt.
Upon the occurrence of any such Proceeding with respect to the Company, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than securities that are
subordinated to at least the same extent as the Debentures are subordinated to
(y) Senior Debt and (z) any securities issued in exchange for Senior Debt), to
which the Holders or the Trustee would be entitled except for the provisions of
this Article 10 shall be paid by the Company, any custodian, receiver, trustee,
assignee, liquidator or similar official or other Person making such payment or
distribution, or by the Holders or by the Trustee if received by them (subject,
in the case of the Trustee, to Section 10.12 of this Indenture), directly to the
holders of the Company's Senior Debt (pro rata to such holders on the basis of
the respective amounts of Senior Debt held by them) or their Representatives, as
their interests may appear, for application to the payment of all outstanding
Senior Debt until all such Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to all other payments or distributions to, or
provisions made for, holders of such Senior Debt.
41
<PAGE>
SECTION 10.04 DEFAULT ON SENIOR DEBT
----------------------
The Company may not make any payment or distribution of any kind or
character to the Trustee or any Holder in respect of Obligations (other than in
the case of the Trustee, fees, expenses and all other amounts payable pursuant
to Section 7.07 hereof) with respect to the Debentures, and may not acquire from
the Trustee or any Holder any Debentures for cash or property (other than
securities that are subordinated to at least the same extent as the Debentures
are subordinated to (i) Senior Debt and (ii) any securities issued in exchange
for Senior Debt) until all principal and other Obligations with respect to the
Senior Debt (including, in the case of the Senior Credit Documents, any interest
accruing subsequent to the filing of a petition for bankruptcy at the rate
specified in the Senior Credit Documents, whether or not such interest is an
allowed claim) have been paid in full in cash or Cash Equivalents (a) if a
default in payment of any principal or other Obligations with respect to such
Senior Debt occurs and is continuing, (b) for a period of 180 days after the
occurrence of a default (other than a payment default) in respect of such Senior
Debt and for successive periods of 180 days if the default is continuing at the
end of such 180-day period or another default (other than a payment default) in
respect of such Senior Debt has occurred or (c) upon the maturity of any Senior
Debt, until payment of all Obligations with respect to such Senior Debt
(including, in the case of the Senior Credit Documents, any interest accruing
subsequent to the filing of a petition for bankruptcy at the rate specified in
the Senior Credit Documents, whether or not such interest is an allowed claim)
that is then due and payable. In addition, upon the acceleration of the
Debentures prior to their stated maturity, holders of Senior Debt must receive
payment in full in cash or Cash Equivalents or in a manner satisfactory to the
holders of such Senior Debt, before any payment may be made to Holders of the
Debentures (other than securities that are subordinated to at least the same
extent as the Debentures are subordinated to (y) Senior Debt and (z) any
securities issued in exchange for Senior Debt).
If any holder of Senior Debt is required by any court or otherwise to
return to either the Company or the Trustee, or similar official acting in
relation to the Company, any amount paid by the Company to such holder of Senior
Debt, the provisions of this Section 10, to the extent theretofore discharged,
shall be reinstated in full force and effect; provided, however, that any
amounts paid pursuant to this Indenture to Holders of Debentures shall not be
subject to disgorgement pursuant to the provisions of this paragraph.
SECTION 10.05 ACCELERATION OF DEBENTURES
--------------------------
If payment of the Debentures is accelerated because of an Event of Default,
the Company shall promptly notify the Representatives of Senior Debt of such
acceleration.
SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER
-----------------------------------
In the event that the Trustee or any Holder receives any payment of, or
other distribution with respect to, any Obligations with respect to the
Debentures (other than in the case of the Trustee, fees, expenses and all other
amounts payable pursuant to Section 7.07 hereof and other than securities that
are subordinated to at least the same extent as the Debentures are
42
<PAGE>
subordinated to (y) Senior Debt and (z) all securities issued in exchange for
Senior Debt) at a time when such payment or distribution is prohibited by this
Article 10 (subject, in the case of the Trustee, to Section 10.12 of this
Indenture), then and in such event such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Debt (pro rata as to
each such holder on the basis of the amount of Senior Debt held by it) or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued (pro rata as to each such holder on the basis
of the amount of Senior Debt held by it) for application to the payment of all
Obligations due to the holders of Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in cash or Cash Equivalents in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
If a payment or distribution is made to the Trustee or any Holder (other
than in the case of the Trustee, fees, expenses and all other amounts payable
pursuant to Section 7.07 hereof and other than securities that are subordinated
to at least the same extent as the Debentures are subordinated to (y) Senior
Debt and (z) all securities issued in exchange for Senior Debt) (subject, in the
case of the Trustee, to Section 10.12 of this Indenture), which payment or
distribution is prohibited pursuant to this Article 10, the Trustee or such
Holder who receives the distribution shall hold it in trust for the benefit of,
and, upon written request, pay it over to, the holders of Senior Debt (pro rata
as to each such holder on the basis of the amount of Senior Debt held by it), or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Debt may have been issued (pro rata as to each such holder on the
basis of the amount of Senior Debt held by it), for application to the payment
of all Obligations due to the holders of Senior Debt remaining unpaid to the
extent necessary to pay such Obligations in full in cash or Cash Equivalents in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, unless such payment or distribution is
made as a result of the willful misconduct or negligence of the Trustee.
Notwithstanding the provisions of this Article Ten 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 to or by
the Trustee in respect of the Debentures, unless and until the Trustee shall
have received written notice thereof at the address specified in Section 11.02
from the Company or a holder of Senior Indebtedness or from any trustee or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 7.01, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if a Trust Officer of
the Trustee shall not have received, at least three Business Days prior to the
date upon which by the terms hereof any such money may become
43
<PAGE>
payable for any purpose, the notice with respect to such money provided for in
this Section 10.06, 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 purpose for which such money was received and
shall not be affected by any notice to the contrary which may be received by it
within three Business Days prior to such date.
44
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SECTION 10.07 NOTICE BY COMPANY
-----------------
The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts known to the Company that would cause a payment of any
Obligations with respect to the Debentures to violate this Article 10, but
failure to give such notice shall not affect the subordination of the Debentures
to the Senior Debt provided in this Article 10 or the rights of the holders of
Senior Debt under this Article 10.
SECTION 10.08 SUBROGATION
-----------
After all Obligations with respect to all Senior Debt are paid in full in
cash or Cash Equivalents and until the Debentures are paid in full, Holders
shall be subrogated (equally and ratably with all other Indebtedness ranking
pari passu with the Debentures) to the rights of holders of Senior Debt to
receive distributions applicable to Senior Debt to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Debt. For the purposes of this Section 10.08, a distribution made under this
Article 10 to holders of Senior Debt which otherwise would have been made to
Holders except for the provisions of this Article 10, and payments over pursuant
to the provisions of this Article 10 to holders of Senior Debt by Holders or the
Trustee, shall not, as between the Company and Holders, be deemed to be a
payment by the Company in respect of Senior Debt.
SECTION 10.09 RELATIVE RIGHTS
---------------
This Article 10 defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of, and interest
on the Debentures in accordance with their terms;
(2) affect the relative rights of the Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
and owners of Senior Debt to receive distributions and payments otherwise
payable to Holders and to enforce their rights under this Article 10.
If the Company fails because of this Article 10 to pay principal of or
interest on a Debenture on the due date, the failure is still a Default or Event
of Default.
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY
--------------------------------------------
No right of any holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by the Debentures as provided in this Article 10 shall be
prejudiced or impaired by any act or failure to act by the Company or any holder
of Senior Debt or by the Company's
45
<PAGE>
failure to comply with this Indenture or the Debentures or any other agreement
regardless of any knowledge thereof which any holder of Senior Debt may have or
be charged.
Without in any way limiting this Section 10.10, the holders of any Senior
Debt may, at any time and from time to time, without the consent of or notice to
any Holders, without incurring any liabilities to any Holder and without
impairing or releasing the subordination and other benefits provided in this
Indenture or the Holders' obligations to the holders of such Senior Debt, even
if any Holder's right of reimbursement or subrogation or other right or remedy
is affected, impaired or extinguished thereby, do any one or more of the
following: (i) amend, renew, exchange, extend, modify or supplement in any
manner such Senior Debt or any instrument evidencing or guaranteeing or securing
such Senior Debt or any agreement under which such Senior Debt is outstanding
(including, but not limited to, changing the manner, place or terms of payment
or changing or extending the time of payment of, or renewing, exchanging,
amending or altering, (1) the terms of such Senior Debt, (2) any security for,
or any guarantee of, such Senior Debt, (3) any liability of any obligor on such
Senior Debt (including any guarantor) or any liability issued in respect of such
Senior Debt; (ii) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any property pledged,
mortgaged or otherwise securing such Senior Debt or any liability of any obligor
thereon, to such holder, or any liability issued in respect thereof; (iii)
settle or compromise any such Senior Debt or any other liability of any obligor
of such Senior Debt to such holder or any security therefor or any liability
issued in respect thereof in any matter or order; and (iv) fail to take or to
record or otherwise perfect, for any reason or for no reason, any lien or
security interest securing such Senior Debt by whomsoever granted, exercise or
delay in or refrain from exercising any right or remedy against any obligor or
any guarantor or any other Person, elect any remedy and otherwise deal freely
with any obligor and any security for such Senior Debt or any liability of any
obligor to the holders of such Senior Debt or any liability issued in respect of
such Senior Debt.
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative, if any.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12 RIGHTS OF TRUSTEE AND PAYING AGENT
----------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if the Trustee
shall in good faith mistakenly pay over or distribute to Holders of Debentures
or to the Company or to any other person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled
46
<PAGE>
by virtue of this Article Ten or otherwise. Notwithstanding the provisions of
this Article 10 or any other provisions 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 or distribution by the Trustee, or the taking of any
action by the Trustee, and the Trustee and the Paying Agent may continue to make
payments on the Debentures unless it shall have received at its Corporate Trust
Office at least one Business Day prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Debentures to violate this Article 10. Only the Company, a Representative or
a holder of an issue of Senior Debt may give such notice. Subject to Section
7.01 hereof, the Trustee shall be entitled to rely on the provision to it of
such written notice by a Person representing itself to be a holder of Senior
Debt (or a trustee or fiduciary therefor). Nothing in this Article 10 shall
impair the claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof. Except as set forth in the immediately preceding sentence, nothing
in this Section 10.12 shall limit the rights of holders of Senior Debt to
recover payments as contemplated by Section 10.06 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Nothing in this Article Ten shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION
-------------------------------------
Each Holder of a Debenture by its acceptance thereof authorizes and directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee as its attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company whether in bankruptcy, insolvency, receivership proceedings or
otherwise, the timely filing of a claim for the unpaid balance of the
indebtedness of the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to file
such a claim, the holders of Senior Debt, or any Representative, may file such a
claim on behalf of Holders of the Debentures.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 TRUST INDENTURE ACT CONTROLS
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S) 318(c), the imposed duties shall control.
SECTION 11.02 NOTICES
-------
Any notice or communication to the Company, the Trustee and the agent under
the Credit Agreement is duly given if in writing and delivered in person or
mailed by first-class mail
47
<PAGE>
(registered or certified, return receipt requested), facsimile or overnight air
courier guaranteeing next day delivery, to the other's address:
If to the Company:
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601
Attention: General Counsel
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Charles I. Cogut, Esq.
Facsimile No.: (212) 455-2502
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
If to the Credit Agent:
The Bank of New York
One Wall Street - 1st Floor
New York, New York 10286
Attention: Alexander F. Duka, Assistant Treasurer
Facsimile: (212) 809-9566
The Company, the Trustee and the Credit Agent by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged, if sent by facsimile
transmission; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to the Holder's address shown on the
register kept by the Registrar. Any notice or communication
48
<PAGE>
shall also be so mailed to any Person described in TIA (S) 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Debentures. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S) 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(1) a statement that the Person making such certificate or opinion
has read and understands such covenant or condition:
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
49
<PAGE>
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; provided that with respect to
matters of fact Opinions of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 11.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07 NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Debentures or this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Debentures waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Debentures.
SECTION 11.08 GOVERNING LAW
THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 11.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10 SUCCESSORS
All agreements of the Company in this Indenture and the Debentures
shall bind its successors.
SECTION 11.11 SEVERABILITY
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13 TRUSTEE AS PAYING AGENT AND REGISTRAR
50
<PAGE>
The Company initially appoints the Trustee as Paying Agent and Registrar.
51
<PAGE>
SECTION 11.14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
52
<PAGE>
SIGNATURES
Dated as of June 17, 1996 EVEREN CAPITAL CORPORATION
(SEAL)
By:_______________________________
Name: Daniel D. Williams
Title: Senior Executive Vice President,
Chief Financial Officer, and Treasurer
Dated as of June 17, 1996 THE BANK OF NEW YORK,
as Trustee
By:_______________________________
Name:
Title:
53
<PAGE>
EXHIBIT A
(Face of Security)
13 1/2% JUNIOR SUBORDINATED DEBENTURE DUE 2007
No. R ____________ $______________
CUSIP No. 299761AA4
EVEREN CAPITAL CORPORATION promises to pay to
or registered assigns,
the principal sum of
Dollars on September 15, 2007
Interest Payment Dates: March 15, June 15, September 15, and
December 15.
Record Dates: March 1, June 1, September 1, and December 1.
Dated: ____________, ____
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures
issued pursuant to the within-
mentioned Indenture.
THE BANK OF NEW YORK, EVEREN EVEREN CAPITAL CORPORATION
as Trustee CAPITAL
CORPORATION
(SEAL) By:/s/James R. Boris
-------------------------
Chairman of the Board and
Chief Executive Officer
By
Authorized Signature
By:/s/Janet L. Reali
-------------------------
Secretary
54
<PAGE>
(Back of Security)
13 1/2% JUNIOR SUBORDINATED DEBENTURE DUE 2007
of
EVEREN CAPITAL CORPORATION
Capitalized terms used herein shall have the meanings ascribed to them in
the Indenture unless otherwise indicated.
1. INTEREST; LIQUIDATED DAMAGES. EVEREN CAPITAL CORPORATION, a Delaware
corporation (the "Company"), promises to pay interest, in cash, on the principal
amount of this Debenture at 13 1/2% per annum from the date of issuance until
maturity. The Company will pay interest quarterly on March 15, June 15,
September 15 and December 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the original date
of issuance; provided that if there is no existing Default in the payment of
interest, and if this Debenture is authenticated between a record date referred
to on the face hereof and the next succeeding Interest Payment Date, interest
shall accrue from such next succeeding Interest Payment Date. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate per annum equal to the then
applicable interest rate on the Debentures to the extent lawful; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Debentures
(except defaulted interest), if any, to the Persons who are registered Holders
of Debentures at the close of business on the March 1, June 1, September 1, or
December 1, next preceding the Interest Payment Date, even if such Debentures
are cancelled after such record date and on or before such Interest Payment
Date. The Debentures will be payable as to principal and interest, in cash, at
the office or agency of the Company maintained for such purpose within or
without the City of New York, or, at the option of the Company, payment of
interest may be made by check mailed to the Holders of Debentures at their
addresses set forth in the register of Holders of Debentures.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Debentures under an Indenture dated as
of June 17, 1996 (the "Indenture") between the Company and the Trustee. The
terms of the Debentures include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Debentures are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The
55
<PAGE>
Debentures are general unsecured obligations of the Company limited to an
aggregate principal amount equal to $32,153,950 million.
5. SUBORDINATION. The Company's payment of the principal of, and
interest on the Debentures is subordinated to the prior payment in full in cash
or Cash Equivalents of all Senior Debt (including all Obligations in respect
thereof). Each Holder of Debentures by his acceptance hereof covenants and
agrees that all payments of the principal of and interest on the Debentures by
the Company shall be subordinated in accordance with the provisions of Article
10 of the Indenture, and each Holder accepts and agrees to be bound by such
provisions.
6. OPTIONAL REDEMPTION. The Debentures may be redeemed, at the
option of the Company, in whole or in part, at the redemption prices (expressed
as a percentage of the principal amount) set forth in the table below, plus
accrued and unpaid interest (including an amount equal to prorated interest from
the most recent Interest Payment Date to the redemption date), if any, if
redeemed during the 12-month periods beginning on September 15 indicated in the
table below:
<TABLE>
<CAPTION>
If Redeemed During The 12 Month Period Beginning September 15 Percentage
- ------------------------------------------------------------- ----------
<S> <C>
1995.......................................................... 114%
1996.......................................................... 112%
1997.......................................................... 110%
1998.......................................................... 108%
1999 and thereafter........................................... 100%
</TABLE>
56
<PAGE>
7. MANDATORY OFFERS TO REPURCHASE.
Following the occurrence of any Change of Control, the Company will be
required to offer to purchase (as the same may be extended in accordance with
applicable law, a "Change of Control Offer") all then outstanding Debentures at
the purchase price specified in Section 6 on the Change of Control Date, plus
accrued and unpaid interest, if any, thereon to the date of purchase (the
"Change of Control Payment"); in each case in accordance with and to the extent
provided in the Indenture. Prior to the Change of Control Payment Date, the
Company will either repay, or cause to be repaid, all outstanding Senior Debt or
obtain the requisite consents, if any, under all agreements governing all such
outstanding Senior Debt, to permit the repurchase of the Debentures. The Change
of Control Offer shall remain open until the fifth Business Day preceding the
Change of Control Payment Date, unless a longer offering period is required by
law. On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment Debentures or portions thereof tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Debentures or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee, the
Debentures so accepted together with an Officers' Certificate stating the
Debentures or portions thereof tendered to the Company. The Paying Agent shall
promptly mail to each holder of Debentures so accepted payment in an amount
equal to the purchase price for such Debentures tendered in the Change of
Control Offer.
Notwithstanding the foregoing, the Company will not be required to make or
consummate a Change of Control Offer until it has either repaid, caused to be
repaid or otherwise satisfied all Obligations under or in connection with the
then outstanding Senior Credit Documents or obtained the requisite consents, if
any, under such outstanding Senior Credit Documents to permit the repurchase of
Debentures pursuant to
57
<PAGE>
such Change of Control Offer.
A Holder of Debentures may tender or refrain from tendering all or any
portion of his Debentures at his discretion by completing the form entitled
"OPTION OF HOLDER TO ELECT PURCHASE" appearing on this Debenture. Debentures
tendered must be in integral multiples of $25, unless all of the Debentures held
by a Holder are tendered.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before each redemption date to
each Holder whose Debentures are to be redeemed at its registered address.
Debentures in denominations larger than $25 may be redeemed in part but only in
integral multiples of $25, unless all of the Debentures held by a Holder are to
be redeemed. On and after the redemption date interest ceases to accrue on
Debentures or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in registered form
without coupons in denominations of $25 and integral multiples of $25; provided,
however, that in connection with the original issuance of Debentures hereunder
in exchange for shares of the Company's Preferred Stock, the Company may elect
to pay any amount remaining after issuance of Debentures in denominations of $25
and/or integral multiples thereof, in cash or in additional Debentures in
denominations of less than $25. The transfer of Debentures may
58
<PAGE>
be registered and Debentures may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Debenture or portion of a Debenture selected for redemption,
except for the unredeemed portion of any Debenture being redeemed in part.
Also, it need not exchange or register the transfer of any Debentures for a
period of 15 days before a selection of Debentures to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be
treated as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or
the Debentures may be amended or supplemented and any existing Default under, or
compliance with any provision of, the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
Debentures then outstanding (including consents obtained in connection with a
tender offer or exchange offer for Debentures). Without the consent of any
Holder, the Company and the Trustee may amend or supplement the Indenture or the
Debentures to cure any ambiguity, defect or inconsistency; to provide for
uncertificated Debentures; to provide for the assumption of the Company's
obligations to Holders in the case of a merger or consolidation to comply with
Article 5 of the Indenture; to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect the legal
rights under the Indenture of any Holder; or to comply with requirements of the
SEC in order to effect or maintain the qualification of the Indenture under the
TIA, if required by law to be so qualified.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Debenture held by a non-consenting Holder): (i) reduce the
principal amount of Debentures whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any Debenture or alter or waive any of the provisions with respect to the
redemption or repurchase of Debentures; (iii) reduce the rate of or change the
time for payment of interest, including default interest, on any Debenture; (iv)
waive a Default or Event of Default in the payment of the principal of or
interest on the Debentures (except a rescission of acceleration of the
Debentures by Holders of at least a majority in aggregate principal amount of
the Debentures and a waiver of payment default that resulted from such
acceleration); (v) make any Debenture payable in money other than that stated in
such Debenture; (vi) make any change in Section 6.04 or 6.07 of the Indenture;
(vii) waive a redemption or repurchase payment with respect to any Debenture;
(viii) make any change in the last sentence of the fourth paragraph of Section
9.02 of the Indenture; or (ix) make any change in the subordination provisions
of the Indenture that adversely affects the Holders.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the Company to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Debentures with respect to which such consent is required
59
<PAGE>
or sought as of a date identified by the Trustee in a notice furnished to
Holders in accordance with the terms of this Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: a default in the
payment when due of interest on the Debentures and such Default continues for a
period 15 days; a default by the Company in the payment of principal of any
Debenture when the same becomes due and payable, whether at maturity, upon
redemption or otherwise, whether or not such payment is prohibited by the
subordination provisions in the Indenture; the failure by the Company to comply
with any of its other agreements or covenants in, or provisions of, the
Debentures or the Indenture and the Default continues for the period and after
the notice specified in Section 6.01 of the Indenture; the occurrence of an
event of default with respect to any Indebtedness of the Company or any of its
Subsidiaries that (a) has caused the acceleration of such Indebtedness or (b)
constitutes a default (beyond any applicable grace periods) in the payment of
such Indebtedness at final maturity of such Indebtedness if such Indebtedness is
not repaid within 30 days of such acceleration or default in payment; or certain
events of bankruptcy, insolvency or reorganization with respect to the Company
or its Significant Subsidiaries. If an Event of Default occurs and is continuing
(other than an Event of default arising from certain events of bankruptcy or
insolvency with respect to the Company), the Trustee by notice to the Company or
the Holders of at least a majority in principal amount of the Debentures then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the Holders) may, and the Trustee at the request of the Holders
must, declare all unpaid principal of and interest on the Debentures to be due
and payable immediately; provided, however, that so long as the Senior Credit
Documents shall be in full force and effect, if an Event of Default shall have
occurred and be continuing (other than an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the Company) any such
acceleration shall not be effective until the earlier to occur of (a) five
Business Days following delivery of a notice of such acceleration to the Credit
Agent under the Senior Credit Documents and (b) the acceleration of any
Indebtedness under the Senior Credit Documents. In case any Event of Default
arising from certain events of bankruptcy or insolvency occurs with respect to
the Company, all unpaid principal of and accrued interest, if any, on the
Debentures will become due and payable immediately without any declaration of
acceleration. Holders may not enforce the Indenture or the Debentures except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Debentures. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Debentures may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of any continuing Default or Event of
Default (except a Default or Event of Default in payment of principal or
interest or that resulted from a failure to comply with Section 4.09 of the
Indenture) if and so long as a committee of its Trust Officers determines in
good faith that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
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14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder, of the Company, as such, shall have any liability
for any obligations of the Company under the Debentures or the Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Debenture waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Debentures.
15. AUTHENTICATION. This Debenture shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to
Minors Act).
61
<PAGE>
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Corporate Secretary
62
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to
(Insert assignee's soc. sec. or tax I.D. No.)
- ----------------------
(Print or type assignee's name, address and zip code)
- -----------------------
and irrevocably appoint to transfer this
-------------------------------------
Debenture on the books of the Company. The agent may substitute another to act
for him.
Date:
--------------
Your Signature:
----------------------------------------
(Sign exactly as your name appears on the
face of this Debenture)
Signature Guarantee:
63
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.09 of the Indenture, check the box below:
Section 4.09
If you want to have only part of the Debenture purchased by the Company
pursuant to Section 4.09 of the Indenture, state the amount you elect to have
purchased:
$__________.
Date:
--------------
Your Signature:
----------------------------------
(Sign exactly as your name appears
on the Debenture)
Tax Identification No.:
Signature Guarantee:
64
<PAGE>
EXHIBIT 10.1
JOINT VENTURE AGREEMENT
BY AND BETWEEN
WHEAT FIRST BUTCHER SINGER, INC.,
WHEAT, FIRST SECURITIES, INC. AND
MENTOR INVESTMENT GROUP, INC.
AND
EVEREN CAPITAL CORPORATION,
EVEREN SECURITIES HOLDINGS, INC,,
EVEREN SECURITIES, INC. AND
EVEREN CLEARING CORP.
DATED AS OF JULY 25, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1
DEFINITIONS
Section 1.1 Defined Terms.......................................... 1
ARTICLE 2
FORMATION OF VENTURE; INITIAL
CLOSING; SECOND CLOSING; RELATED TRANSACTIONS
Section 2.1 Formation of Venture................................... 8
Section 2.2 Transactions Prior to the Initial Closing.............. 9
Section 2.3 Initial Closing........................................ 9
Section 2.4 Second Closing......................................... 9
ARTICLE 3
OPERATION OF THE VENTURE
Section 3.1 Management............................................. 10
Section 3.2 Management Committee................................... 10
Section 3.3 Asset Management Services.............................. 11
Section 3.4 Capitalization of the Venture.......................... 11
Section 3.5 Provision of Financial Information..................... 11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of WFBS................. 12
Section 4.2 Representations and Warranties of EVEREN............... 18
ARTICLE 5
OBLIGATIONS OF MENTOR AND EVEREN
Section 5.1 Conduct of Business Prior to Initial Closing........... 21
Section 5.2 Money Market Conversion................................ 22
Section 5.3 Access to Information.................................. 22
Section 5.4 Further Assurances; Consents; Waiver of
Notices................................................ 22
(i)
<PAGE>
ARTICLE 6
CONDITIONS TO MENTOR'S OBLIGATIONS
Section 6.1 Representations and Warranties........................... 23
Section 6.2 Performance of Agreements................................ 23
Section 6.3 Absence of Litigation.................................... 23
Section 6.4 Consents and Approvals................................... 23
Section 6.5 No Material Adverse Change............................... 24
Section 6.6 Miscellaneous Agreements; Certificates; Etc.............. 24
Section 6.7 Legal Matters............................................ 24
ARTICLE 7
CONDITIONS TO EVEREN'S OBLIGATIONS
Section 7.1 Representations and Warranties........................... 24
Section 7.2 Performance of Agreements................................ 24
Section 7.3 Absence of Litigation.................................... 25
Section 7.4 Consents and Approvals................................... 25
Section 7.5 No Material Adverse Change............................... 25
Section 7.6 Miscellaneous Agreements; Certificates; Etc.............. 25
Section 7.7 Legal Matters............................................ 25
Section 7.8 Services Agreement....................................... 26
ARTICLE 8
FURTHER AGREEMENTS
Section 8.1 Additional Documents..................................... 26
Section 8.2 Mutual Assistance........................................ 26
Section 8.3 Confidentiality.......................................... 26
Section 8.4 Non-Competition; Right to Acquire Competing
Business................................................. 27
Section 8.5 Income Tax Liabilities of Mentor......................... 29
Section 8.6 No Commitments........................................... 29
ARTICLE 9
CERTAIN COVENANTS AND AGREEMENTS REGARDING
INTERESTS IN MENTOR
Section 9.1 Restrictions on Transfer................................. 29
Section 9.2 Minimum Ownership........................................ 31
Section 9.3 Limitations on Transfer.................................. 31
Section 9.4 Extraordinary Events..................................... 32
(ii)
<PAGE>
ARTICLE 10
TERM AND TERMINATION
Section 10.1 Term . . . . . . . . . . . . . . . . . . . . 32
Section 10.2 Voluntary Termination . . . . . . . . . . . 32
Section 10.3 Termination Upon Change of Control . . . . . 33
ARTICLE 11
CHANGE OF CONTROL
Section 11.1 Look Back Option . . . . . . . . . . . . . . 34
ARTICLE 12
MISCELLANEOUS
Section 12.1 Survival of Representations and Warranties . 34
Section 12.2 Expenses . . . . . . . . . . . . . . . . . . 34
Section 12.3 Press Release . . . . . . . . . . . . . . . 34
Section 12.4 Entire Agreement . . . . . . . . . . . . . . 35
Section 12.5 Binding Effect . . . . . . . . . . . . . . . 35
Section 12.6 No Third Party Beneficiaries . . . . . . . . 35
Section 12.7 Amendment or Modification . . . . . . . . . 35
Section 12.8 Waiver . . . . . . . . . . . . . . . . . . . 35
Section 12.9 Non-Assignability . . . . . . . . . . . . . 35
Section 12.10 Severability . . . . . . . . . . . . . . . . 35
Section 12.11 Governing Law . . . . . . . . . . . . . . . 36
Section 12.12 Dispute Resolution . . . . . . . . . . . . . 36
Section 12.13 Notices . . . . . . . . . . . . . . . . . . 36
Section 12.14 Counterparts . . . . . . . . . . . . . . . . 37
(iii)
<PAGE>
SCHEDULES
Schedule Description
- -------- -----------
Schedule l.l(a) Operating Agreement
(iv)
<PAGE>
JOINT VENTURE AGREEMENT
-----------------------
THIS JOINT VENTURE AGREEMENT is made as of this 25th day of July, l996, by
and between WHEAT FIRST BUTCHER SINGER, INC. ("WFBS"), WHEAT, FIRST
SECURITIES, INC. ("Wheat"), AND MENTOR INVESTMENT GROUP, INC. ("Mentor") and
EVEREN CAPITAL CORPORATION ("EVEREN"), EVEREN SECURITIES HOLDINGS, INC. ("EVEREN
Holdings"), EVEREN SECURITIES, INC. ("EVEREN Securities") and EVEREN CLEARING
CORP. ("EVEREN Clearing"), (hereinafter collectively called the "parties").
RECITALS
--------
1. Mentor and EVEREN desire to enter into a strategic alliance whereby,
as a preferred provider, Mentor will offer asset management services, including
money market funds, mutual funds and private account management, to the clients
of EVEREN Securities and EVEREN Clearing.
2. In recognition of the mutual growth opportunities offered by this
strategic alliance, EVEREN and Mentor desire for EVEREN to acquire and maintain
an equity investment in the venture created by this strategic alliance.
3. Mentor and EVEREN acknowledge and agree that Mentor is seeking to
increase revenues through diversification of its customer base to enable Mentor
to become a successful public offering candidate at such time as a public
offering will further its strategic business initiatives.
4. The parties desire to enter into this Agreement to set forth the terms
and conditions of the joint venture.
ARTICLE 1
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DEFINITIONS
-----------
Section 1.1 Defined Terms. In this Agreement, except where the context
otherwise requires:
"Additional Joint Venture Member" shall have the meaning set forth in
Section 2.4.
"Additional Joint Venture Member Clients" means persons receiving
Investment Advisory Services from the Venture Entities, whether through
ownership of shares of Mentor Funds, private accounts or otherwise, which
persons are customers of, or who were referred to the Venture by, an Additional
Joint Venture Member, or by persons for whom such Additional Joint Venture
Member acts as the clearing broker.
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"Advisers Act" means the Investment Advisers Act of 1940, as amended.
"Affiliate" means with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such other
person; and "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through ownership of voting securities, by contract or otherwise.
"Broker-Dealer Firm" means a firm that generates at least two-thirds of its
revenues from services of a type that require registration of the provider of
such services as a broker or dealer under the Securities Exchange Act.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in Richmond, Virginia or Chicago,
Illinois are authorized or obligated by law or executive order to close.
"Change of Control" means, with respect to WFBS or EVEREN, any merger,
consolidation, other business combination, liquidation, sale of the party or all
or substantially all of the assets of the party, change in a majority of the
party's board of directors as a result of a proxy contest, tender offer,
exchange offer, merger, consolidation or other business combination, any other
acquisition of at least 40% of the outstanding voting securities of the party by
a person other than a person who is a beneficial owner of voting securities of
the party as of the date of this Agreement, or any other change of control of
the party or similar extraordinary transaction, but excluding any merger,
consolidation or other business combination in which the party is the surviving
and acquiring corporation and in which the businesses or assets so acquired do
not, or would not reasonably be expected to, have a value greater than 50% of
the assets of the party after such merger, consolidation or other business
combination.
"Current Market Price" of a security means the average of the daily closing
prices per share of such security for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that in the event that the
Current Market Price is determined during a period following the announcement by
the issuer of the security of (A) a dividend or distribution on such security
payable in such security or securities convertible into such security, or (B)
any subdivision, combination or reclassification of such security, and prior to
the expiration of the 30 Trading Day period, as set forth above, after the ex-
dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
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"current market pricers shall be properly adjusted to take into account ex-
dividend trading. The closing price for each day shall be the last sale price,
regular way, or, in the case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Interests are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the security is listed or admitted to trading or, if the security is
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use. Prior to a Venture IPO, the Current Market Price
of Interests shall be their Fair Market Value, and in the determination of Fair
Market Value, the investment banking firms shall assume that (i) the Venture is
a reporting company under the Securities Exchange Act, (ii) at least 20% of the
Interests is publicly held and (iii) the holder of the Interests as to which
Current Market Price is being determined is not bound by the terms of this
Agreement, and otherwise shall disregard such items as minority or similar
discounting and the effect, if any, of this Agreement on determining Current
Market Price. The term "Trading Day" means a day on which the principal national
securities exchange on which the Interests are listed or admitted to trading is
open for the transaction of business or, if the Interests are not listed or
admitted to trading on any national securities exchange, a Business Day.
"EVEREN" means EVEREN Capital Corporation, a Delaware corporation.
"EVEREN Clearinq" means EVEREN Clearing Corp., a Delaware corporation, and
a Wholly-Owned Subsidiary of EVEREN Securities.
"EVEREN Clients" means persons receiving Investment Advisory Services from
the Venture Entities, whether through ownership of shares of Mentor Funds,
private accounts or otherwise, which persons are customers of, or who were
referred to the Venture by, EVEREN Securities, or by persons for whom EVEREN
Clearing acts as the clearing broker.
"EVEREN Holdinqs" means EVEREN Securities Holdings, Inc., a Delaware
corporation, and a Wholly-Owned Subsidiary of EVEREN.
"EVEREN Securities" means EVEREN Securities, Inc., a Delaware corporation,
and a Wholly-Owned Subsidiary of EVEREN Holdings.
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"EVEREN Venture Entities" means EVEREN and each of the Affiliates of EVEREN
entering into a Venture Document or providing property or services to the
Venture.
"Exit Price" shall have the meaning set forth in Section 10.2(a).
"Fair Market Value" shall be determined (i) by mutual agreement between the
Venture and EVEREN; or (ii) in the event that the Venture and EVEREN cannot
mutually agree on Fair Market Value, based on the average of the values
determined by the opinions of two investment banking firms of national
recognition, one to be chosen and paid by the Venture and one to be chosen and
paid by EVEREN, and if the two investment banking firms' values differ by more
than 10%, then based on the average of the two closest values determined by the
opinions of the two investment banking firms and a third investment banking firm
of national recognition, to be chosen by the original two investment banking
firms, with such third investment banking firm's fees to be divided equally
between the Venture and EVEREN.
"Financial Statements of EVEREN" means the audited balance sheets of EVEREN
as of December 31, 1995 and December 31, 1994, together with the audited
statements of operations for each of the years in the three-year period ended
December 31, 1995, and comparable interim financial statements at June 30, 1996.
"Financial Statements of Mentor" means the unaudited balance sheets of
Mentor as of March 31, 1996 and March 31, 1995, together with the unaudited
statements of revenues for each of the years in the three-year period ended
March 31, 1996, and comparable interim financial statements at June 30, 1996.
"Governmental Approval" means any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or order of,
registration, declaration or filing with, or report or notice to, any
Governmental Authority.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, body, commission or instrumentality of the United States, any State of
the United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
"Initial Closinq" shall have the meaning set forth in Section 2.3.
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<PAGE>
"Initial Closinq Date" shall mean the fifth Business Day following
satisfaction of the conditions set forth in Article 6 and Article 7, or such
other date as is mutually agreed upon by the parties.
"Interests" means the Membership Interests of the Venture issued to WFBS
and EVEREN Holdings as contemplated by this Agreement, and such other equity
interest in the Venture or any successor to the Venture into which the Interests
may be converted.
"Investment Advisorv Services" means services of the type that require
registration of the provider of such services under the Advisers Act, including
advisory services to any company registered under the Investment Company Act and
including all discretionary money management services involving individual
accounts and/or companies registered under the Investment Company Act, but
excluding (i) performance monitoring, manager search and "wrap-fee" services
utilizing third party investment managers or internal investment management by
registered representatives, such services being of the type generally provided
by Broker-Dealer Firms from time to time, (ii) revenue sharing arrangements with
third party investment managers of the type generally entered into by
BrokerDealer Firms from time to time and (iii) services to a unit investment
trust (as such term is defined in the Investment Company Act) and (iv) the
services Previously Disclosed.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Law" means any national, federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
"Management Committee" means the management committee of the Venture as
defined in the Operating Agreement.
"Managers" means the managers of the Venture, as defined in the Operating
Agreement.
"Members" means the members of the Venture, as defined in the Operating
Agreement.
"Membership Interest" shall have the meaning provided in the Operating
Agreement.
"Mentor" means Mentor Investment Group, Inc., a Virginia corporation and a
Wholly-Owned Subsidiary of WFBS.
"Mentor Funds" means investment companies registered under the Investment
Company Act for which a Venture Entity serves as the investment adviser,
including the Mentor Money Market Funds.
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<PAGE>
"Mentor Money Market Funds" means money market open-end investment
companies for which a Venture Entity serves as the investment adviser.
"Mentor Venture Entities" means Mentor and each of the Affiliates of
Mentor entering into a Venture Document or providing services or property to the
Venture.
"Money Market Conversion" shall mean the investment in the Mentor Money
Market Funds of all sweep account assets held at EVEREN Clearing and introduced
by EVEREN Securities (except (i) sweep account assets currently invested in
money market open-end investment companies for which there is not a comparable
Mentor Money Market Fund and (ii) sweep account assets with respect to which the
client of such account has not consented to the Money Market Conversion).
"Money Market Conversion Date" means the date on which the Money Market
Conversion occurs.
"NASD" means the National Association of Securities Dealers, Inc.
"Operating Agreement" means the Operating Agreement between WFBS and EVEREN
to be entered into pursuant to Section 2.2 and substantially in the form of
Schedule l.l(a).
"Ownership Percentage" means, with respect to any party, the proportion of
all outstanding Membership Interests, expressed as a percentage, held by such
party.
"person" means an individual, corporation, partnership, limited liability
company, trust or unincorporated organization or a government or any agency or
political subdivision thereof.
"Previously Disclosed" shall mean disclosed in a letter from the party
dated and delivered not later than the date of this Agreement.
"Regional Representatives" shall have the meaning set forth in Section
3.3(b).
"SEC" means the United States Securities and Exchange Commission.
"Second Closing" shall have the meaning set forth in Section 2.4.
"Second Closing Date" means the date that is the earlier of (A) 24 months
following the later of (i) the Money Market Conversion Date or (ii) the date the
Venture has employed the Regional Representatives or (B) the date that is the
last Business
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Day of the month following the month during which the annualized Venture
Revenues attributable to EVEREN for the preceding three month period constitute
at least 50% of the Venture Revenues.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"SIPC" means the Securities Investor Protection Corporation.
"Services Agreement" shall have the meaning set forth in Section 7.8.
"Subsidiary" means, with respect to any person, (i) any corporation 50% or
more of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation is at the
time owned by such person, directly or indirectly through Subsidiaries, and (ii)
any partnership, limited liability company, association, joint venture or other
entity in which such person, directly or indirectly through one or more
Subsidiaries, has a 50% or more equity interest at the time.
"Third Party Clients" means persons receiving Investment Advisory Services
from the Venture Entities, whether through ownership of shares of Mentor Funds,
private accounts or otherwise, other than EVEREN Clients, Wheat Clients and
Additional Joint Venture Member Clients.
"True-Up Option" shall have the meaning set forth in Section 10.2(a).
"Venture" means the Virginia limited liability company to be formed
pursuant to Section 2.1, and to have the name Mentor Investment Group, L.L.C.,
and any successor thereof.
"Venture Documents" means this Agreement, the Operating Agreement, the
agreements attached as Schedules hereto and each other agreement, instrument or
document executed and delivered in connection with the transactions contemplated
by this Agreement by Mentor or any of its Affiliates, EVEREN or any of its
Affiliates or the Venture, or to which any of them is a party.
"Venture Entities" means (a) the Virginia limited liability companies to be
formed pursuant to Section 2.2(a) and (b) (each to be referred to herein as a
"Venture Entity," and collectively as the "Venture Entities") and (b) any other
companies registered under the Advisers Act that are, or become, Subsidiaries of
the Venture.
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"Venture IPO" means an initial public offering of equity securities of the
Venture as a result of which the Venture becomes a reporting company under the
Securities Exchange Act.
"Venture Revenues" means the advisory fees, administrative fees, marketing
fees and other items recorded as revenues on the consolidated financial
statements of the Venture in accordance with generally accepted accounting
principles and the accounting principles used in the preparation of the
Financial Statements of Mentor (which revenues shall be net of fee payments
received by the Venture under shareholder service plans and Investment Company
Act Rule 12b-1 plans that are paid out to any person that is not a Venture
Entity). Venture Revenues attributable to a person shall mean Venture Revenues
arising from EVEREN Clients or Wheat Clients, as the case may be, plus such
person's relative share of Venture Revenues arising from Third Party Clients
represented by such person's Ownership Percentage as of the date of measurement
of such Venture Revenues.
"Venture Revenue Schedule" shall have the meaning set forth in Section
3.5(d).
"WFBS" means Wheat First Butcher Singer, Inc., a Virginia corporation.
"Wheat" means Wheat, First Securities, Inc., a Virginia corporation, and a
Wholly-Owned Subsidiary of WFBS.
"Wheat Clients" means persons receiving Investment Advisory Services from
the Venture Entities, whether through ownership of shares of Mentor Funds,
private accounts or otherwise, which persons are customers of, or were referred
to the Venture by, Wheat, by persons for whom Wheat acts as the clearing broker
or by the persons Previously Disclosed to EVEREN by Mentor.
"Wholly-Owned Subsidiary" of a person means a Subsidiary of such person,
all of the issued and outstanding shares (other than directors' qualifying
shares) of the capital stock or other ownership interests of which shall at the
time be owned by such person or one or more of its Wholly-Owned Subsidiaries or
by such person and one or more of its Wholly-Owned Subsidiaries.
ARTICLE 2
FORMATION OF VENTURE; INITIAL
CLOSING; SECOND CLOSING; RELATED TRANSACTIONS
Section 2.1 Formation of Venture. Following execution of this Agreement
and at the time of the Initial Closing, Mentor will cause the Venture to be
formed.
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Section 2.2 Transactions Prior to the Initial Closing. Subject to the terms
and conditions hereof, immediately prior to the Initial Closing:
(a) Mentor shall (i) cause Commonwealth Investment Counsel, Inc. to be
converted into a Virginia limited liability company with the name Mentor
Investment Advisers L.L.C. and to issue to WFBS a membership interest in such
limited liability company representing 1% of the outstanding membership interest
of such limited liability company and (ii) thereafter cause the merger into such
limited liability company of Commonwealth Advisors, Inc., Charter Asset
Management, Inc., Mentor U.K. Inc., and Wellesley Advisors, Inc.; and
(b) Mentor shall cause Mentor Distributors, Inc. to be converted into a
Virginia limited liability company with the name Mentor Distributors L.L.C. and
to issue to WFBS a membership interest in such limited liability company
representing 1% of the outstanding membership interest of such limited liability
company.
Section 2.3 Initial Closing. On the Initial Closing Date:
(a) WFBS shall cause Mentor to be converted into the Venture;
(b) WFBS shall cause the Venture to issue to WFBS that amount of Interests
representing 79.8% of the outstanding Membership Interest of the Venture;
(c) WFBS shall cause the Venture to issue to EVEREN Holdings that amount of
Interests representing 20.2% of the outstanding Membership Interest of the
Venture; provided that if the Money Market Conversion Date has not occurred by
December 31, 1996, the Venture shall have the right to call the Interests held
by EVEREN Holdings at no cost to the Venture;
(d) WFBS shall execute and deliver the Operating Agreement; and
(e) EVEREN Holdings shall execute and deliver the Operating Agreement.
Section 2.4 Second Closing. On the Second Closing Date, the Venture shall
issue to EVEREN Holdings that amount of Interests, if any, necessary for the
EVEREN Holdings' Ownership Percentage to equal the percentage of annualized
Venture Revenues attributable to EVEREN; provided that EVEREN Holdings shall not
own more than 50% (or such lower percentage of outstanding Interests owned by
WFBS immediately prior to the Second Closing) or less than 20% (or such lower
percentage as results from the Venture's issuing Membership Interest to an
Additional Joint Venture Member prior to the Second Closing) of the outstanding
Membership Interests following the Second Closing. The relative annualized
Venture Revenues
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attributable to EVEREN shall be determined based on the average monthly relative
Venture Revenues attributable to EVEREN for the three month period prior to the
Second Closing. In the event the Venture enters into a strategic alliance with a
third party (an "Additional Joint Venture Member") in addition to EVEREN
Holdings and WFBS prior to the Second Closing and provides such Additional Joint
Venture Member with Membership Interest pursuant to an agreement with the
Additional Joint Venture Member containing provisions similar in substance to
those provided for in Section 3.3, EVEREN Holdings' and WFBS's relative
Ownership Percentage of the Venture will be proportionate to the relative
contribution to the Venture Revenues attributable to EVEREN and WFBS, as the
case may be, and Venture Revenues attributable to the Additional Joint Venture
Member shall be excluded from the calculation of Venture Revenues attributable
to EVEREN and WFBS.
ARTICLE 3
---------
OPERATION OF THE VENTURE
--------- -- --- -------
Section 3.1 Management. On the Initial Closing Date, WFBS and EVEREN
Holdings will execute and deliver an Operating Agreement for the Venture,
substantially in the form attached hereto as Schedule l.l(a). The Operating
Agreement shall govern the operation of the Venture, including admission of
Additional Joint Venture Members and voting rights and powers of the Management
Committee. In accordance with the Operating Agreement, each Member will elect
representatives to the Management Committee as set forth in Section 3.2 hereof.
Section 3.2 Management Committee.
---------- ---------
(a) Upon the Initial Closing, WFBS shall cause two persons nominated by
EVEREN to be elected as Managers by action of the Management Committee of the
Venture. At each annual or special meeting of the Members at which, or the
taking of action by written consent of the Members with respect to which, any
Managers of the Venture are to be elected, EVEREN shall have the right, but not
the obligation, pursuant to this Agreement to nominate for election that number
of Managers (but not less than two) which, when added to the number of Managers
who are EVEREN nominees and who will continue to serve as Managers without
regard to the outcome of the election at such meeting or by such consent,
represent the same proportion of the total number of Managers as EVEREN
Holdings' Ownership Percentage, rounded to the nearest whole number. WFBS hereby
agrees to vote its Interests in favor of such EVEREN nominees. At such time, if
any, as EVEREN Holdings' Ownership Percentage shall equal 50%, EVEREN Holdings
agrees to vote its Interests in favor of WFBS nominees to the Management
Committee.
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(b) The Management Committee will hold regular meetings on a quarterly
basis. In accordance with the Operating Agreement, the Management Committee will
appoint an executive committee consisting of Mentor and EVEREN representatives
to exercise powers of the Management Committee between meetings. In accordance
with the Operating Agreement, the Management Committee will elect officers of
the Venture as of the Initial Closing Date.
Section 3.3 Asset Management Services.
(a) Following the Initial Closing, (i) EVEREN Securities shall cause the
Mentor Money Market Funds to be exclusively utilized for its client sweep
accounts (except with respect to sweep account assets which the client desires
to invest in money market open-end investment companies of the type offered in
EVEREN Securities sweep accounts as of the date of this Agreement for which
there is not a comparable Mentor Money Market Fund) and cause the Money Market
Conversion to occur and (ii) each of EVEREN Securities and Wheat shall include
the Mentor Funds and the Venture Entities' private account management services
in its "preferred" or "focus group" list of mutual funds and private account
managers offered to customers with a status that reflects WFBS' and EVEREN's
proprietary interest in the Venture. Following the Initial Closing, EVEREN
Clearing will use commercially reasonable efforts to cause persons for whom it
serves as the clearing broker to accomplish the objectives set forth in the
preceding two sentences;
(b) Following the Initial Closing, WFBS shall cause the Venture to hire
five (or such lesser number as is mutually agreeable to Mentor and EVEREN)
regional representatives (the "Regional Representatives") acceptable to EVEREN
Securities to service EVEREN Securities in the sale of Mentor products. EVEREN
Securities shall provide the Regional Representatives with access to its branch
office system commensurate with EVEREN's proprietary interest in the Venture.
Normal marketing and advertising expenses attributable to the Venture's efforts
within EVEREN Securities shall be born by the Venture; and
(c) Following the Initial Closing, WFBS shall cause the Venture to maintain
sufficient sales and administrative operations to support the EVEREN Clients.
Section 3.4 Capitalization of the Venture. Capital calls shall be made by
the Management Committee in accordance with the Operating Agreement.
Section 3.5 Provision of Financial Information.
(a) Annual Financials. The Venture will prepare and deliver, or cause to be
prepared and delivered, to WFBS and EVEREN Holdings annual audited financial
statements prepared in accordance with
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generally accepted accounting principles within 75 days of the Venture's fiscal
year end.
(b) Quarterly Financials. The Venture will prepare and deliver, or cause to
be prepared and delivered, to WFBS and EVEREN Holdings unaudited financial
statements within 35 days of the end of the Venture's fiscal quarter.
(c) Interim Financials. The Venture will prepare and deliver, or cause to
be prepared and delivered, to WFBS and EVEREN Holdings monthly financial
statements within 20 days of the end of each calendar month.
(d) Venture Revenue Schedule. In addition to the financial statements
described above, the Chief Financial Officer of the Venture shall prepare and
deliver, or cause to be prepared and delivered, to WFBS and EVEREN Holdings, at
the end of each fiscal quarter of the Venture a schedule (the "Venture Revenue
Schedule") certified by such officer that sets forth the Venture Revenues
attributable to EVEREN Clients, Wheat Clients, Additional Joint Venture Member
Clients and Third Party Clients. The Venture Revenue Schedule shall be delivered
to EVEREN Holdings and WFBS within the time period provided above in Sections
3.5(a) and 3.5(b) for delivery of the Venture's financial statements. The
Venture Revenue Schedule shall provide sufficient detail and be supported by
detailed revenue ledgers to permit independent verification. In accordance with
the Operating Agreement, EVEREN Holdings and WFBS shall have the right to
inspect the Venture's accounting records upon reasonable prior written notice.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1 Representations and Warranties of WFBS. Each of WFBS, Wheat and
Mentor represents and warrants to EVEREN as follows,
(a) Organization, Standing and Power. Each of WFBS and each Mentor Venture
Entity is, or will be, an entity duly organized, validly existing and in good
standing under the Laws of Virginia and has, or will have, all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business, as now being conducted and to perform this Agreement and
to effect the transactions contemplated hereby.
(b) Qualification. Each of WFBS and each Mentor Venture Entity is duly
qualified and in good standing as a foreign entity authorized to transact
business in each jurisdiction where the conduct of its business or the ownership
of its properties requires such qualification, or, if not so qualified, its
failure so to
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qualify will not have a material adverse effect on its financial condition or
operations and will not impair its right to enforce any material agreement to
which it is a party.
(c) Ownership of Capital Stock of Mentor Venture Entities. The issued
shares of capital stock of each Mentor Venture Entity have been duly authorized
and validly issued, are fully paid and nonassessable and all of such shares
(except for the membership interest of Mentor Perpetual Advisers, LLC, of which
Mentor UK Inc. owns 50%), are owned beneficially by Mentor free and clear of all
liens, security interests, pledges, charges, encumbrances, defects, stockholders
agreements, voting trusts, equities or claims of any nature whatsoever. There
are no outstanding (A) securities or obligations of any Mentor Venture Entity
convertible into or exchangeable for any capital stock of such Mentor Venture
Entity, (B) warrants, rights or options to subscribe for or purchase from any
Mentor Venture Entity any such capital stock or any such convertible or
exchangeable securities or obligations, or (C) obligations of any Mentor Venture
Entity to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or options.
(d) Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of WFBS, Wheat and Mentor, and
this Agreement is a valid and binding obligation of WFBS, Wheat and Mentor,
enforceable in accordance with its terms. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by WFBS, Wheat and Mentor with any of the provisions hereof will not
(i) conflict with or result in a breach of any provision of their articles of
incorporation or by-laws or other organizational documents or a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any material note, bond, debenture, mortgage,
indenture, license, agreement or other material instrument or obligation to
which WFBS, Wheat or Mentor is a party, or by which they or any of their
properties or assets may be bound, or (ii) violate any order, writ, injunction,
decree, or Law applicable to WFBS, Wheat or Mentor, or any of their properties
or assets. No Governmental Approval, other than compliance with applicable
United States federal and state securities laws, and regulations of the SEC, is
required in connection with the execution and delivery by WFBS, Wheat and Mentor
of this Agreement or the consummation by WFBS and each Mentor Venture Entity of
the transactions contemplated hereby.
(e) Mentor Funds. Mentor has Previously Disclosed to EVEREN certain
information regarding the Mentor Funds, including a description of (i) the
advisory fee rates payable to the Mentor Venture Entities as of June 30, 1996
pursuant to the advisory
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agreements for each of the Mentor Funds, and (ii) the net assets of each Mentor
Fund as of June 30, 1996.
(f) Legal Proceedings. There is no legal, administrative, arbitration or
other proceeding or governmental investigation pending or, to the knowledge of
WFBS' management, threatened or probable of assertion against WFBS or any Mentor
Venture Entity which, if decided adversely, would have a material adverse effect
on this Agreement or on the financial condition, results of operations or
business of Mentor or the Venture on a consolidated basis.
(g) Compliance with Laws and Other Instruments; Governmental Approvals.
(i) No Mentor Venture Entity is, nor in the three years prior to
the date hereof has been, in violation of or default under (A) any Law
applicable to it or any of its properties or business, (B) any provision of
its articles of incorporation, bylaws or other organizational documents, or
(C) any contract, or any other material agreement or instrument to which it
is a party or by which it or any of its properties is bound or affected,
except for any such violations of and defaults under any such applicable
Law, contract or other agreement or instrument that, individually and in
the aggregate, have not had and would not have a material adverse effect on
WFBS' consolidated financial condition, results of operations or business.
(ii) All Governmental Approvals necessary for the conduct of the
business and operations of each Mentor Venture Entity have been duly
obtained and are in full force and effect, except for any Governmental
Approvals which the failure to obtain, individually or in the aggregate,
have not had and would not have a material adverse effect on Mentor's or
the Venture's consolidated financial condition, results of operations or
business. There are no proceedings pending or, to the knowledge of Mentor,
threatened that would result in the revocation, cancellation or suspension,
or any adverse modification, of any such Governmental Approval, and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such revocation,
cancellation, suspension or modification.
(iii) Each Mentor Venture Entity has timely filed all registrations,
reports, statements, notices and other filings required to be filed with
the SEC or any other Governmental Authority, and all amendments or
supplements to any of the above (the "Mentor Venture Entity Filings"). The
Mentor Venture Entity Filings were prepared in all material respects, where
applicable, in accordance with the Advisers Act or other applicable Law. As
of their respective dates, the Mentor
14
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Venture Entity Filings did not contain any 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 light of the circumstances under which they were
made, not misleading. The Mentor Venture Entity Filings constitute all filings
with the SEC or other Governmental Authority that each Mentor Venture Entity was
required to make under the Act or other applicable Law.
(h) Government Requlation.
(i) Each Mentor Venture Entity is duly registered, licensed or qualified
as an investment advisor or a broker-dealer in each United States jurisdiction
where the conduct of its business requires such registration, licensing or
qualification and is in compliance with all federal and state Laws requiring any
such registration, licensing or qualification or is subject to no material
liability or disability by reason of the failure to be so registered, licensed
or qualified.
(ii) Each of the Mentor Funds (A) required by law to be so registered is
duly registered as an investment company under the Investment Company Act; (B)
the shares of each Mentor Fund are duly and validly issued, fully paid and
nonassessable and are qualified for sale, or an exemption therefrom is in full
force and effect, in each state and territory of the United States, the District
of Columbia and Puerto Rico to the extent required under applicable law; (C) all
outstanding shares of each Mentor Fund that were required to be registered under
the Securities Act have been sold pursuant to an effective registration
statement filed thereunder; (D) to the knowledge of Mentor in the case of
documents applicable to the Mentor Funds, no such registration statement
contained, as of its effective date, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein in order to make
the statements therein not misleading or is subject to any stop order or similar
order restricting its use; and (E) each Mentor Fund has operated and is
currently operating in compliance in all material respects with all laws, rules,
regulations and orders applicable to it or its business, including but not
limited to the Securities Act and the Investment Company Act, and consummation
of the transactions contemplated hereby will not result in a violation of any
such laws, rules, regulations or orders.
(iii) Each Mentor Fund is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has full
power, right and authority to own its properties and to carry on its business as
it is now conducted, and is qualified to do business in
15
<PAGE>
each jurisdiction where the conduct of its business requires such qualification,
or, if not so qualified, its failure to so qualify will not have a material
adverse effect on its financial condition or operations and will not impair its
right to enforce any material agreement to which it is a party.
(iv) Each Mentor Fund has duly adopted procedures pursuant to Rule 17e-1 under
the Investment Company Act, to the extent applicable; and each Mentor Fund has
complied, since their respective dates of inception, and currently complies with
the requirements of Section 17(e) of the Investment Company Act and Rule 17e-1
thereunder, to the extent applicable.
(v) Mentor has adopted a formal code of ethics and a written policy regarding
insider trading. Such code and policy comply with Section 17(j) of the
Investment Company Act, Rule 17j-1 thereunder and Section 204A of the Investment
Advisers Act, respectively. The policies of Mentor with respect to avoiding
conflicts of interest have been made available to EVEREN. To the knowledge of
Mentor, no material violations have occurred and no allegations of material
violations of such policies have been made.
(vi) Neither Mentor nor any Mentor Fund nor, to the knowledge of Mentor or any
Mentor Venture Entity, any person "associated" (as defined under the Investment
Advisers Act) with Mentor or any Mentor Fund, has for the period beginning not
less than five years prior to the date hereof and ending on the date hereof been
convicted of any crime or is or has been subject to any disqualification that
would be a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Investment Advisers Act or Rule
206 (4)-4(b) thereunder or of a broker-dealer under Section 15 of the Securities
Exchange Act, or for disqualification as an investment adviser for any
Investment Company pursuant to Section 9(a) of the Investment Company Act, and
to Mentor's knowledge there is no basis for, or proceeding or investigation that
is reasonably likely to become the basis for, any such disqualification, denial,
suspension or revocation.
(vii) Each current "Prospectus" (which term, as used in this Agreement, shall
include any related statement of additional information and any private
placement memorandum), as amended or supplemented, relating to each Mentor Fund,
and all current supplemental advertising and marketing material relating to each
Mentor Fund complies in all material respects with the Securities Act and the
Investment Company Act, applicable state laws and, where applicable, the rules
of the NASD. None of such Prospectuses, amendments, supplements or
16
<PAGE>
supplemental advertising and marketing materials, as of their respective
dates, includes, or will as of the Initial Closing Date include, an untrue
statement of a material fact or omits, or will as of the Initial Closing
Date omit, to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(i) No Broker. WFBS, Wheat and Mentor are not committed to any liability for
any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement.
(j) NASD and Exchange Memberships. Wheat is a member organization in good
standing of the NASD and each other securities exchange or association the
failure to be a member of which would have a material adverse effect on the
financial condition of Wheat.
(k) SIPC Assessments. Wheat is not in arrears with respect to any assessment
made upon it by SIPC that is presently due and payable.
(1) Financial Statements of Mentor. The Financial Statements of Mentor, taken
as a whole, fairly present the financial position and results of operations of
Mentor as of the dates thereof and the periods then ended and were prepared in
accordance with generally accepted accounting principles. As of the dates of the
Financial Statements of Mentor, Mentor had no material liabilities or
obligations, fixed or contingent, not adequately reflected in such statements or
balance sheets, the notes thereto or the exhibits hereto.
(m) Contracts. Each of the material contracts to which a Mentor Venture Entity
is a party (the "Mentor Contracts") is in full force and effect and is a valid
and binding obligation of the applicable Mentor Venture Entity, except as may be
limited by any bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar law affecting creditors' rights and remedies generally
and, with respect to the enforceability thereof, by general principles of equity
regardless of whether enforcement is sought in a proceeding at law or in equity,
and, to the knowledge of Mentor, the other parties thereto. Each Mentor Venture
Entity has performed each material term, covenant and condition of each of the
Mentor Contracts that is to be performed by it at or before the date hereof. No
event has occurred that would, with the passage of time or compliance with any
applicable notice requirements, constitute a default by any Mentor Venture
Entity or, to the knowledge of Mentor, any other party under any of the Mentor
Contracts, and, to the knowledge of Mentor, no party to any of the Mentor
Contracts intends to cancel, terminate or exercise any option under any of the
Mentor Contracts. To the knowledge of Mentor, there is no matter that adversely
affects, or would adversely affect, any Mentor Contract that, individually or in
the
17
<PAGE>
aggregate, has had or would have a material adverse effect on the Mentor Venture
Entities or the Venture.
(n) No Adverse Change. Since March 3l, l996, there has not been any material
adverse change in the business or the financial condition of Mentor or the
Venture, other than as a result of distributions to WFBS made by Mentor prior to
the Initial Closing in accordance with the methodology set forth in the pro
forma balance sheet of the Venture Previously Disclosed to EVEREN by Mentor.
(o) Disclosure. This Agreement and any certificate or other document furnished
by WFBS or any Mentor Venture Entity to EVEREN pursuant hereto or in connection
herewith, taken as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein and herein, in light of the circumstances under which they were made,
not misleading. Each document delivered or to be delivered by WFBS or any Mentor
Venture Entity to EVEREN is or will be a true and complete copy of such
document, unmodified except by another document delivered by WFBS or any Mentor
Venture Entity to EVEREN prior to the date hereof.
Section 4.2 Representations and Warranties of EVEREN. Each of EVEREN, EVEREN
Holdings, EVEREN Securities and EVEREN Clearing represents and warrants to WFBS,
Wheat and Mentor as follows:
(a) Organization. Standing and Power. Each of EVEREN and each EVEREN Venture
Entity, is, or will be, a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its organization and has or
will have all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and to
perform this Agreement and to effect the transactions contemplated hereby.
(b) Qualification. Each of EVEREN and each EVEREN Venture Entity is duly
qualified and in good standing as a foreign entity authorized to transact
business in each jurisdiction where the conduct of its business or the ownership
of its properties requires such qualification, or, if not so qualified, its
failure so to qualify will not have a material adverse effect on its financial
condition or operations and will not impair its right to enforce any material
agreement to which it is a party.
(c) Authoritv. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of EVEREN, EVEREN Holdings,
EVEREN Securities and EVEREN Clearing; and this Agreement is a valid and binding
obligation of EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN Clearing,
enforceable in accordance with its terms. The execution and
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<PAGE>
delivery of this Agreement, the consummation of the transactions contemplated
hereby and compliance by EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN
Clearing with any of the provisions hereof will not (i) conflict with or result
in a breach of any provision of their articles of incorporation or by-laws or a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, agreement or other material instrument or
obligation to which EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN
Clearing is a party, or by which they or any of their properties or assets may
be bound or (ii) violate any order, writ, injunction, decree, or Law applicable
to EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN Clearing or any of
their properties or assets. No Governmental Approval, other than compliance with
United States federal and state securities laws, and regulations of the SEC, is
required in connection with the execution and delivery by EVEREN of this
Agreement or the consummation by each EVEREN Venture Entity of the transactions
contemplated hereby.
(d) Legal Proceedings. There is no legal, administrative, arbitration or other
proceeding or governmental investigation pending, or, to the knowledge of
EVEREN's management, threatened or probable of assertion against EVEREN or any
EVEREN Venture Entity which, if decided adversely, would have a material adverse
effect on this Agreement or on the financial condition, results of operations,
business or prospects of EVEREN on a consolidated basis.
(e) Compliance with Laws and Other Instruments; Governmental Approvals.
(i) No EVEREN Venture Entity is, nor in the three years prior to the
date hereof has been, in violation of or default under (A) any Law
applicable to it or any of its properties or business, (B) any provision of
its articles of incorporation, bylaws or other organizational documents, or
(C) any contract, or any other material agreement or instrument to which it
is a party or by which it or any of its properties is bound or affected,
except for any such violations of and defaults under any such applicable
Law, contract or other agreement or instrument that, individually and in
the aggregate, have not had and would not have a material adverse effect on
EVEREN's consolidated financial condition, results of operations or
business.
(ii) All Governmental Approvals necessary for the conduct of the
business and operations of each EVEREN Venture Entity have been duly
obtained and are in full force and effect, except for any Governmental
Approvals which the failure to obtain, individually or in the aggregate,
have not had and would not have a material adverse effect on Mentor's
19
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or the Venture's consolidated financial condition, results of operations or
business. There are no proceedings pending or, to the knowledge of EVEREN,
threatened that would result in the revocation, cancellation or suspension,
or any adverse modification, of any such Governmental Approval, and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such revocation,
cancellation, suspension or modification.
(iii) Each EVEREN Venture Entity has timely filed all registrations,
reports, statements, notices and other filings required to be filed with
the SEC or any other Governmental Authority, and all amendments or
supplements to any of the above (the "EVEREN Venture Entity Filings"). The
EVEREN Venture Entity Filings were prepared in all material respects, where
applicable, in accordance with applicable Law. As of their respective
dates, the EVEREN Venture Entity Filings did not contain any 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 light of
the circumstances under which they were made, not misleading. The EVEREN
Venture Entity Filings constitute all filings with the SEC or other
Governmental Authority each EVEREN Venture Entity was required to make
under applicable Law.
(f) Government Regulation. Each EVEREN Venture Entity is duly registered,
licensed or qualified as an investment advisor or a broker-dealer in each United
States jurisdiction where the conduct of its business requires such
registration, licensing or qualification and is in compliance with all federal
and state laws requiring any such registration, licensing or qualification or is
subject to no material liability or disability by reason of the failure to be so
registered, licensed or qualified.
(g) No Broker. EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN
Clearing are not committed to any liability for any brokers' or finders' fees or
any similar fees in connection with the transactions contemplated by this
Agreement, other than with respect to Lehman Brothers Inc.
(h) NASD and Exchange Memberships. Each of EVEREN Securities and EVEREN
Clearing is a member organization in good standing of the NASD and each other
securities exchange or association the failure to be a member of which would
have a material adverse effect on the financial condition of EVEREN.
(i) SIPC Assessments. EVEREN Securities and EVEREN Clearing are not in
arrears with respect to any assessment made upon it by the SIPC that is
presently due and payable.
(j) Financial Statements of EVEREN. The Financial Statements of EVEREN,
taken as a whole, fairly present the financial position
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and results of operations of EVEREN as of the dates thereof and the periods then
ended and were prepared in accordance with generally accepted accounting
principles. As of the dates of the Financial Statements of EVEREN, EVEREN had no
material liabilities or obligations, fixed or contingent, not adequately
reflected in such statements or balance sheets, the notes thereto or the
exhibits hereto.
(k) Contracts. Each of the material contracts to which an EVEREN Venture
Entity is a party (the "EVEREN Contracts") is in full force and effect and is a
valid and binding obligation of the applicable EVEREN Venture Entity, except as
may be limited by any bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar law affecting creditors' rights and
remedies generally and, with respect to the enforceability thereof, by general
principles of equity regardless of whether enforcement is sought in a proceeding
at law or in equity, and, to the knowledge of EVEREN, the other parties thereto.
Each EVEREN Venture Entity has performed each material term, covenant and
condition of each of the EVEREN Contracts that is to be performed by it at or
before the date hereof. No event has occurred that would, with the passage of
time or compliance with any applicable notice requirements, constitute a default
by any EVEREN Venture Entity or, to the knowledge of EVEREN, any other party
under any of the EVEREN Contracts, and, to the knowledge of EVEREN, no party to
any of the EVEREN Contracts intends to cancel, terminate or exercise any option
under any of the EVEREN Contracts. To the knowledge of EVEREN, there is no
matter that adversely affects, or would adversely affect, any EVEREN Contract
that, individually or in the aggregate, has had or would have a material adverse
effect on the EVEREN Venture Entities or the Venture.
(l) No Adverse Change. Since June 30, 1996, there has not been any material
adverse change in the business or the financial condition of EVEREN.
(m) Disclosure. This Agreement and any certificate or other document furnished
by any EVEREN Venture Entity to WFBS or any Mentor Venture Entity pursuant
hereto or in connection herewith, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein and herein, in light of the circumstances under
which they were made, not misleading. Each document delivered or to be delivered
by any EVEREN Venture Entity to WFBS or any Mentor Venture Entity is or will be
a true and complete copy of such document, unmodified except by another document
delivered by any EVEREN Venture Entity to WFBS or any Mentor Venture Entity
prior to the date hereof.
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ARTICLE 5
------- -
OBLIGATIONS OF MENTOR AND EVEREN
----------- -- ------ --- ------
Section 5.1 Conduct of Business Prior to Initial Closing. Except as permitted
by prior written consent of the other party between the date hereof and the
Initial Closing, each of WFBS, Wheat and Mentor and EVEREN, EVEREN Holdings,
EVEREN Securities and EVEREN Clearing will, and will cause each other Mentor
Venture Entity and EVEREN Venture Entity, as the case may be, to use its good
faith efforts and reasonable business judgment to preserve the business,
properties and employees with respect to its respective business intact and
preserve for the Venture existing business relations necessary or useful in the
conduct of such business consistent with past practice.
Section 5.2 Money Market Conversion. Following the Initial Closing, each of
the Venture, EVEREN Securities and EVEREN Clearing will use its best efforts to
cause the Money Market Conversion to occur. The Venture will use its best
efforts to cause the formation of a California tax-exempt money market fund in
which assets of EVEREN Clients may be invested as of the Money Market Conversion
Date. Following the Initial Closing, the Venture and EVEREN together will
examine whether it would be in the best interests of the Venture to form a New
York tax-exempt money market fund prior to the Money Market Conversion Date.
Section 5.3 Access to Information.
(a) Upon reasonable request, subject to the compliance by the Venture, WFBS,
Wheat and Mentor with Section 8.3 hereof, EVEREN will, and will cause each other
EVEREN Venture Entity to, furnish WFBS and the Venture with copies of such
documents and with such information with respect to each EVEREN Venture Entity's
operations as WFBS, Wheat or the Venture may from time to time reasonably
request in connection with the performance of such Entity's obligations under
the Venture Documents; provided that WFBS, Wheat and the Venture shall not
unreasonably interfere with any EVEREN Venture Entity's conduct of its business;
and further provided that the furnishing of such documents or information shall
not violate confidentiality obligations to a client of such EVEREN Venture
Entity.
(b) Upon reasonable request, subject to the compliance by EVEREN, EVEREN
Holdings, EVEREN Securities and EVEREN Clearing with Section 8.3, WFBS, Wheat
and the Venture will, and will cause each of the Venture Entities and the Mentor
Venture Entities to, furnish EVEREN with copies of such documents and with such
information with respect to the Venture, each Venture Entity and each Mentor
Venture Entity's operations as EVEREN may from time to time reasonably request
in connection with the performance of such Entity's obligations under the
Venture Documents; provided that EVEREN,
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EVEREN Holdings, EVEREN Securities and EVEREN Clearing shall not unreasonably
interfere with the Venture, WFBS, Wheat or any Venture Entity or Mentor Venture
Entity's conduct of its business; and further provided that the furnishing of
such documents or information shall not violate confidentiality obligations to a
client of the Venture, WFBS, Wheat or such Venture Entity or Mentor Venture
Entity.
Section 5.4 Further Assurances; Consents; Waiver of Notices. Each of the
parties hereto hereby agrees to proceed diligently (i) to obtain, and to cause
the Venture to obtain, any and all Governmental Approvals and third party
consents, approvals, notations and authorizations required in connection with
the consummation of the transactions contemplated by this Agreement, (ii) to
comply, and cause the Venture to comply, with all conditions and covenants
applicable or related to it as contemplated by this Agreement and (iii) to do,
and cause the Venture to do, all such other acts as are necessary or advisable
in order to cause the consummation of the transactions contemplated hereby.
ARTICLE 6
------- -
CONDITIONS TO WFBS's AND MENTOR'S OBLIGATIONS
---------- -- ------ --- -------- -----------
WFBS' and Mentor's obligation to perform its obligations pursuant to
Article 2 and Article 3 hereof is subject to the fulfillment, at or prior to the
Initial Closing, of the following conditions:
Section 6.1 Representations and Warranties. Each of the representations and
warranties of EVEREN and the other EVEREN Venture Entities in this Agreement and
in any other Venture Document, all of which shall be deemed to have been made
again at and as of the Initial Closing, shall be true and correct in all
material respects when made and when deemed made at the time of the Initial
Closing, and WFBS and Mentor shall have received a certificate from EVEREN to
such effect.
Section 6.2 Performance of Agreements. Each EVEREN Venture Entity shall
have performed in all material respects each of the obligations and agreements,
and have complied with, and be in compliance with, in all material respects,
each of the covenants and conditions, applicable to such EVEREN Venture Entity
contained in this Agreement and the other Venture Documents to be performed and
complied with by such EVEREN Venture Entity at or prior to the time of the
Initial Closing and upon consummation of the Initial Closing, and WFBS and
Mentor shall have received a certificate from EVEREN to such effect.
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Section 6.3 Absence of Litigation. No action or suit (including, without
limitation, any action or suit by any United States or foreign Governmental
Authority) challenging the transactions contemplated by this Agreement shall
have been instituted or seriously threatened before or by any court,
administrative agency or body or Governmental Authority.
Section 6.4 Consents and Approvals. There shall have been obtained all
consents, approvals and authorizations, there shall have been given all notices
and there shall have been made all registrations and filings under all laws,
statutes, rules, regulations, judgments, orders, injunctions, contracts or other
instruments to which any of the EVEREN Venture Entities is a party or by which
any of them or any of their respective properties is bound or subject, in each
case that are required to permit the consummation of the transactions
contemplated by this Agreement without contravention, violation or breach by any
EVEREN Venture Entity, of any of the terms thereof.
Section 6.5 No Material Adverse Change. There shall not have occurred since
the date of this Agreement any action or event relating to EVEREN or any EVEREN
Venture Entity that could reasonably be expected to have a material adverse
effect on the financial condition, results of operations or business of the
Venture.
Section 6.6 Miscellaneous Agreements; Certificates; Etc. WFBS and Mentor
shall have received, in form and substance and, if reasonably requested by WFBS
and Mentor, certified in a manner, reasonably satisfactory to WFBS and Mentor,
such other documents and evidence as Mentor may reasonably request that are
customary in order to establish (i) the power and authority of each EVEREN
Venture Entity to consummate the transactions contemplated by this Agreement and
(ii) compliance with the conditions of Initial Closing set forth in this
Agreement.
Section 6.7 Legal Matters. All documents and legal proceedings taken in
connection with the transactions contemplated by this Agreement and the other
Venture Documents or incident thereto shall be reasonably satisfactory in form
and substance to Hunton & Williams, counsel to WFBS and Mentor.
ARTICLE 7
------- -
CONDITIONS TO EVEREN'S OBLIGATIONS
---------- -- -------- -----------
EVEREN's obligation to perform its obligations pursuant to Article 2 and
Article 3 hereof is subject to the fulfillment, at or prior to the Initial
Closing, of the following conditions:
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Section 7.1 Representations and Warranties. Each of the representations and
warranties of WFBS, Wheat and Mentor and the other Mentor Venture Entities in
this Agreement and in any other Venture Document, all of which shall be deemed
to have been made again at and as of the Initial Closing, shall be true and
correct in all material respects when made and when deemed made at the time of
the Initial Closing, and EVEREN shall have received a certificate from WFBS,
Wheat and Mentor to such effect.
Section 7.2 Performance of Aqreements. Each of WFBS and each Mentor Venture
Entity shall have performed in all material respects each of the obligations and
agreements, and have complied with, and be in compliance with, in all material
respects each of the covenants and conditions, applicable to it, contained in
this Agreement and the other Venture Documents to be performed and complied by
it, at or prior to the time of the Initial Closing and upon consummation of the
Initial Closing, and EVEREN shall have received a certificate from WFBS, Wheat
and Mentor to such effect.
Section 7.3 Absence of Litiqation. No action or suit (including, without
limitation, any action or suit by any United States or foreign Governmental
Authority) challenging the transactions contemplated by this Agreement shall
have been instituted or seriously threatened before or by any court,
administrative agency or body or Governmental Authority.
Section 7.4 Consents and Approvals. There shall have been obtained all
consents, approvals and authorizations, there shall have been given all notices
and there shall have been made all registrations and filings under all laws,
statutes, rules, regulations, judgments, orders, injunctions, contracts or other
instruments to which any of the Mentor Venture Entities is a party or by which
any of them or any of their respective properties is bound or subject, in each
case that are required to permit the consummation of the transactions
contemplated by this Agreement without contravention, violation or breach by any
Mentor Venture Entity, or of any of the terms thereof, including the SEC's and
the various state securities commissioners' granting of the registration of each
of the Venture Entities as an investment adviser and/or broker-dealer under the
Advisers Act, the Securities Exchange Act, and applicable state securities laws.
Section 7.5 No Material Adverse Chanqe. There shall not have occurred since
the date of this Agreement any action or event relating to WFBS or any Mentor
Venture Entity that could reasonably be expected to have a material adverse
effect on the financial condition, results of operations or business of the
Venture.
Section 7.6 Miscellaneous Aqreements; Certificates; Etc. EVEREN shall have
received, in form and substance and, if reasonably requested by EVEREN,
certified in a manner, reasonably satisfactory to EVEREN, such other documents
and evidence as EVEREN
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may reasonably request that are customary in order to establish (i) the power
and authority of each Mentor Venture Entity to consummate the transactions
contemplated by this Agreement and (ii) compliance with the conditions of
Initial Closing set forth in this Agreement.
Section 7.7 Leqal Matters. All documents and legal proceedings taken in
connection with the transactions contemplated by this Agreement and the other
Venture Documents or incident thereto shall be reasonably satisfactory in form
and substance to Bell, Boyd & Lloyd, counsel to EVEREN.
Section 7.8 Services Aqreement. The Venture and WFBS shall have entered
into a Services Agreement in the form Previously Disclosed by Mentor to EVEREN.
ARTICLE 8
---------
FURTHER AGREEMENTS
------------------
The parties hereto further agree as follows:
Section 8.1 Additional Documents. Each of the parties agrees to execute and
deliver, and to cause the execution and delivery of, prior to, at and after the
Initial Closing such additional instruments and documents as any one or more of
them may reasonably request for the purposes of carrying out or confirming the
transactions contemplated by this Agreement and the other Venture Documents.
Section 8.2 Mutual Assistance. After the Initial Closing, each party agrees
that it will, and that it will cause the Mentor and EVEREN Venture Entities, as
the case may be, and the Venture to, cooperate with each of the parties, the
Venture and the Mentor and EVEREN Venture Entities and furnish to each of them,
such information, documents, records, evidence, testimony and other assistance
as any of the EVEREN Venture Entities, any of the Mentor Venture Entities or the
Venture may reasonably request in connection with any actions, proceedings,
arrangements or disputes of any nature involving or affecting the Venture that
reasonably relate to matters that occurred prior to the Initial Closing and in
which any of the EVEREN Venture Entities or any of the Mentor Venture Entities,
as the case may be, was involved or for which it has records, information or
knowledge.
Section 8.3 Confidentiality.
---------------
(a) As used herein, "Information" of the Venture and EVEREN, respectively,
means all technical, financial and other information, in whatever form it may be
held, relating to the business of the Venture, WFBS, any Mentor Venture Entity
or any EVEREN Venture Entity, respectively, or furnished under the Venture
Documents made
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available to the other party in connection with the transactions contemplated
hereby.
(b) The party receiving Information (the "Receiving Party") from the other
party (the "Supplying Party") shall treat such Information with the same degree
of care and confidentiality that it affords its own trade secrets and
proprietary information.
(c) The Receiving Party agrees not to disclose or communicate to any third
party (other than agents of the Receiving Party who need to know such
Information and agree to be bound by the terms and conditions of this Section
8.3), in any manner whatsoever, any Information supplied by the Supplying Party,
without the prior written consent of the Supplying Party.
(d) The Receiving Party agrees to confine access to, and knowledge of, the
Information supplied by the Supplying Party to individuals in its organization
who are directly concerned with the transactions contemplated by the Venture
Documents and to ensure that every such individual is informed that he is bound
by the provisions of this Agreement.
(e) The Receiving Party agrees to study and use Information received from
the Supplying Party only in connection with the transactions contemplated by the
Venture Documents.
(f) In the event that the parties fail to consummate the transactions
contemplated hereby and this Agreement is terminated, the Receiving Party agrees
to destroy or return, at the option of the Supplying Party, all Information of
the Supplying Party, and any copies thereof, to the Supplying Party upon such
termination. At the time of return by the Receiving Party to the Supplying Party
of said Information, the Receiving Party shall also permanently destroy all
electronically stored records of such Information.
(g) Nothing contained herein shall be construed as restricting or creating
any liability for the disclosure, communication or use of Information that:
(i) is or becomes publicly known through no wrongful act of the
Receiving Party or its employees or agents;
(ii) is received from a party who is under no obligation to the
Supplying Party with respect thereto, without restriction and without breach of
this Agreement;
(iii) is disclosed pursuant to governmental or judicial requirements;
provided, however, that prior to any such disclosure the Receiving Party shall
provide notice of its intention to do so.
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(h) Notwithstanding anything contained herein to the contrary, the
obligations of confidentiality and non-disclosure shall survive termination of
this Agreement and the Operating Agreement.
Section 8.4 Non-Competition; Right to Acquire Competing Business.
--------------- ----- -- ------- --------- --------
(a) During the term of this Agreement, each party agrees that it will not,
and that it will cause each of its Subsidiaries, and use its best efforts to
cause each of its other Affiliates not to, directly or indirectly, other than
pursuant to and in accordance with the express terms and conditions of any
Venture Document, at any time prior to the earlier of (A) the termination of the
Venture in accordance with the terms of this Agreement or (B) a purchase by
either party of all of the Interest in the Venture of the other party, engage
in, develop or enter into, through acquisition or otherwise, any type of
arrangement or agreement regarding the provision of Investment Advisory
Services; provided that this provision shall not prohibit a party from owning de
minimis amounts of capital stock of a publicly traded company. Notwithstanding
the foregoing, this non-compete provision shall terminate with respect to EVEREN
if, after the Second Closing, both of the following conditions are met: (i)
EVEREN Holdings' Ownership Percentage is less than 50%, and (ii) the percentage
of annualized Venture Revenues for the preceding six month period attributable
to EVEREN exceeds 50% of the Venture Revenues. Notwithstanding any provision
contained in this Section 8.4(a), nothing contained in this Section 8.4 shall
prevent WFBS, Wheat, the Venture or any Affiliate of the Venture from entering
into an agreement or arrangement relating to Investment Advisory Services for
purposes of admitting an Additional Joint Venture Member, subject to the
provisions of Section 9.4(b).
(b) If EVEREN or any Subsidiary thereof acquires a Broker-Dealer Firm with
a division that provides Investment Advisory Services, the Venture shall have
the exclusive option following the closing of such acquisition of such Broker-
Dealer Firm to acquire such division (the "Purchase Option"). The purchase price
(the "Option Price") for the Purchase Option shall be the Fair Market Value of
such division. The Venture shall notify EVEREN within 10 Business Days of the
closing of such acquisition of its interest in exercising the Purchase Option in
which event the Venture and EVEREN shall proceed in the determination of Fair
Market Value. The Venture shall notify EVEREN within 20 Business Days after the
determination of Fair Market Value of the Venture's intent to exercise its
Purchase Option. EVEREN shall have the right to require the Venture to pay the
Option Price in Interests, valued at their Current Market Price; provided,
however, that if payment of the Option Price in Interests would increase the
Ownership Percentage of EVEREN and its Subsidiaries to more than 50% or that
percentage that is equal to the Ownership Percentage held by WFBS
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at that time, the Venture shall have the right to prorate the Option Price
between Membership Interests and cash, so that the portion of the Option Price
paid in Membership Interests would increase the Ownership Percentage of EVEREN
and its Subsidiaries to 50% or that percentage that is equal to the Ownership
Percentage held by WFBS at such time, with the balance of the Option Price paid
in cash; further provided, that in the event EVEREN or a Subsidiary thereof
shall have paid cash for the acquisition of the Broker-Dealer Firm, EVEREN shall
have the right to require the Venture to pay the Option Price in cash. If the
Venture does not elect to exercise the Purchase Option, EVEREN's operation of
such division of the acquired Broker-Dealer Firm shall not violate Section
8.4(a); provided that all other provisions of this Agreement shall remain in
effect.
Section 8.5 Income Tax Liabilities of Mentor. The income and other tax
items of Mentor and its Subsidiaries (the "Mentor Companies") for all periods
ending on or before the Initial Closing Date shall be included in the
consolidated federal income tax return of the affiliated group of which WFBS is
the common parent. Notwithstanding that Mentor shall be merged into the Venture,
WFBS shall be responsible for the payment of, shall hold the Venture harmless
from, and shall be entitled to any refund of (i) any income taxes of the Mentor
Companies for all periods ending on or before the Initial Closing Date and (ii)
any interest, penalties, and additions to taxes imposed with respect to any such
income taxes.
Section 8.6 No Commitments. Each party agrees that, except for the
liabilities to be assumed by the Venture pursuant to this Agreement and the
other Venture Documents or as provided or permitted hereby or thereby, neither
it nor any of its Subsidiaries will take, without prior written consent of the
other parties, any action that will commit or bind the Venture or any other
partner thereof to any act, agreement, contract or undertaking of any kind or
nature whatsoever.
ARTICLE 9
------- -
CERTAIN COVENANTS AND AGREEMENTS REGARDING
INTERESTS IN MENTOR
--------- -- ------
Section 9.1 Restrictions on Transfer. Any sale, transfer, assignment or
other disposition (collectively a "Disposition") of an Interest shall be void ab
initio unless consummated in accordance with the terms of this Agreement and the
Operating Agreement.
(a) Right of First Refusal. Prior to a Venture IPO, any proposed
Disposition of Membership Interest shall be subject to the following; provided,
however, that EVEREN Holdings shall have the
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option under this Section 9.1(a) to acquire Interests held by WFBS only if
EVEREN Holdings' Ownership Percentage at such time is equal to the lesser of 40%
or WFBS' Ownership Percentage:
(i) If either WFBS or EVEREN Holdings shall receive a bona fide
offer for the purchase of any or all of its Interests that it desires to accept,
then it (the "Selling Member") shall give notice to the Venture and the other
Member (the "Non-Selling Member") of such proposed Disposition (the "Disposition
Notice"). The Disposition Notice shall describe the proposed transferee, the
number of Interests proposed to be transferred (the "Offered Interests"), the
price per Interest and all other material terms and conditions of the proposed
Disposition, and shall also be accompanied by a copy of the bona fide offer.
(ii) For a period of 20 consecutive Business Days following the
receipt of the Disposition Notice (the "Initial Option Period"), the Venture
shall have the irrevocable option to purchase the Offered Interests at the price
and on the terms specified in the Disposition Notice. If the Venture exercises
the option to purchase all of the Offered Interests as specified above, then a
closing with respect to such purchase shall be held within 15 Business Days of
the expiration of the Option Period.
(iii) If the Venture does not exercise its option to purchase all of
the Offered Interests as specified above, then, for a period of five consecutive
Business Days following the expiration of the Initial Option Period (the "Second
Option Period"), the Non-Selling Member shall have the irrevocable option to
purchase the Offered Interests at the price and on the terms specified in the
Option Notice. If the Non-Selling Member exercises its option to purchase all of
the Offered Interests, then a closing with respect to such purchase shall be
held within 15 Business Days of the expiration of the Second Option Period.
(iv) Subject to the foregoing, the Selling Member may, within 90
days after the expiration of the five Business Day period referred to above,
transfer the Offered Interests to the transferee(s) identified in the
Disposition Notice at a price and on terms no less favorable to the Selling
Member than specified in the Disposition Notice. However, if such Disposition is
not consummated within such 90-day period, the Selling Member shall not transfer
any of the Offered Interests as have been purchased within such period without
again complying with all of the provisions of this Section 9.1(a).
(b) Tag Along Right. Within 10 Business Days of receipt of a bona fide
third-party offer to purchase, in the aggregate, more than 50% of the
outstanding Membership Interest, the Venture, WFBS and/or EVEREN Holdings (as
such, the "Selling Party"), as the case may be, shall give notice (the
"Disposition Notice") to each non-Selling Party setting forth (i) the number of
Interests proposed to
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be transferred by the Selling Party (the "Offered Interests"), (ii) the
anticipated date of the proposed Disposition and the names and addresses of the
proposed transferees, and (iii) the material terms of the proposed Disposition.
Upon receipt of a Disposition Notice, each non-Selling Party may elect to
participate in the proposed Disposition by delivering written notice to the
Selling Party within 10 Business Days after the receipt of such Disposition
Notice. Each non-Selling Party shall have the right (the "Tag Along Right") to
sell to the proposed transferee(s), as a condition to such Transfer by the
Selling Party, at the same price per Interest and on the same terms and
conditions as are specified in the Disposition Notice, the same Ownership
Percentage owned by the non-Selling Party as the Offered Interests represent
with respect to the Interests owned by the Selling Party immediately prior to
the Disposition of any of the Offered Interests to the proposed transferee(s).
The Selling Party shall be entitled to sell in the proposed Disposition the
balance of the Offered Interests proposed to be so sold. The Selling Party shall
use its best efforts to obtain the agreement of the prospective transferee(s) to
the participation of the non-Selling Party in any proposed Disposition and shall
not transfer any Interests to such prospective transferee(s) unless such
prospective transferee(s) allows the participation of the non-Selling Party on
the terms specified in the Disposition Notice. Subject to the foregoing, the
Selling Party may, within 90 days after the expiration of the 10 day period
referred to above, transfer the Offered Interests (reduced by the number of
Interests with respect to which the non-Selling Party has elected to
participate, if any) to the transferee(s) identified in the Disposition Notice
at a price and on the terms no more favorable to the Selling Party than
specified in the Disposition Notice. However, if such Disposition is not
consummated within such 90 day period, the Selling Party shall not transfer any
of the Offered Interests as have not been purchased within such period without
again complying with all of the provisions of this Section 9.1(b).
(c) Drag Along Right. If either WFBS or the Venture receives a bona
fide third-party offer to purchase more than 50% of the outstanding Membership
Interest, such party receiving the bona fide offer may require the Non-Selling
Members to offer, and the Non-Selling Members hereby agree to sell (the "Drag
Along Right"), up to all of their Interests in accordance with the terms of the
bona fide third-party offer. The Drag Along Right shall terminate for all
parties at any time EVEREN's Ownership Percentage is equal to the lesser of 40%
or WFBS's Ownership Percentage.
(d) Opinion of Counsel. No Dispositions of Interests will be permitted
hereunder if, in the opinion of counsel to the Venture, such Disposition would
violate any applicable state or federal securities law.
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Section 9.2 Minimum Ownership. Notwithstanding anything in this Agreement
to the contrary, WFBS hereby agrees and covenants that it will maintain a
minimum Ownership Percentage of 30% during the term of this Agreement. EVEREN
Holdings hereby agrees and covenants that it will maintain a minimum Ownership
Percentage of 20% during the term of this Agreement. The respective minimum
Ownership Percentages shall be reduced proportionately for any subsequent
issuances of Interests by the Venture.
Section 9.3 Limitations on Transfer. Following a Venture IPO and subject to
the provisions of Section 9.2, EVEREN Holdings may sell in any three-month
period the amount of Interests that would be permitted by Rule 144(f) under the
Securities Act; provided, that with respect to privately negotiated
transactions, the Venture and WFBS shall have the right of first refusal to
acquire any Interests for which EVEREN Holdings shall have obtained a bona fide
offer to purchase, as provided in Section 9.1(a).
Section 9.4 Extraordinary Events. (a) At such time as EVEREN's Ownership
Percentage is at least 40% or such lower ownership held by WFBS, the parties
agree that the Venture shall not, and the Venture shall not cause any of the
Venture Entities to, take any action set forth below without first obtaining the
approval of a majority of each of (i) the EVEREN nominees to the Management
Committee and (ii) the WFBS nominees to the Management Committee:
(A) merge or consolidate with any corporation or other entity, or
sell, lease, transfer, distribute or otherwise dispose of all or
substantially all of its assets (including capital stock of its
Subsidiaries) to any other person; or
(B) approve an Additional Joint Venture Member.
(b) The parties agree that the Venture shall not take any action referred
to in subsection (a) above without, if so requested by EVEREN, obtaining the
opinion of an investment banking firm that the taking of such action is fair to
the Members of the Venture from a financial point of view.
ARTICLE 10
------- --
TERM AND TERMINATION
---- --- -----------
Section 10.1 Term. This Agreement shall remain in full force and effect for
a period beginning as of the date hereof and continuing until the third
anniversary of the Money Market Conversion Date; provided, however, that all
Interests held by EVEREN Holdings shall be callable by the Venture at no cost to
the Venture, if the Money Market Conversion Date has not occurred as of the
close of business on December 31, 1996. Following the third
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anniversary of the Money Market Conversion Date, this Agreement shall continue
in full force and effect until termination pursuant to this Article.
Section 10.2 Voluntary Termination. Following the third anniversary of the
Money Market Conversion Date, either WFBS or EVEREN may voluntarily terminate
this Agreement by providing the other parties 24 months prior written notice.
(a) In the event EVEREN terminates this Agreement in accordance with this
Section 10.2, if the annualized Venture Revenues attributable to EVEREN decline,
both absolutely and in proportion to the annualized Venture Revenues
attributable to WFBS, between (i) the date upon which EVEREN delivers notice of
termination (the "Notice Date") and (ii) the date of termination (the
"Termination Date") (which shall be no earlier than 24 months after the Notice
Date), WFBS shall have the option (the "True-Up Option") to purchase that number
of EVEREN Holdings' Interests that reduces EVEREN Holdings' Ownership Percentage
to the percentage of total Venture Revenues attributable to EVEREN on the
Termination Date. For purposes of this Section 10.2, annualized Venture Revenues
attributable to EVEREN shall not include Venture Revenues attributable to EVEREN
Clients invested in the Mentor Money Market Funds. The purchase price for all
Interests subject to the True-Up Option shall equal the sum of $1.00 plus any
undistributed net after tax profits of the Venture accrued as of the Termination
Date and attributable to such Interests (the "Exit Price"). If EVEREN delivers
the notice of termination prior to a Venture IPO, WFBS also shall have the
option to purchase any remaining Interests held by EVEREN Holdings at such
Interests' Current Market Price. The closing with respect to such purchase shall
occur within 15 days of the exercise of the foregoing option.
(b) If (i) WFBS terminates this Agreement in accordance with this Section
10.2, (ii) the annualized Venture Revenues attributable to WFBS decline between
the Notice Date and the Termination Date, both absolutely and in proportion to
the annualized Venture Revenues attributable to EVEREN and (iii) EVEREN
Holdings' Ownership Percentage is at least 40% or such lower Ownership
Percentage held by WFBS as of the Notice Date, EVEREN shall have a True-Up
Option, as described in the preceding paragraph, to purchase, at the Exit Price,
that number of WFBS' Interests that reduces WFBS' Ownership Percentage to the
percentage of total Venture Revenues attributable to WFBS on the Termination
Date. For purposes of this Section 10.2(b), annualized Venture Revenues
attributable to WFBS shall not include revenues attributable to Wheat Clients
invested in Mentor Money Market Funds. The closing with respect to such purchase
shall occur within 15 days of the exercise of the foregoing option.
Section 10.3 Termination Upon Change of Control. Upon a Change of Control
of WFBS or EVEREN after the Money Market
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Conversion Date, the party with respect to which the Change of Control has
occurred may terminate this Agreement by providing, within 20 Business Days of
the Change of Control, 120 days prior written notice to the other party. If
either party terminates this Agreement (as such, a "Terminating Party") upon a
Change of Control as provided in this Section 10.3, the other party shall have
the option, for a period of 60 days following receipt of the notice of
termination, to purchase at the Exit Price all Interests held by the Terminating
Party. The closing with respect to such purchase shall occur within 15 days of
the exercise of the foregoing option.
ARTICLE 11
CHANGE OF CONTROL
Section 11.1 Look Back Option. If (i) a Change of Control occurs with
respect to either WFBS or EVEREN (as such, the "Target"), (ii) the Target elects
not to terminate this Agreement pursuant to Section 10.3, and (iii) between the
date of the Change of Control of the Target and the date of the second
anniversary of such Change of Control, the annualized Venture Revenues
attributable to the Target decline both absolutely and in proportion to the
annualized Venture Revenues attributable to the other party, the other party
shall have the option to purchase, for a period of 60 days following the second
anniversary date of the Change of Control, at the Exit Price, that number of the
Target's Interests so that the Target's Interests remaining after the exercise
of the option are proportionate to the percentage of the Venture Revenues
attributable to the Target as of the second anniversary of the date of Change of
Control. The closing with respect to such purchase shall occur within 15 days of
the notice of exercise of the option.
ARTICLE 12
MISCELLANEOUS
Section 12.1 Survival of Representations and Warranties. The statements,
representations, warranties, agreements and undertakings contained in this
Agreement or any Schedule shall not survive the Initial Closing.
Section 12.2 Expenses. Each of the parties hereto shall pay the fees and
expenses of its respective counsel, accountants and other experts and shall pay
all other expenses incurred by it in connection with the negotiation,
preparation and execution of the Venture Documents and the consummation of the
transactions contemplated by this Agreement.
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Section 12.3 Press Release. No press release or other public disclosure
with respect to this Agreement or the transactions hereby contemplated shall be
issued by EVEREN, WFBS or the Venture without their mutual consent, which
consent shall not be unreasonably withheld or delayed by either party, and any
such press release or other public disclosure shall be subject, in any event, to
the requirements of applicable law or stock exchange regulations; provided,
however, that if EVEREN is required by law to issue a press release or other
public disclosure with respect to this Agreement or the operation of the
Venture, EVEREN shall consult with the Venture and WFBS as to the content of
such press release or other public disclosure before it is issued.
Section 12.4 Entire Agreement. This Agreement and the Schedules, and other
documents and agreements contemplated hereby contain the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede and cancel all prior agreements with respect thereto. There are no
restrictions, promises, representations, warranties, agreements or undertakings
of any of the parties hereto with respect to the transactions contemplated
hereby other than those set forth herein or therein or made hereunder or
thereunder.
Section 12.5 Binding Effect. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.
Section 12.6 No Third Party Beneficiaries. Except for Section 8.5, Section
9.1, and Article 4 to the extent they relate to the Venture, nothing in this
Agreement, express or implied, is intended to confer, nor shall anything herein
confer, on any person other than the parties hereto and the respective
successors or permitted assigns of the parties hereto, any rights, remedies,
obligations or liabilities.
Section 12.7 Amendment or Modification. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto by their
duly authorized officers or representatives.
Section 12.8 Waiver. Any of the conditions to Initial Closing set forth in
this Agreement may be waived at any time prior to or at the Initial Closing
hereunder by the party entitled to the benefit thereof. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of such
party thereafter to enforce each and every such provision. No waiver of any
breach of or non-compliance with this Agreement shall be held to be a waiver of
any other or subsequent breach or non-compliance.
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Section 12.9 Non-Assignability. This Agreement, the Exhibits hereto and the
other documents contemplated hereby shall not be assignable by any party hereto
without the prior written consent of the other party hereto.
Section 12.10 Severability. If any provision of this Agreement shall be
determined by a court of competent jurisdiction to be invalid or unenforceable
in any jurisdiction, such determination shall not affect the validity or
enforceability of the remaining provisions of this Agreement in such
jurisdiction or affect the validity or enforceability of such provision in any
other jurisdiction.
Section 12.11 Governing Law. This Agreement shall be governed by, and be
construed in accordance with, the law of the Commonwealth of Virginia without
reference to choice of law principles.
Section 12.12 Dispute Resolution. (a) Unless the parties shall mutually
agree to an alternative method of dispute resolution, any dispute, claim or
controversy arising out of or relating to this Agreement or any other Venture
Document, or the interpretation or breach thereof, shall be referred to
arbitration under the rules of the American Arbitration Association, to the
extent such rules are not inconsistent with this paragraph (a). Judgment upon
the award of the arbitrators may be entered in any court having jurisdiction
thereof or such court may be asked to judicially confirm the award and order its
enforcement, as the case may be. The demand for arbitration shall be made within
a reasonable time after the claim, dispute or other matter in question has
arisen, and in any event shall not be made after the date when institution of
legal or equitable proceedings, based on such claim, dispute or other matter in
question, would be barred by the applicable statute of limitations.
(b) The arbitration panel shall consist of three arbitrators, one of whom
shall be appointed by each party hereto. The two arbitrators thus appointed
shall choose the third arbitrator; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator,
either arbitrator may petition the American Arbitration Association to make the
appointment.
(c) The place of arbitration shall be Washington, D.C.
(d) Notwithstanding the foregoing, no arbitration panel shall have any
power to terminate or dissolve the Venture.
Section 12.13 Notices. All communications hereunder shall be in writing and
shall be deemed to have been duly given if signed by the respective persons
giving them (in the case of any corporation the signature shall be by an
appropriate officer thereof) and
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delivered by hand, or sent by registered mail, return receipt requested, or
reliable courier, or by telex, telecopier, telegram or cable to the following
addresses:
If to WFBS or Mentor:
Mentor Investment Group, Inc.
Riverfront Plaza, East Tower
901 East Byrd Street
Richmond, Virginia 23219
Telecopier No.: (1) (804) 782-3510
Telephone No.: (1) (804) 782-3286
Attention: Daniel J. Ludeman
Managing Director
With a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter, Esq.
Telecopier No.: (804) 788-8218
Telephone No.: (804) 788-8200
If to EVEREN:
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601-1694
Attention: Arthur J. McGivern
Senior Executive Vice President
Telecopier No.: (312) 574-8823
Telephone No.: (312) 574-5704
With a copy to:
Bell, Boyd & Lloyd
Three First National Plaza
Suite 3300
70 West Madison Street
Chicago, Illinois 60602
Attention: Cameron S. Avery, Esq.
Telecopier No.: (312) 372-2098
Telephone No.: (312) 372-1121
By written notice to the other party, a party may change the address to which
notices shall be directed.
37
<PAGE>
Section 12.14 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original of this Agreement and
all of which together shall constitute one and the same instrument.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have Caused this Agreement to be
executed as of the date and year first above written.
WHEAT FIRST BUTCHER SINGER, INC.
By /s/ Marshall B. Wishnack
---------------------------------------
Name: Marshall B. Wishnack
Title: Chairman and CEO
WHEAT FIRST SECURITIES, INC.
By /s/ Marshall B. Wishnack
---------------------------------------
Name: Marshall B. Wishnack
Title: Chairman and CEO
MENTOR INVESTMENT GROUP, INC.
By /s/ Daniel J. Ludeman
---------------------------------------
Name: Daniel J. Ludeman
Title: Chairman and CEO
EVEREN CAPITAL CORPORATION
By
---------------------------------------
Name:
Title:
EVEREN SECURITIES HOLDINGS, INC.
By
---------------------------------------
Name:
Title:
EVEREN SECURITIES, INC.
By
---------------------------------------
Name:
Title:
EVEREN CLEARING CORP.
By
---------------------------------------
Name:
Title:
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
WHEAT FIRST BUTCHER SINGER, INC.
By
---------------------------------------
Name:
Title:
WHEAT, FIRST SECURITIES, INC.
By
---------------------------------------
Name:
Title:
MENTOR INVESTMENT GROUP, INC.
By
---------------------------------------
Name:
Title:
EVEREN CAPITAL CORPORATION
By /s/ Arthur J. McGivern
---------------------------------------
Name: Arthur J. McGivern
Title: Senior Executive Vice President
EVEREN SECURITIES HOLDINGS, INC.
By /s/ Arthur J. McGivern
---------------------------------------
Name: Arthur J. McGivern
Title: Authorized Signer
EVEREN SECURITIES, INC.
By /s/ Arthur J. McGivern
---------------------------------------
Name: Arthur J. McGivern
Title: Senior Executive Vice President
EVEREN CLEARING CORP.
By /s/ Arthur J. McGivern
---------------------------------------
Name: Arthur J. McGivern
Title: Authorized Signer
40
<PAGE>
Schedule l.l(a)
OPERATING AGREEMENT
OF
MENTOR INVESTMENT GROUP, L.L.C.
DATED AS OF _______ ___, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1. Defined Terms ............................................ 1
ARTICLE 2
FORMATION OF COMPANY
2.1. Formation................................................. 4
2.2. Name, Office and Registered Agent......................... 4
2.3. Governing Law............................................. 4
2.4. Purpose................................................... 4
2.5. Term...................................................... 4
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1. Capital Requirements of the Company....................... 6
3.2. Failure to Make Additional Capital Contributions.......... 7
3.3. Withdrawal of Capital..................................... 9
3.4. No Interest............................................... 9
ARTICLE 4
RIGHTS AND OBLIGATIONS OF MEMBERS
4.1. Members................................................... 9
4.2. Voting Rights; Management Rights.......................... 9
4.3. Other Activities.......................................... 9
4.4. No Right to Withdraw...................................... 9
4.5. Places of Meetings........................................ 9
4.6. Special Meetings.......................................... 10
4.7. Notice of Meetings........................................ 10
4.8. Quorum.................................................... 10
4.9. Voting.................................................... 10
ARTICLE 5
MANAGEMENT; OFFICERS
5.1. Management Committee; Executive Committee................. 11
5.2. Voting by Management Committee and Executive
Committee................................................. 13
5.3. Appointment and Removal................................... 14
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5.4. Meetings of the Management Committee and the
Executive Committee.................................. 14
5.5. Meetings by Means of Conference Telephone............ 15
5.6. Other Committees..................................... 15
5.7. Officers............................................. 16
5.8. Indemnification of Managers and Others............... 18
ARTICLE 6
MEMBER INDEMNIFICATION AND OTHER VENTURES
6.1. Indemnification...................................... 21
ARTICLE 7
ACCOUNTING, TAX AND FISCAL MATTERS
7.1. Fiscal Year.......................................... 22
7.2. Books of Account..................................... 22
7.3. Audits; Inspection of Books and Records.............. 23
ARTICLE 8
ALLOCATIONS AND DISTRIBUTIONS
8.1. Definitions.......................................... 23
8.2. Capital Accounts; Distributions; Allocations......... 24
8.3. Distributions........................................ 26
8.4. No Right to Distributions in Kind.................... 26
8.5. Limitations on Return of Capital Contributions....... 26
8.6. Distributions Upon Liquidation....................... 27
8.7. Substantial Economic Effect.......................... 27
ARTICLE 9
TRANSFERS
9.1. Restrictions on Transfers/Encumbrances............... 27
ARTICLE 10
MISCELLANEOUS
10.1. Fixing Record Date.................................. 28
10.2. Voting of Shares Held............................... 28
10.3. Applicable Laws..................................... 29
10.4. Modification........................................ 29
10.5. Arbitration......................................... 29
10.6. Amendment and Notice................................ 29
10.7. Severability........................................ 31
10.8. Captions............................................ 31
10.9. Burden and Benefit Upon Successors.................. 31
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<PAGE>
Schedule 3.1 - Percentage Interests of Members
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<PAGE>
OPERATING AGREEMENT
-------------------
THIS OPERATING AGREEMENT of MENTOR INVESTMENT GROUP, L.L.C., a
Virginia limited liability company (the "Company"), is made as of this ___ day
of ______, 1996, by and between WHEAT FIRST BUTCHER SINGER, INC., a Virginia
corporation ("WFBS"), and EVEREN SECURITIES HOLDINGS, INC., a Delaware
corporation ("EVEREN Holdings") (each of such entities a "Member" and
collectively, the "Members"), recites and provides as follows:
RECITALS
--------
l. WFBS and EVEREN desire to enter into a strategic alliance whereby,
as a preferred provider, the Company will offer asset management services,
including money market funds, mutual funds and private account management, to
the clients of Wheat, First Securities, Inc., EVEREN Securities, Inc. ("EVEREN
Securities") and EVEREN Clearing Corp. ("EVEREN Clearing").
2. In recognition of the mutual growth opportunities offered by this
strategic alliance, EVEREN and WFBS desire for EVEREN Holdings to acquire and
maintain an equity investment in Mentors
3. In order to accomplish these objectives, WFBS and EVEREN have
entered into a Joint Venture Agreement dated as of July ___, 1996.
4. WFBS and EVEREN Holdings desire to enter into this Agreement to set
forth the terms and conditions pursuant to which the Company will be operated.
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.1. Defined Terms. In this Agreement, except where the
context otherwise requires:
"Act" shall mean the Virginia Limited Liability Act, as amended.
"Affirmative Vote of Management Committee" shall have the meaning set
forth in Section 5.1.
"Agreement" shall mean this Operating Agreement, as it may be amended
from time to time.
"Capital Account" shall have the meaning set forth in Section 8.l(A).
<PAGE>
"Capital Contributions" shall have the meaning set forth in Section
3.1.
"Code" shall have the meaning set forth in Section 8.1(B).
"Company" shall mean Mentor Investment Group, L.L.C.
"Company Minimum Gain" shall have the meaning set forth in Section
8.1(C).
"Defaulting Member" shall have the meaning set forth in Section
3.2(a).
"Default Rate" shall have the meaning set forth in Section 3.2(d).
"Event of Bankruptcy" shall have the meaning set forth in Section
2.5.
"EVEREN" shall mean EVEREN Capital Corporation, a Delaware
corporation.
"EVEREN Clearing" shall mean EVEREN Clearing Corp., a Delaware
corporation, and a wholly-owned subsidiary of EVEREN Securities.
"EVEREN Holdings" shall mean EVEREN Securities Holdings, Inc., a
Delaware corporation, and a wholly-owned subsidiary of EVEREN.
"EVEREN Securities" shall mean EVEREN Securities, Inc., a Delaware
corporation, and a wholly-owned subsidiary of EVEREN Holdings.
"Executive Committee" shall have the meaning set forth in Section
5.1.
"Indemnifying Member" shall have the meaning set forth in Section 6.1.
"Liquidating Agent" shall have the meaning set forth in Section
2.5(b).
"Loss" shall have the meaning set forth in Section 8.2(c)(6).
"Management Committee" shall have the meaning set forth in Section
5.1.
"Manager" shall have the meaning set forth in Section 5.1.
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"Material Decisions" shall have the meaning set forth in Section 5.1.
"Member" or "Members" shall mean WFBS and EVEREN.
"Member Nonrecourse Debt Minimum Gain" shall have the meaning set forth in
Section 8.1(D).
"Members' Management Group" shall have the meaning set forth in Section
5.1.
"Membership Interest" or "Membership Interests" shall mean the ownership
interest of a Member in the Company, described as a percentage set forth on
Schedule 3.1 hereto, and the right of such Member to any and all the benefits to
which such Member may be entitled as provided in this Agreement and in the Act,
together with the obligations of such Member to comply with all the provisions
of this Agreement and of the Act.
"Membership Notice" shall have the meaning set forth in Section
3.2(b).
"Mentor" means Mentor Investment Group, Inc., a Virginia corporation.
"Ownership Percentage" shall mean, with respect to any party, the
proportion of all outstanding Membership Interests, expressed as a percentage,
held by such party.
"Percentage Interest" shall have the meaning set forth in Section
8.2(b).
"Profit" shall have the meaning set forth in Section 8.2(c)(6).
"Redemption Price" shall have the meaning set forth in Section
3.2(a).
"Regulations" shall have the meaning set forth in Section 8.1(E).
"Removing Member" shall have the meaning set forth in Section 5.3.
"Tax Matters Member" shall have the meaning set forth in Section
7.2.
"Triggering Event" shall have the meaning set forth in Section 2.5.
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<PAGE>
"Venture Agreement" shall mean the Joint Venture Agreement between WFBS,
WFS, Mentor and EVEREN, EVEREN Holdings, EVEREN Securities and EVEREN Clearing
dated as of July __, 1996.
"WFBS" shall mean Wheat First Butcher Singer, Inc., a Virginia
corporation.
"WFS" shall mean Wheat, First Securities, Inc., a Virginia
corporation.
ARTICLE 2
FORMATION OF COMPANY
Section 2.1. Formation. The Members hereby acknowledge the formation of the
Company as a limited liability company pursuant to the Act by virtue of the
Articles of Organization dated _____, 1996. The rights and liabilities of the
Members shall be as provided in the Act and as otherwise provided herein.
Section 2.2. Name, Office and Registered Agent. The name of the Company
shall be Mentor Investment Group, L.L.C. The principal place of business of the
Company shall be located at 901 East Byrd Street, Richmond, Virginia 23219. The
registered agent of the Company for purposes of the Act (as defined in Section
1.2) is David M. Carter, Esq., who is a resident of Virginia and a member of the
Virginia State Bar and whose address is 951 East Byrd Street, Richmond, Virginia
23219. The registered agent's sole duty as such is to forward to the Company at
its principal office and place of business any notice that is served on him as
registered agent.
Section 2.3. Governing Law. This Agreement and all questions with respect
to the rights and obligations of the Members, the construction, enforcement and
interpretation hereof, and the formation, administration and termination of the
Company shall be governed by the provisions of the Act, and other applicable
laws of the Commonwealth of Virginia.
Section 2.4. Purpose. The nature of the Company's business shall be to
engage in investment advisory and asset management activities in North America.
Section 2.5. Term. (a) The term of the Company shall continue in full force
and effect until July ____, 2096, except that the Company shall be dissolved
upon the first to occur of any of the following events (a "Triggering Event"):
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<PAGE>
(i) The unanimous determination in writing of the holders of all of
the Membership Interests to dissolve and terminate the Company;
(ii) The entry of a decree of judicial dissolution under Section
13.1-1047 of the Act; or
(iii) The occurrence of (A) the filing of a petition for relief as to
a Member as debtor or bankrupt under the Bankruptcy Code of 1978 or other
similar provision of law of any jurisdiction (except if such petition is
contested by such Member and has been dismissed within 90 days); (B) the
insolvency of such Member as finally determined by a court proceeding; (C)
the filing by such Member of a petition or application to accomplish the
same or for the appointment of a receiver or a trustee for such Member or a
substantial part of its assets; (D) the commencement of any proceedings
relating to such Member as a debtor under any other reorganization,
arrangement, insolvency, adjustment of debt or liquidation law of any
jurisdiction, whether now in existence or hereinafter commenced, if such
Member indicates its approval of such proceeding, consents thereto or
acquiesces therein, or such proceeding is contested by such Member and has
not been finally dismissed within 90 days ((A), (B), (C) and (D)
collectively, an "Event of Bankruptcy"); (E) the dissolution of a Member;
or (F) any other event that terminates the membership of a Member; unless
there are at least two remaining Members and, within 90 days of the
occurrence of any event identified in this subsection (iii), Members
representing at least a majority of the remaining Membership Interest agree
to continue the business of the Company, in which event the Company shall
not be dissolved and the Company and the business of the Company shall be
continued; provided that if any Member is a partnership or a limited
liability company on the date of such occurrence, the dissolution of such
Member as a result of an Event of Bankruptcy or dissolution of a partner or
member in such partnership or limited liability company, as the case may
be, shall not be an event of dissolution of the Company if the business of
such Member is continued by its remaining partner(s) or member(s), as the
case may be, either alone or with additional partners or members and such
Member and such partners or members comply with any other applicable
requirements of this Agreement.
(b) Upon the dissolution of the Company for any reason, WFBS as the
Liquidating Agent of the Company (collectively, in such capacity, the
"Liquidating Agent"), shall proceed promptly to wind up the affairs of and
liquidate the Company. Except as otherwise provided in this Agreement, the
Members shall continue to share distributions and tax allocations during the
period of liquidation in the same manner as before the dissolution.
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Subject to the provisions of Section 8.6, the Liquidating Agent shall have
reasonable discretion to determine the time, manner and terms of any sale or
sales of Company's property pursuant to such liquidation.
(c) Notwithstanding any other provisions of this Agreement, in the event
that the "Money Market Conversion Date" (as such term is defined in the Venture
Agreement) has not occurred as of the close of business on December 31, 1996,
the Company shall have the right to call the Membership Interest held by EVEREN
Holdings at no cost to the Company, and if such Membership Interest is called,
EVEREN Holdings shall forfeit such Membership Interest.
ARTICLE 3
CAPITAL CONTRIBUTIONS
Section 3.1. Capital Requirements of the Company. (a) The original
capital contributions of the Members shall be as set forth in Schedule 3.1.
Subject to Section 3.1(c), the Management Committee shall determine whether, and
to what extent, the Members shall contribute additional amounts to the capital
of the Company (the "Capital Contributions"). The Management Committee also
shall determine when such Capital Contributions are due and in what form they
shall be made. The right of the Management Committee to provide for any Capital
Contributions shall not be construed as conferring any rights or benefits upon
any person not a party to this Agreement.
(b) In the event of a determination by the Management Committee that the
Members shall make Capital Contributions in accordance with Section 3.1(a), the
Management Committee shall offer to the Members the opportunity to make Capital
Contributions in order to maintain their Percentage Interest, except as provided
in the Venture Agreement. The Members shall have 10 business days following
receipt of notice that they may make Capital Contributions to notify the
Management Committee in writing of their decision whether or not to make such
Capital Contributions. Thereafter, the Management Committee shall notify the
Members of the amount of their required Capital Contribution and the date such
Capital Contributions shall be due.
(c) In the event the Management Committee determines that the Members
shall make Capital Contributions in accordance with Section 3.1(a) and
notwithstanding the provisions of Section 3.1(b), each Member shall be required
to make Capital Contributions equal to the aggregate amount of previous
distributions to such Member during the 60-month period prior to the Management
Committee's determination to require a Capital
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<PAGE>
Contribution, other than such distributions to such Member pursuant to Section
8.3(b).
Section 3.2. Failure to Make Additional Capital Contributions. (a) In the
event that any Member fails to contribute to the Company all or any portion of a
Capital Contribution agreed upon by such Member in accordance with Section
3.1(b) or required to be made by such Member pursuant to Section 3.1(c) within
10 days after the date scheduled for such contribution, such Member shall be
deemed to be in default hereunder (a "Defaulting Member"), and the Company shall
have the option, in addition to any other rights or remedies available to it,
exercisable in the sole discretion of the Management Committee, by written
notice from the Company to the Defaulting Member given within 15 days after the
occurrence of such default, to redeem such Defaulting Member's Membership
Interest in the Company, including, without limitation, all cash and other
distributions and all Profits and Losses (as determined in accordance with
Article 8) attributable to such interest which have not previously been
distributed (or allocated in a tax return filed by the Company) to the
Defaulting Member (and, regardless of whether such option is exercised, the
Defaulting Member shall have no right to receive such present or future
distributions and Profits and Losses of the Company, but any successors to his
interest shall receive the benefits of the same) by paying to the Defaulting
Member, within 10 days after exercise of its option to redeem, an amount in cash
equal to $1.00 plus any undistributed net after tax profits of the Company
relating to the Defaulting Member's Membership Interest (the "Redemption
Price"). Any amounts forfeited by the Defaulting Member shall be allocated among
the remaining Members in accordance with the provisions of Article 8 hereof. In
the event of such forfeiture, this Agreement (including Schedule 3.1 hereto)
shall be amended to reflect such forfeiture.
(b) In the event that the Company does not elect to redeem a Defaulting
Member's Membership Interest in the Company pursuant to paragraph (a) above, the
Company shall send a written notice to that effect to each of the Members
("Membership Notice"), and the Members (excluding the Defaulting Member) shall
have the option, exercisable as hereinafter provided, to purchase such
Defaulting Member's Membership Interest in the Company, including, without
limitation, all cash and other distributions and all Profits and Losses
attributable to such interest which have not previously been distributed (or
allocated in a tax return filed by the Company) to the Defaulting Member (and,
regardless of whether such option is exercised, the Defaulting Member shall have
no right to receive such present or future distributions and Profits and Losses
of the Company, but any successor to his interest shall receive the benefits of
the same), by (i) paying the Defaulting Member an amount in cash equal to the
Redemption Price, and (ii) making, or undertaking to
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<PAGE>
make, the additional payments to the Company required to be made by the
Defaulting Member to the extent that such additional payments have not been made
by the Defaulting Member. Such purchase may be made by the Members, in such
proportions as they may determine, by giving notice to the Management Committee
of their intent to exercise such right within 15 days after receipt of the
Membership Notice. If two or more Members desire to purchase such interest, the
Management Committee shall give each of them prompt notice of the names and
addresses of all Members desiring to make such purchase, and if such Members are
unable to agree as to the apportionment thereof within 10 days after the
Management Committee has given such notice, each such Member shall be entitled
to purchase that portion of the Membership Interest equal to the ratio that such
Member's Membership Interest bears to the total Membership Interests owned by
all Members desiring to make such purchase. Such purchase shall take place two
days after the expiration of such 10-day period, and simultaneously therewith
each purchasing Member shall pay to the Company his pro rata share of the amount
which the Defaulting Member failed to pay.
(c) Each Member hereby constitutes and appoints the Management Committee,
and any person or entity which becomes a substitute or additional Management
Committee of the Company, his agent and attorney-in-fact for the purpose of
executing and delivering any and all documents necessary to convey his interest
in the Company to the purchaser thereof pursuant to this Section 3.2, which
power of attorney, being coupled with an interest, is irrevocable and shall
survive the death, dissolution or incapacity of any Member.
(d) Notwithstanding any of the foregoing, unless the Company elects to
exercise its option to redeem the Defaulting Member's Membership Interest, in
which event all further obligations of the Defaulting Member to pay the balance
of his Capital Contribution shall be extinguished, the obligations of the
Defaulting Member to the Company hereunder shall not be extinguished by the
existence of such options, or by their exercise, but only by, and to the extent
of, the payments made in the Defaulting Member's place by any Member or Members
who have purchased his interest hereunder, and the Company may proceed to
collect any amount due from the Defaulting Member as and when due, together with
interest thereon from the date for payment stated herein at a rate equal to 2%
per annum plus the rate announced from time to time by __________ Bank as its
"prime" or "base" rate (the "Default Rate"), plus all costs and expenses of
collection incurred by the Company (including reasonable fees and disbursements
of counsel). No delay or failure to act by the Company or the Management
Committee with respect to any failure by a Defaulting Member to pay any amount
which he is required to pay to the Company as and when due hereunder shall
constitute a waiver thereof nor shall any waiver in respect of any such non-
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<PAGE>
payment impair any rights of the Company or any of the Members as to any other
or subsequent failure(s) to pay by that Defaulting Member or any other Member,
provided, however that any waiver of the provisions of this Section 3.2 by the
Management Committee shall bind the Company and all Members.
Section 3.3. Withdrawal of Capital. No Member shall be entitled to
withdraw any part of its Capital Contribution in the Company or to receive any
distribution from the Company, except as specifically provided herein. No Member
shall be entitled to demand any property from the Company other than cash.
Section 3.4. No Interest. No interest shall be paid on Capital
Contributions or on the balance in each Member's Capital Account as defined in
Section 8.2(a).
ARTICLE 4
---------
RIGHTS AND OBLIGATIONS OF MEMBERS
---------------------------------
Section 4.1. Members. The Members of the Company, and their respective
Membership Interest, are listed on Schedule 3.1 attached hereto.
Section 4.2. Voting Rights; Management Rights. Except as otherwise
required by law, the Members shall not have any right to take part in the
management or operation of the Company other than through the Managers appointed
by the Members to the Management Committee. No Member shall, without the prior
written approval of the Management Committee, take any action on behalf of or in
the name of the Company, or enter into any commitment or obligation binding upon
the Company, except for actions expressly authorized by the terms of this
Agreement. Each Member shall have the responsibility to bring to the attention
of the Management Committee all matters of major management significance to the
Company.
Section 4.3. Other Activities. Except as otherwise expressly provided
herein or in the Venture Agreement, any Member may engage in or possess any
interest in another business or venture of any nature and description,
independently or with others, even if such activities compete directly with the
business of the Company, and neither the Company nor any Member hereof shall
have any rights in or to any such independent ventures or the income or profits
derived therefrom.
Section 4.4. No Right to Withdraw. Except as set forth in Article 9, no
Member shall have any right to voluntarily resign or otherwise withdraw from the
Company without the written consent of all the remaining Members.
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<PAGE>
Section 4.5. Places of Meetings. All meetings of the Members shall be held
at such place, either within or without the Commonwealth of Virginia, as from
time to time may be fixed by the Management Committee.
Section 4.6. Special Meetings. A special meeting of the Members for any
purpose or purposes may be called at any time by the Chairman of the Management
Committee or by Members holding a majority in interest of the Membership
Interests and entitled to vote with respect to the business to be transacted at
such meeting. At a special meeting no business shall be transacted and no action
shall be taken other than that stated in the notice of the meeting.
Section 4.7. Notice of Meetings. Written or printed notice stating the
place, day and hour of every meeting of the Members and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
mailed not less than ten nor more than sixty days before the date of the meeting
to each Member entitled to vote at such meeting, at its address maintained in
the records of the Company by the Company's Secretary. Such further notice shall
be given as may be required by law, but meetings may be held without notice if
all the Members entitled to vote at the meeting are present in person or by
proxy or if notice is waived in writing by those not present, either before or
after the meeting.
Section 4.8. Quorum. Any number of Members together holding at least a
majority of the Membership Interests entitled to vote with respect to the
business to be transacted, who shall be present in person or by telephone or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If less than a quorum shall be in attendance at the
time for which a meeting shall have been called, the meeting may be adjourned
from time to time by a majority of the members present or represented by proxy
without notice other than by announcement at the meeting.
Section 4.9. Voting. At any meeting of the Members, each Member of a class
entitled to vote on any matter coming before the meeting shall, as to such
matter, have a vote, in person, by telephone or by proxy, equal to the number of
Membership Interests held in its name on the date, not more than seventy days
prior to such meeting, fixed by the Management Committee as the record date for
the purpose of determining Members entitled to vote. Every proxy shall be in
writing, dated and signed by the member entitled to vote or its duly authorized
attorney-in-fact.
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ARTICLE 5
---------
MANAGEMENT; OFFICERS
--------------------
Section 5.1. Management Committee; Executive Committee. There shall be a
Management Committee (the "Management Committee") made up of five Managers
(each, a "Manager") from WFBS and two Managers from EVEREN (each, a "Manager")
(each such group of Managers being hereinafter referred to as a "Members'
Management Group"), such number of Managers comprising EVEREN's Members'
Management Group to represent the same proportion of the total number of
Managers as EVEREN's Membership Interest down to the nearest whole number (but
not less than two), which Management Committee shall have sole responsibility
for managing the business and affairs of the Company, except as otherwise
provided herein or in the Act. Except for any "Material Decision" (as defined in
this Section), the Management Committee may delegate any of its powers or
responsibilities to an executive committee which shall consist of two Managers
from the WFBS Members' Management Group and one Manager from the EVEREN Members'
Management Group (the "Executive Committee").
Any action required or permitted to be taken at any meeting of the
Management Committee may be taken without a meeting, if all the Managers consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings and meetings of the Management Committee.
The Management Committee shall have the power and responsibility to make
all decisions to take any of the following actions, which shall constitute
material decisions ("Material Decisions") which must be made by the affirmative
vote of a majority of the Management Committee, provided that at such time as
EVEREN's Ownership Percentage is at least 40% (or such lower ownership held by
WFBS), approval of an action set forth in (A) or (B) below shall require the
affirmative vote of a majority of each of EVEREN's Members' Management Group and
WFBS's Members' Management Group) (the "Affirmative Vote of the Management
Committee"), or which may be delegated to the Executive Committee only by
Affirmative Vote of the Management Committee (except that the power to take the
actions set forth in subsections (A), (B), (Q) and (W) below may not be
delegated to the Executive Committee and must be made by the Management
Committee):
(A) admit any additional Member to the Company;
(B) merge or consolidate with any corporation or other entity, or sell,
lease, transfer, distribute or otherwise dispose of all or substantially all of
its assets (including capital stock of its subsidiaries) to any other person; or
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(C) prepare a budget for the succeeding business year for the Company or
amend any such budget;
(D) approve as an expenditure of the Company any expenditure incurred by
any Member;
(E) adopt or change the fiscal procedures of the Company;
(F) adopt a general regulatory strategy or make any substantial changes
therein;
(G) create, incur or assume any indebtedness for borrowed money;
(H) approve any independent public accountant for the Company;
(I) create, incur or assume any guaranties of payment or performance by
third parties;
(J) create any lien upon the property of the Company, except for liens
incurred in the regular course of operations, including, without limitation,
mechanics' liens and liens for taxes not due;
(K) authorize loans of money by the Company except for loans to employees
of the Company for cash advances and relocation expenses in accordance with
policies and procedures approved by the Management Committee from time to time;
(L) enter into any contract, lease or other commitment not in the ordinary
course of business;
(M) enter into any license, technology transfer or technical assistance
agreement;
(N) approve any transaction with any Member or any affiliate of a Member;
(O) change the strategic direction of the Company;
(P) amend the Company's budget for any calendar year;
(Q) approve any Capital Contribution, whether or not included in a budget,
or the authorization or issuance of additional Membership Interests;
(R) acquire any corporation or other entity, invest in any corporation or
other entity, or acquire any portion of the assets of any corporation or other
entity other than in the ordinary course of the Company's business;
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<PAGE>
(S.) purchase any real property;
(T.) purchase all insurance required for a business of the type conducted
by the Company;
(U.) approve the dissolution of the Company;
(V) approve any distributions to Members;
(W.) approve an amendment to the Agreement;
(X) approve the compensation of officers of the Company; or
(Y.) make any other decision or take any other action that could have a
material effect on the conduct of the business and other affairs of the Company.
If the Management Committee fails to make a Material Decision, the Company
shall not take the action constituting such Material Decision. The failure of
the Management Committee to make a Material Decision shall not be cause for
dissolution of the Company.
Section 5.2. Voting by Management Committee and Executive Committee. (a)
Unless otherwise specified herein, all decisions of the Management Committee
must be made by the Affirmative Vote of the Management Committee.
(b) All decisions of the Executive Committee must be made by the
affirmative vote of a majority of the Executive Committee.
(c) A Manager shall not vote, however, and the number of outstanding votes
shall be accordingly reduced when the Member represented by such Manager is
affected by any of the following issues:
(i) If a Member has caused a dissolution of the Company by its express will
in contravention of this Agreement, the Managers designated by such Member shall
not vote thereafter on any matter; and
(ii) If the issue before the Management Committee is whether a Member should
be expelled from the Company because of the occurrence of an event described in
Section 2.4(a), then the Managers designated by the Member under consideration
for expulsion shall not vote, and the vote necessary for expulsion shall be
determined as though that Member never participated in the Company.
Except as provided in paragraphs (i) and (ii) of this Section 5.2 of this
Agreement, no Manager shall be disqualified from voting on any issue,
notwithstanding any interest that a
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Member may have therein which differs from the interest of the Company or the
other Members.
Section 5.3. Appointment and Removal. (a) The Members hereby agree that in
any and all elections of the Managers of the Company (whether at a meeting and
whether by the Members of the Company or by the Management Committee), each
Member shall vote or cause to be voted all of his respective Membership
Interests which are owned by him or over which he has voting control, and
otherwise use his respective best efforts so as to: (i) fix the number of
Managers at seven as provided in Section 5.1; (ii) elect the WFBS Members'
Management Group; (iii) elect the EVEREN Members' Management Group.
(b) The Company shall provide the Members with prior notice of any intended
mailing or notice to Members for a meeting in which Managers are to be elected.
Each Member shall notify the Company, prior to such mailing, of the persons
designated by such Member as nominees for election as Managers. If any Member
shall fail to give notice to the Company as provided above, the designees then
serving as Managers on behalf of such Members shall be deemed the designees for
reelection.
(c) Any Manager may be removed or replaced at any time by the Member (a
"Removing Member") that appointed such Manager; however, a replacement must be
named by the Removing Member within five business days of such removal. The
Removing Member must immediately notify in writing each member of the Management
Committee of such replacement.
Section 5.4. Meetings of the Management Committee and the Executive
Committee. An annual meeting of the Management Committee shall be held on an
annual basis at such time and place within or without the Commonwealth of
Virginia as the Management Committee may designate. Regular meetings of the
Management Committee shall be held on a quarterly basis, at such times and
places within or without the Commonwealth of Virginia determined by the
Management Committee. Special meetings of the Management Committee may be called
by the Chairman of the Management Committee. Notice of a meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given to each Member either by mail not less than
five days before the date of the meeting or by telephone, telegram or fax no
less than 48 hours before the date and hour of the meeting. Presence at the
meeting shall constitute waiver of any deficiency of notice under this Section
5.4.
Meetings of the Executive Committee may be called by the Chairman of the
Executive Committee. Notice of a meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given to each Member either by mail not less than five days before the date of
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the meeting or by telephone, telegram or fax no less than 48 hours before the
date and hour of the meeting. Presence at the meeting shall constitute waiver of
any deficiency of notice under this Section 5.4.
Section 5.5. Meetinqs by Means of Conference Telephone. Members of the
Management Committee may participate in a meeting of the Management Committee or
the Executive Committee, as applicable, by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in a meeting pursuant to this
Section 5.5 shall constitute presence in person at such meeting and shall
constitute a waiver of any deficiency of notice pursuant to Section 5.4.
Section 5.6. Other Committees.
(a) Other Committees. Subject to Section 5.1, the Management Committee, by
resolution adopted by a majority of the number of Managers fixed by this
Agreement, may establish such other standing or special committees of the
Management Committee as it may deem advisable, consisting of not less than two
Managers; and the members, terms and authority of such committees shall be as
set forth in the resolutions establishing the same.
(b) Meetings. Regular and special meetings of any Committee established
pursuant to this Section 5.6 may be called and held subject to the same
requirements with respect to time, place and notice as are specified in this
Agreement for regular and special meetings of the Management Committee.
(c) Quorum and Manner of Acting. A majority of the members of any Committee
serving at the time of any meeting thereof shall constitute a quorum for the
transaction of business at such meeting. The action of a majority of those
members present at a Committee meeting at which a quorum is present shall
constitute the act of the Committee.
(d) Term of Office. Members of any Committee shall be elected as above
provided and shall hold office until their successors are elected by the
Management Committee or until such Committee is dissolved by the Management
Committee.
(e) Resignation and Removal. Any member of a Committee may resign at any
time by giving written notice of his intention to do so to the President or the
Secretary of the Company, or may be removed, with or without cause, at any time
by such vote of the Management Committee as would suffice for his election.
(f) Vacancies. Any vacancy occurring in a Committee resulting from any
cause whatever may be filled by the
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affirmative vote of a majority of the number of Managers fixed by this
Agreement.
Section 5.7. Officers.
(a) Designation and Election of Officers; Duties. The officers of the
Company shall consist of a Chairman of the Management Committee, a President, a
Treasurer and a Secretary. Other officers, including one or more Vice-
Presidents, and assistant and subordinate officers, may from time to time be
elected by the Management Committee. All officers shall hold office until the
next annual meeting of the Management Committee and until their successors are
elected by the Management Committee. Any two offices may be held by the same
person as the Management Committee may determine.
(b) Removal of Officers; Vacancies. Any officer of the Company may be
removed summarily with or without cause, at any time, by approval of the
Management Committee. Vacancies may be filled by approval of the Management
Committee.
(c) Duties. The officers of the Company shall have such duties as generally
pertain to their offices, respectively as well as such powers and duties as are
hereinafter provided or as time to time shall be confirmed by the Management
Committee.
(d) Duties of the Chairman of the Management Committee. The Chairman of the
Management Committee shall be the chief executive officer of the Company and
shall be responsible for the execution of the policies of the Management
Committee, shall serve as the Chairman of the Executive Committee and shall have
direct supervision over the business of the Company and its several officers,
subject to the ultimate authority of the Management Committee. He shall be a
Manager, and except as otherwise provided in this Agreement or in the
resolutions establishing such committees, he shall be ex officio a member of all
Committees of the Management Committee. He shall preside at all meetings of
Members, the Management Committee and the Executive Committee. He may sign and
execute in the name of the Company, deeds, mortgages, bonds, contracts or other
instruments except in cases where the signing and the execution thereof shall be
expressly delegated by the Management Committee or by this Agreement to some
other officer or agent of the Company or shall be required by law otherwise to
be signed or executed. In addition, he shall perform all duties incident to the
office of the Chairman of the Management Committee and chief executive officer
and such other duties as from time to time may be assigned to him by the
Management Committee.
(e) Duties of the President. The President shall be primarily responsible
for the implementation of policies of the Management Committee. He shall have
authority over the general
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management and direction of the business and operations of the Company, subject
only to the ultimate authority of the Management Committee. He may sign and
execute in the name of the Company, deeds, mortgages, bonds, contracts or other
instruments except in cases where the signing and the execution thereof shall be
expressly delegated by the Management Committee or by this Agreement to some
other officer or agent of the Company or shall be required by law otherwise to
be signed or executed. In addition, he shall perform all duties incident to the
office of the President and such other duties as from time to time may be
assigned to him by the Management Committee.
(f) Duties of the Vice-Presidents. Each Vice-President, if any, shall have
such powers and duties as may from time to time be assigned to him by the
President or the Management Committee. Any Vice-President may sign and execute
in the name of the Company deeds, mortgages, bonds, contracts or other
instruments authorized by approval of the Management Committee, except where the
signing and execution of such documents shall be expressly delegated by the
Management Committee or the President to some other officer or agent of the
Company or shall be required by law or otherwise to be signed or executed by
some other officer or agent.
(g) Duties of the Treasurer. The Treasurer, if any, shall have charge of
and be responsible for all funds, securities, receipts and disbursements of the
Company, and shall deposit all monies and securities of the Company in such
banks and depositories as shall be designated by the Management Committee. He
shall be responsible: (a) for maintaining adequate financial accounts and
records in accordance with generally accepted accounting practices; (b) for the
preparation of appropriate operating budgets and financial statements; (c) for
the preparation and filing of all tax returns required by law; and (d) for the
performance of all duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Management Committee
or the President. The Treasurer may sign and execute in the name of the Company
deeds, mortgages, bonds, contracts or other instruments, except in cases where
the signing and the execution thereof shall be expressly delegated by the
Management Committee or by this Agreement to some other officer or agent of the
Company or shall be required by law or otherwise to be signed or executed by
some other officer or agent.
(h) Duties of the Secretary. The Secretary shall act as secretary of all
meetings of the Management Committee and Members of the Company. He shall keep
and preserve the minutes of all such meetings in permanent books. He shall see
that all notices required to be given by the Company are duly given and served;
shall have custody of all deeds, leases, contracts and other important
documents; shall have charge of the books, records and
<PAGE>
papers of the Company relating to its organization and management as a Company;
shall see that all reports, statements and other documents required by law
(except tax returns) are properly filed; and shall in general perform all the
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the Management Committee or the President.
(i) Compensation. The compensation of all officers of the Company shall be
determined by the Management Committee.
Section 5.8. Indemnification of Managers and Others.
--------------------------------------
(a) Definitions in this Section.
---------------------------
"applicant" means the person seeking indemnification pursuant to this
Section 5.8.
"expenses" includes counsel fees.
"liability" means the obligation to pay a judgment, settlement, penalty,
fine, including any excise tax assessed with respect to an employee benefit
plan, or reasonable expenses incurred with respect to a proceeding.
"party" includes an individual who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
"proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal.
(b) Liability. In any proceeding brought by or in the right of the Company
or brought by or on behalf of the Members of the Company, no Manager shall be
liable to the Company or its Members for monetary damages with respect to any
transaction, occurrence or course of conduct, whether prior or subsequent to the
effective date of this Section 5.8, except for liability resulting from such
person's having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities, pension, trust or consumer
protection law.
(c) Indemnification. The Company shall indemnify any person who was or is
a party to any proceeding, including a proceeding brought by a Member in the
right of the Company or brought by or on behalf of the Members of the Company,
by reason of the fact that he is or was a Manager, or is or was serving at the
request of the Company as a manager, director, trustee, partner or officer of
another limited liability company, corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability incurred
by him in connection with such proceeding unless he engaged in willful
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misconduct or a knowing violation of the criminal law. A person is considered to
be serving an employee benefit plan at the Company's request if his duties to
the Company also impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan. The Management
Committee is hereby empowered, by a majority vote of a quorum of disinterested
Managers, to enter into a contract to indemnify any member of the Management
Committee in respect of any proceedings arising from any act or omission,
whether occurring before or after the execution of such contract.
[(d) Assumption of Defense. Promptly after receipt by a party of notice of
the commencement of any proceeding with respect to which such party is seeking
indemnification, such party shall notify the Company in writing of the
commencement thereof (as such, the "notifying party"), and the Company shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof, with counsel satisfactory to the notifying party; provided,
however, that if the defendants in any such action include both the Company and
the notifying party, and the notifying party shall have been advised by counsel
that there may be legal defenses available to it that are different from or
additional to those available to the Company, the notifying party shall have the
right to select separate counsel.]
(e) Availability. The provisions of this Section 5.8 shall be applicable
to all proceedings commenced after the adoption hereof by the Members of the
Company, arising from any act or omission, whether occurring before or after
such adoption. No amendment or repeal of this Section 5.8 shall have any effect
on the rights provided under this Section 5.8 with respect to any act or
omission occurring prior to such amendment or repeal. The Company promptly shall
take all such actions, and make all such determinations, as shall be necessary
or appropriate to comply with its obligation to make any indemnity under this
Section 5.8 and shall promptly pay or reimburse all reasonable expenses,
including attorneys' fees, incurred by any such member of the Management
Committee in connection with such actions and determinations or proceedings of
any kind arising therefrom.
(f) Standard of Conduct. The termination of any 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 applicant did not
meet the standard of conduct described in Sections 5.8(b) or (c).
(g) Determination of Standard of Conduct. Any indemnification under
Section 5.8(c) (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of the
applicant
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is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 5.8(c).
The determination shall be made:
(i) By the Management Committee by a majority vote of a quorum consisting
of Managers not at the time parties to the proceeding; or
(ii) If a quorum cannot be obtained under subsection (i) of this section,
by majority vote of a committee duly designated by the Management Committee (in
which designation the Managers who are parties may participate), consisting
solely of two or more Managers not at the time parties to the proceeding; or
(iii) By such counsel selected by the Management Committee voting as
determined in this subsection (f).
(h) Expenses.
--------
(i) The Company shall pay for or reimburse the reasonable expenses
incurred by any applicant who is a party to a proceeding in advance of final
disposition of the proceeding or the making of any determination under Section
5.8(f) if the applicant furnishes the Company:
A. a written statement of his good faith belief that he has met the
standard of conduct described in Section 5.8(c); and
B. a written undertaking, executed personally or on his behalf, to
repay the advance if it ultimately is determined that he did not meet such
standard of conduct.
(ii) The undertaking required by paragraph B. of subsection (i) of this
section shall be an unlimited general obligation of the applicant but need not
be secured and may be accepted without reference to financial ability to make
repayment.
(iii) Authorizations of payments under this Section 5.8(g) shall be made by
the persons specified in Section 5.8(f).
(i) Additional Indemnitees. The Management Committee is hereby empowered,
by majority vote of a quorum consisting of disinterested Managers, to cause the
Company to indemnify or contract to indemnify any person not specified in
Section 5.8(b) or (c) who was, is or may become a party to any proceeding, by
reason of the fact that he is or was an employee or agent of the Company, or is
or was serving at the request of the Company as a manager, director, officer,
employee, trustee or agent of another company, corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, to the same extent as
if such
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person were specified as one to whom indemnification is granted in Section
5.8(c). The provisions of Sections 5.8(d) through (g) shall be applicable to any
indemnification provided hereafter pursuant to this Section 5.8(h).
(j) Insurance. The Company may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it in
accordance with this Section 5.8 and may also procure insurance, in such amounts
as the Board of Managers may determine, on behalf of any person who is or was a
Manager, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a manager, director, officer, employee, trustee or
agent of another company, corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against any liability asserted
against or incurred by him in any such capacity or arising from his status as
such, whether or not the Company would have power to indemnify him against such
liability under the provisions of this Section 5.8.
(k) Non-Exclusivity. Every reference herein to Managers or agents shall
include former Managers and agents and their respective heirs, executors and
administrators. The indemnification hereby provided and provided hereafter
pursuant to the power hereby conferred by this Section 5.8(j) on the Management
Committee shall not be exclusive of any other rights to which any person may be
entitled, including any right under policies of insurance that may be purchased
and maintained by the Company or others, with respect to claims, issues or
matters in relation to which the Company would not have the power to indemnify
such person under the provisions of this Section 5.8. Such rights shall not
prevent or restrict the power of the Company to make or provide for any further
indemnity, or provisions for determining entitlement to indemnity, pursuant to
one or more indemnification agreements or other arrangements (including, without
limitation, creation of trust funds or security interests funded by letters of
credit or other means) approved by the Management Committee (whether or not any
of the Managers of the Company shall be a party to or beneficiary of any such
agreements or arrangements); provided, however, that any provision of such
agreements or other arrangements shall not be effective if and to the extent
that it is determined to be contrary to this Section 5.8(j) or applicable laws
of the Commonwealth of Virginia.
ARTICLE 6
---------
MEMBER INDEMNIFICATION AND OTHER VENTURES
-----------------------------------------
Section 6.l. Indemnification. In addition to the rights of Indemnification
provided for in the Venture Agreement, each
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Member (an Indemnifying Member") shall indemnify and hold harmless the Company
and the other Members from and against any loss, expense, damage or injury
(including reasonable attorneys' fees) suffered or sustained by the Company or
the other Members resulting directly or indirectly from any act or omission by
the Indemnifying Member if such act or omission is not within the scope of the
authority of such Member under this Agreement or is in contravention of this
Agreement. The Company shall indemnify and hold harmless a Member from and
against any loss, expense, damage or injury (including reasonable attorneys'
fees) suffered or sustained by reason of any act or omission by such Member in
the conduct of the business of the Company unless such act or omission is not
within the scope of the authority of such Member under this Agreement or is in
contravention of this Agreement.
ARTICLE 7
---------
ACCOUNTING, TAX AND FISCAL MATTERS
----------------------------------
Section 7.1. Fiscal Year. The Company hereby adopts the year April 1
through and including March 31 as its fiscal year.
Section 7.2. Books of Account. The Company shall keep full and accurate
books of account in accordance with generally accepted accounting principles, as
required by the Venture Agreement.
As soon as reasonably practicable after the end of each fiscal year of the
Company, but in any event no later than June 15 of each year, the Management
Committee shall furnish each Member with Internal Revenue Service Form K-1 (Form
1065), and such other information as shall be necessary to enable each Member to
prepare its income tax returns. All questions of accounting shall be determined
by the Management Committee.
The Management Committee must approve all tax elections and tax accounting
methods adopted by the Company for income tax purposes, and all agreements and
settlements proposed to be entered into with the Internal Revenue Service as a
result of an audit or examination of the Company's federal income tax return.
Each Member shall have the right to participate equally in the conduct and
negotiation of such agreement or settlement, and no Member shall litigate a tax
issue involving the Company without the consent of the other Members. Expenses
of administrative proceedings and of litigation of Company tax issues, as
approved by the Members, shall be paid by the Company. Each Member shall have
the right to review the Company's income tax returns prior to the filing of such
returns.
WFBS hereby is designated the Company's tax matters member ("Tax Matters
Member"), with all powers and responsibilities of a "tax matters partner" as
defined in Section 6231(a)(7)(A) of the
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Code (as defined in Section 7.1(B)) and shall manage administrative tax
proceedings conducted at the Company level by the Internal Revenue Service with
respect to Company matters.
Section 7.3. Audits; Inspection of Books and Records. Any Member may, at
its option and at its own expense, conduct internal audits of the books, records
and accounts of the Company. Audits may be on either a continuous or a periodic
basis and may be conducted by employees of any Member, or of an affiliate of any
Member, or by independent auditors retained by the Company or by any Member. All
books of the Company shall be open to inspection and examination by any of the
Members or their representatives at all times.
ARTICLE 8
---------
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
Section 8.1. Definitions. For purposes of this Article 8, the terms listed
below shall have the following definitions:
(A) Capital Account. "Capital Account" has the meaning described in Section
8.2(a) hereof.
(B) Code. "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law), including
effective date and transition rules (whether or not codified).
(C) Company Minimum Gain. "Company Minimum Gain" has the meaning set forth
in Regulations Section 1.704-2(d). In accordance with Regulations Section 1.704-
2(d), the amount of Company Minimum Gain is determined by first computing, for
each Company nonrecourse liability, any gain the Company would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Member's share of Company Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(g)(1).
(D) Member Nonrecourse Debt Minimum Gain. "Member Nonrecourse Debt Minimum
Gain" has the meaning set forth in Regulations Section 1.704-2(i). A Member's
share of Member Nonrecourse Debt Minimum Gain shall be determined in accordance
with Regulations Section 1.704-2(i)(5).
(E) Regulations. "Regulations" means the Income Tax Regulations promulgated
under the Code as such Regulations may be amended from time to time
(including corresponding provisions of succeeding Regulations).
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Section 8.2. Capital Accounts; Distributions; Allocations.
(a) Capital Accounts. The Company shall establish and maintain on its books
and records a capital account for each Member (Capital Account") in accordance
with Regulations Section 1.704-l(b)(2)(iv). If (i) a new or existing Member
acquires an additional Percentage Interest in exchange for more than a de
minimis Capital Contribution, (ii) the Company distributes to a Member more than
a de minimis amount of Company property as consideration for a Percentage
Interest, or (iii) the Company is liquidated within the meaning of Regulations
Section 1.704-l(b)(2)(ii)(g), the Management Committee shall revalue the
property of the Company to its fair market value (as determined by the
Management Committee and taking into account Section 7701(g) of the Code) in
accordance with Regulations Section 1.704-l(b)(2)(iv)(f). When the Company's
property is revalued by the Management Committee, the Capital Accounts of the
Members shall be adjusted in accordance with Regulations Sections 1.704-
l(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be
adjusted to reflect the manner in which the unrealized gain or loss inherent in
such property (that has not been reflected in the Capital Accounts previously)
would be allocated among the Members pursuant to Section 8.2(c) if there were a
taxable disposition of such property for its fair market value (as determined by
the Management Committee and taking into account Section 7701(g) of the Code) on
the date of the revaluation.
(b) Percentage Interests of the Members. The interest of each Member in the
Company (the percentage Interest") initially shall be as indicated on Schedule
3.1.
(c) Allocation of Profit and Loss.
(1) General. Except as otherwise provided in this Section 8.2(c), Profit
and Loss of the Company for each fiscal year of the Company shall be allocated
among the Members in accordance with their respective Percentage Interests.
(2) Minimum Gain Chargeback. Notwithstanding any provision to the contrary,
(i) any expense of the Company that is a "nonrecourse deduction" within the
meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance
with the Members' respective Percentage Interests, (ii) any expense of the
Company that is a "partner nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated in accordance with
Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Company
Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any
Company taxable year, items of gain and income shall be allocated among the
Members in accordance with Regulations Section 1.704-2(f) and the ordering rules
contained in Regulations Section 1.704-2(j), and (iv) if
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there is a net decrease in Member Nonrecourse Debt Minimum Gain within the
meaning of Regulations Section 1.704-2(i)(4) for any Company taxable year, items
of gain and income shall be allocated among the Members in accordance with
Regulations Section 1.704-2(i)(4) and the ordering rules contained in
Regulations Section 1.704-2(j). A Member's "interest in partnership profits" for
purposes of determining its share of the nonrecourse liabilities of the Company
within the meaning of Regulations Section 1.752-3(a)(3) shall be such Member's
Percentage Interest.
(3) Oualified Income Offset. Notwithstanding any provision to the
contrary, if a Member receives in any Company taxable year an adjustment,
allocation, or distribution described in subparagraphs (4), (5), or (6) of
Regulations Section 1.704-l(b)(2)(ii)(d) that causes or increases a negative
balance in such Member's Capital Account that exceeds the sum of such Member's
shares of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, as
determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i),
such Member shall be allocated specially for such taxable year (and, if
necessary, later taxable years) items of income and gain in an amount and manner
sufficient to eliminate such negative Capital Account balance as quickly as
possible as provided in Regulations Section 1.704-l(b)(2)(ii)(d). After the
occurrence of an allocation of income or gain to a Member in accordance with
this Section 8.2(c)(3), to the extent permitted by Regulations Section
1.704-l(b), items of expense or loss shall be allocated to such Member in an
amount necessary to offset the income or gain previously allocated to such
Member under this Section 8.2(c)(3).
(4) Capital Account Deficits. Loss shall not be allocated to a Member to
the extent that such allocation would cause a deficit in such Member's Capital
Account (after reduction to reflect the items described in Regulations Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Member's shares
of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain. Any Loss in
excess of that limitation shall be allocated to the other Members in proportion
to their Percentage Interests (taking into account the limitation in this
Section 8.2(c)(4)). After the occurrence of an allocation of Loss to a Member in
accordance with this Section 8.2(c)(4), to the extent permitted by Regulations
Section 1.704-l(b), Profit shall be allocated to such Member in an amount
necessary to offset the Loss previously allocated to such Member under this
Section 8.2(c)(4).
(5) Allocations Between Transferor and Transferee. If a Member transfers
any part or all of its Membership Interest during a fiscal year of the Company,
the distributive shares of the various items of Profit and Loss allocable among
the Members during such fiscal year shall be allocated between the transferor
and the transferee either (i) as if the Company's fiscal year had
-25-
<PAGE>
ended on the date of the transfer, or (ii) based on the number of days of such
fiscal year that each was a Member without regard to the results of Company
activities in the respective portions of such fiscal year in which the
transferor and the transferee were Members. The Management Committee, in its
sole discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the
transferor and the transferee.
(6) Definition of Profit and Loss. "Profit" and "Loss" and any items of
income, gain, expense, or loss referred to in this Agreement shall be determined
in accordance with federal income tax accounting principles, as modified by
Regulations Section 1.704-l(b)(2)(iv), except that Profit and Loss shall not
include items of income, gain and expense that are specially allocated pursuant
to Section 8.2(c)(2), 8.2(c)(3), or 8.2(c)(4). All allocations of income,
Profit, gain, Loss, and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 8.2(c), except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-l(b)(4). The Management Committee shall
have the authority to elect the method to be used by the Company for allocating
items of income, gain, and expense as required by Section 704(c) of the Code and
such election shall be binding on all Members.
Section 8.3. Distributions. (a) Distributions of cash shall be made at such
times and in such amounts as the Management Committee shall decide to the
Members in accordance with their Percentage Interests.
(b) The Management Committee may provide for distributions of cash to be
made to the Members in accordance with their Percentage Interests taking into
account federal, state and local income taxes payable by the Members on their
shares of the Company's taxable income.
Section 8.4. No Riqht to Distributions in Kind. No Member shall be entitled
to demand property other than cash in connection with any distributions by the
Company.
Section 8.5. Limitations on Return of Capital Contributions.
Notwithstanding any of the provisions of this Article 8, no Member shall have
the right to receive and the Company shall not have the right to make, a
distribution which includes a return of all or part of a Member's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Company liabilities, other than the liabilities to
a Member for the return of his Capital Contribution, does not exceed the fair
market value of the Company's assets.
-26-
<PAGE>
Section 8.6. Distributions Upon Liquidation. Upon liquidation of the
Company, after payment of, or adequate provision for, debts and obligations of
the Company, including any Member loans, any remaining assets of the Company
shall be distributed to all Members with positive Capital Accounts in accordance
with their respective positive Capital Account balances. For purposes of the
preceding sentence, the Capital Account of each Member shall be determined after
all adjustments made in accordance with Sections 8.2 and 8.3 resulting from
Company operations and from all sales and dispositions of all or any part of the
Company's assets. Any distributions pursuant to this Section 8.6 should be made
by the end of the Company's taxable year in which the liauidation occurs (or, if
later, within 90 days after the date of the liquidation). To the extent deemed
advisable by the Management Committee, appropriate arrangements (including the
use of a liquidating trust) may be made to assure that adequate funds are
available to pay any contingent debts or obligations.
Section 8.7. Substantial Economic Effect. It is the intent of the Members
that the allocations of Profit and Loss under the Agreement have substantial
economic effect (or be consistent with the Members' interests in the Company in
the case of the allocation of losses attributable to nonrecourse debt) within
the meaning of Section 704(b) of the Code as interpreted by the Regulations
promulgated pursuant thereto. Article 8 and other relevant provisions of this
Agreement shall be interpreted in a manner consistent with such intent.
ARTICLE 9
---------
TRANSFERS
---------
Section 9.1. Restrictions on Transfers/Encumbrances. Each Member agrees not
to transfer, assign, mortgage or otherwise encumber all or any part of its
Membership Interest or any economic interest in the Company or its Profits or
Losses (or take or omit to take any action, filing, election or other action
which could result in a deemed transfer, assignment, mortgage or encumbrance),
except in accordance with the provisions of the Venture Agreement. Any transfer
of a Membership Interest shall be effective only to give the transferee the
right to receive the share of allocations and distributions to which the
transferring Member would otherwise have been entitled. Unless and until
admitted as a substituted Member, a transferee shall have no other powers,
rights or privileges of a Member of the Company. No transferee of a Membership
Interest shall have the right to become a substituted Member unless all the
nontransferring Members, in their sole and absolute discretion, expressly
consent thereto, and the transferee agrees to become a Member of the Company and
be bound by all of the terms and conditions of this
-27-
<PAGE>
Agreement as then in effect, including, without limitation, the restrictions on
transfer hereunder. Each Member agrees not to transfer all or any part of its
Membership Interest (or take or omit any action which could result in a deemed
transfer) without the consent of all other Members if such transfer (either
considered alone or in the aggregate with transfers by other Members) would
result in the termination of the Company under Section 708 of the Code. Any
attempted transfer not in accord with the provisions of the Venture Agreement or
this Section 9.1 shall be void ab initio.
ARTICLE 10
----------
MISCELLANEOUS
-------------
Section 10.1. Fixing Record Date. For the purpose of determining Members
entitled to notice of or to vote at any meeting of Members or any adjournment
thereof, or entitled to receive a payment of any kind, or in order to make a
determination of Members for any other proper purpose, the Management Committee
may fix in advance a date as the record date for any such determination of
Members, such date in any case to be not more than seventy days prior to the
date on which the particular action, requiring such determination of Members, is
to be taken. If no record date is fixed for the determination of Members
entitled to notice of or to vote at a meeting of Members, or Members entitled to
receive payment of a distribution, the date on which notices of the meeting are
mailed or the date on which the resolution of the Management Committee declaring
such distribution is adopted, as the case may be, shall be the record date for
such determination of Members. When a determination of Members entitled to vote
at any meeting of Members has been made as provided in this Section 10.1, such
determination shall apply to any adjournment thereof unless the Management
Committee fixes a new record date, which it shall do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
Section 10.2. Voting of Shares Held. Unless otherwise provided by
resolution of the Managers, the Management Committee may from time to time
appoint an attorney or attorneys or agent or agents of the Company, in the name
and on behalf of the Company, to cast the vote which the Company may be entitled
to cast as a member, shareholder or otherwise in any other company, any of whose
securities may be held by the Company, at meetings of the holders of the shares
or other securities of such other company, or to consent in writing to any
action by any such other company; and the Management Committee shall instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent and may execute or cause to be executed on
-28-
<PAGE>
behalf of the Company such written proxies, consents, waivers or other
instruments as may be necessary or proper.
Section 10.3. Applicable Laws. The Members agree to comply with all
applicable state and federal statutes and regulations.
Section 10.4. Modification. The Members agree that, in the event of a
decision by a state or federal regulatory authority that requires modifications
in this Agreement, the Members will negotiate in good faith to modify this
Agreement in light of such decision. If the Members are unable to agree upon
such modifications within one hundred eighty (180) days after such decision,
then that portion of the Agreement which was found to require change by the
regulatory authorities shall terminate.
Section 10.5. Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled in accordance
with the Venture Agreement.
Section 10.6. Amendment and Notice. This Agreement may not be amended,
except as provided in Section 5.1.
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Virginia. Notices to the Members shall be deemed to be
given when personally delivered, or if mailed prepaid registered or certified
mail, return receipt requested to the addresses shown below, marked to the
attention of the respective Manager of each Member, when delivered or refused
upon presentation.
All communications hereunder shall be in writing and shall be deemed to
have been duly given if signed by the respective persons giving them (in the
case of any corporation the signature shall be by an appropriate officer
thereof) and delivered by hand, or sent by registered mail, return receipt
requested, or reliable courier, or by telex, telecopier, telegram or cable to
the following addresses:
If to the Company:
Mentor Investment Group, L.L.C.
Riverfront Plaza, East Tower
901 East Byrd Street
Richmond, Virginia 23219
Attention: Daniel J. Ludeman
Managing Director
Telecopier No.: (1) (804) 782-3510
Telephone No.: (1) (804) 649-2311
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<PAGE>
With a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter, Esq.
Telecopier No.: (804) 788-8218
Telephone No.: (804) 788-8200
If to WFBS:
Wheat First Butcher Singer, Inc.
Riverfront Plaza, East Tower
901 East Byrd Street
Richmond, Virginia 23219
Attention: Marshall B. Wishnack
Chairman and Chief Executive
Officer
Telecopier No.: (1) (804) 782-____
Telephone No.: (1) (804) 649-2311
With a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: David M. Carter, Esq.
Telecopier No.: (804) 788-8218
Telephone No.: (804) 788-8200
If to EVEREN:
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601-1694
Attention: Arthur J. McGivern
Senior Executive Vice President
Telecopier No.: (312) 574-8823
Telephone No.: (312) 574-5704
-30-
<PAGE>
With a copy to:
Bell, Boyd & Lloyd
Three First National Plaza
Suite 3300
70 West Madison Street
Chicago, Illinois 60602
Attention: Cameron S. Avery, Esq.
Telecopier No.: (312) 372-2098
Telephone No.: (312) 372-1121
By written notice to the other party, a party may change the address to which
notices shall be directed.
This Agreement shall be binding and inure to the benefit of the Members
hereto and their respective successors and permitted assigns.
No waiver of any breach or default hereunder shall be deemed a waiver of
any other breach or default whether or not of the same or similar nature.
This Agreement does not constitute a Member as the agent or legal
representative of another and does not constitute the Members as partners or
joint venturers except as set out herein. No Member shall have the authority to
contract or bind any other Member in any manner whatsoever. It is agreed that
this Agreement confers no rights upon the Members except those expressly set out
herein, and confers no rights of any kind on any third party.
Section 10.7. Severability. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of the Agreement.
Section 10.8. Captions. Captions are inserted for convenience only and
shall not be given any legal effect.
Section 10.9. Burden and Benefit Upon Successors. Except as expressly
otherwise provided herein, this Agreement is binding upon, and inures to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
-31-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
WHEAT FIRST BUTCHER SINGER, INC.
By:
_____________________________
Name:
Title:
EVEREN SECURITIES HOLDINGS, INC.
By:
_____________________________
Name:
Title:
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<PAGE>
Schedule 3.1
------------
Member Percentage Interest
------ -------------------
Wheat First Butcher Singer, Inc. 79.8%
EVEREN Capital Corporation 20.2%
------
Total 100.0%
======
-33-
<PAGE>
RI-CS\t:\Wheat\Mentor\Opagt.5
7/24/96
-34-
<PAGE>
EXHIBIT 11
EVEREN CAPITAL CORPORATION
PRO FORMA COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
ended June 30, ended June 30,
1995 1995
---- ----
<S> <C> <C>
Net income (loss) reported
Less: $ 503 $ (2,713)
Pro Forma Preferred Dividends
(13.5% of liquidation value) (1,085) (2,130)
----------- ---------
Pro Forma Net Income (loss)
Applicable to Common Shares $ (582) $ (4,843)
=========== =========
Pro Forma Net Income (loss) per Common
Share $ (.06) $ (.51)
=========== =========
Pro Forma Weighted Average Common Shares
Outstanding: 10,082,787 9,454,163
========== =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 43,195,000
<SECURITIES> 181,173,000
<RECEIVABLES> 939,498,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 34,771,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,767,385,000
<CURRENT-LIABILITIES> 0
<BONDS> 31,542,000
<COMMON> 121,000
0
0
<OTHER-SE> 195,770,000
<TOTAL-LIABILITY-AND-EQUITY> 1,767,385,000
<SALES> 0
<TOTAL-REVENUES> 300,427,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 250,919,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,457,000
<INCOME-PRETAX> 81,232,000
<INCOME-TAX> 32,007,000
<INCOME-CONTINUING> 49,225,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,225,000
<EPS-PRIMARY> 4.98
<EPS-DILUTED> 0
</TABLE>
