ARCADIA FINANCIAL LTD.
(formerly Olympic Financial Ltd.)
To
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
Second Supplemental Indenture
Dated as of October 8, 1997
to
Senior Notes Indenture
Dated as of March 12, 1997
SECOND SUPPLEMENTAL INDENTURE, dated as of October 8, 1997 (this
"Supplemental Indenture") between ARCADIA FINANCIAL LTD. (formerly Olympic
Financial Ltd.), a corporation duly organized and existing under the laws of the
State of Minnesota (herein called the "Company"), having its principal office at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and Norwest Bank
Minnesota, National Association, as Trustee (herein called the "Trustee") having
its Corporate Trust office at Norwest Center, Sixth Street and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America.
RECITALS OF THE COMPANY
The Company entered into an Indenture dated as of March 12, 1997 with
the Trustee (the "Indenture") to provide for the issuance from time to time of
its notes or other evidences of indebtedness (herein generally called the
"Securities"), to be issued in one or more series as in the Indenture provided.
The Company proposes to issue a series of Securities denominated its
11 1/2% Senior Notes due 2007, in the aggregate principal amount of $75,000,000
(the "Notes").
Sections 1001(v) and 1001(vii) of the Indenture provide that without
the consent of any Holders, the Company, when authorized by or pursuant to a
Board Resolution, and the Trustee, at any time and from time to time, may amend
the Indenture or enter into one or more indentures supplemental to the Indenture
to (1) add to, change or eliminate any of the provisions of the Indenture in
respect of one or more series of Securities, provided that any such addition,
change or elimination (i) shall neither (A) apply to any Security of any series
created prior to the execution of such supplemental indenture and entitled to
the benefits of such provision nor (B) modify the rights of the Holders of any
Security with respect to such provision or (ii) shall become effective only when
there is no such Security Outstanding and (2) establish the form or terms of
Securities of any series as permitted by Sections 201 and 301 thereof.
The entry into this Supplemental Indenture by the parties hereto is in
all respects authorized by the provisions of the Indenture.
All things necessary to make this Supplemental Indenture a valid
agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of Notes except as otherwise provided in
the Indenture or this Supplemental Indenture, as follows:
SECTION 1. The Indenture is hereby amended and supplemented, solely
with respect to the Notes, as follows:
(a) By amending Section 101 to delete the definitions in the Indenture of
"Capital Stock," "Consolidated Net Worth," "Disqualified Stock," "Hedging
Obligations," "Indebtedness," "Person," "Subsidiary," "Warehouse Debt," and
"Warehouse Facilities" and add the following definitions of those terms:
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a partnership or
limited liability company, partnership (whether general or limited) or
membership interests and (iv) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to 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 received by such
Person upon issuance of such preferred stock, 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 12 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 Restricted Subsidiary of such
Person, (y) all Investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), 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.
"DISQUALIFIED STOCK" means any Capital Stock that either (A) 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, (i) matures or is mandatorily
redeemable, in whole or in part, pursuant to a sinking fund obligation or
otherwise or, (ii) is convertible into or exchangeable for Indebtedness or
Disqualified Stock in whole or in part, or (iii) is redeemable in whole or in
part, at the option of the Holder thereof at any time, in any such case, on or
prior to the date that is 91 days after the date on which the Notes mature, or
(B) is designated by the Company (in a resolution of the Board of Directors
delivered to the Trustee) as Disqualified Stock.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate or currency swap agreements, cap agreements,
collar agreements and related agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in value of
assets owned, financed or sold, or of liabilities incurred or assumed, or of
pre-funding arrangements, in any case in the ordinary course of business of such
Person and not for speculative purposes.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of (i) borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, (ii) all indebtedness of others secured
by a Lien (except Liens on Receivables and other assets (including spread
accounts of a Special Purpose Entity incurred in connection with a Loan
Securitization)) on any asset of such Person (whether or not such indebtedness
is assumed by such Person), (iii) without duplication, all Warehouse Debt,
(iv) all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock and, in the case of any Subsidiary
Guarantor, preferred stock (but excluding in
2
each case any accrued dividends thereon), and (v) to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person
to the extent of any Guarantee of such indebtedness provided by such Person.
Except in the case of Warehouse Debt (the amount of which shall be determined in
accordance with the definition thereof) and except in the case of Hedging
Obligations (the amount of which shall be determined on a net basis after rights
of set-off and related positions), the amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date. Notwithstanding the foregoing, the term "Indebtedness" does not
include (i) obligations pursuant to representations, warranties, covenants and
indemnities in connection with a Loan Securitization or Warehouse Facility or
(ii) deposit liabilities of any Subsidiary, the deposits of which are insured by
the Federal Deposit Insurance Corporation or any successor thereto.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SUBSIDIARY" means, with respect to any Person, (i) 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 such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership or limited liability company (a) the sole
general partner or the managing general partner or managing member of which is
such Person or a Subsidiary of such Person or (b) the only general partners or
managing members of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
"WAREHOUSE DEBT" means Indebtedness of the Company or a Restricted
Subsidiary of the Company equal to the greater of (x) the consideration received
by the Company or its Restricted Subsidiaries under a Warehouse Facility and
(y) in the case of a Purchase Facility, the book value of the Eligible
Receivables financed under such Warehouse Facility, until such time as such
Eligible Receivables are (i) securitized, (ii) repurchased by the Company or its
Restricted Subsidiaries or (iii) sold by the counterparty under the Warehouse
Facility to a Person who is not an Affiliate of the Company, including any
Guarantees issued by the Company or a Restricted Subsidiary of the Company in
connection therewith.
"WAREHOUSE FACILITY" means any funding arrangement, including Purchase
Facilities, with a financial institution or other lender or purchaser or any
conduit or special purpose vehicle used in connection with such funding
arrangement, to the extent (and only to the extent) that the Company or any of
its Restricted Subsidiaries incurs Warehouse Debt thereunder exclusively to
finance or refinance the purchase or origination of Receivables by the Company
or a Restricted Subsidiary of the Company prior to securitization.
(b) By amending Section 101 to add the following sentence as the last sentence
of the definition of "Affiliate":
Notwithstanding the foregoing, no Person (other than the Company or any
Restricted Subsidiary of the Company) in whom a Special Purpose Entity makes an
Investment in connection with a Loan
3
Securitization shall be deemed to be an Affiliate of the Company or any of its
Restricted Subsidiaries solely by reason of such Investment.
(c) By amending Section 101 to add new definitions thereto, in the appropriate
alphabetical sequence, as follows:
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, 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 secured by a Lien
encumbering any asset acquired by such specified Person.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, (x) by way of a sale and leaseback
and (y) the sale or other disposition of any Excess Spread) other than sales of
Receivables in connection with Loan Securitizations or Warehouse Facilities and
sales of repossessed assets in the ordinary course of business (PROVIDED that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of Section 509 and/or the provisions of Section
601 and not by the provisions of Section 510), and (ii) the issue by the Company
or any of its Restricted Subsidiaries of Equity Interests, or the sale by the
Company or any Restricted Subsidiary of any Equity Interests, of their
Subsidiaries (other than directors qualifying shares), in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following will not be deemed to be Asset Sales: (i) an issuance of Equity
Interests by a Wholly-Owned Restricted Subsidiary of the Company to the Company
or to another Wholly-Owned Restricted Subsidiary of the Company; (ii) a
Restricted Payment that is permitted by Section 511; (iii) a pledge, or transfer
pursuant to a pledge, of assets, which pledge is a Permitted Lien; (iv) a
disposition by a Restricted Subsidiary of the Company to the Company or a
Wholly-Owned Restricted Subsidiary of the Company or by the Company to a
Wholly-Owned Restricted Subsidiary of the Company; and (v) leasing transactions
and other sales of goods and services in the ordinary course of business of a
Permitted Business.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a ▇▇▇▇▇ Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having one of the two highest
ratings obtainable from ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's and
in each case maturing within nine months after the date of acquisition, and
(vi) money market funds, the portfolios of which are limited to investments
described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation and excluding
4
sales, leases, transfers, conveyances or other dispositions pursuant to Loan
Securitizations or Warehouse Facilities), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by general voting power rather than number of shares),
(iv) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors or (v) the Company consolidates
with, or merges with or into, any Person, or any Person consolidates with, or
merges with or into, the Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Company outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such issuance). For
purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring Voting Stock of the Company will be
deemed to be a transfer of such portion of such Voting Stock as corresponds to
the portion of the equity of such entity that has been so transferred.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED LEVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of all consolidated Indebtedness of the
Company and its Restricted Subsidiaries excluding (A) Permitted Warehouse Debt,
(B) Hedging Obligations permitted to be incurred pursuant to clause (5) or (7)
of Section 512 hereof and (C) Indebtedness of a Special Purpose Entity permitted
to be incurred pursuant to clause (5) or (12)(A) of Section 512 hereof to
(ii) the Consolidated Net Worth of the Company.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP);
PROVIDED, that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders; PROVIDED, that this clause (ii) shall not exclude Net Income, the
distribution of which is restricted solely by reason of spread account
requirements with respect to Special Purpose Entities or Warehouse Facilities or
limitations imposed by any Credit Enhancement Agreement or Warehouse Facility
that are permitted by Section 514 hereof, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
5
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"CREDIT AGREEMENT" means any credit agreement entered into by and among the
Company (and, if the Company so elects, one or more Subsidiary Guarantors) and
one or more financial institutions, providing for revolving credit borrowings,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"CREDIT ENHANCEMENT AGREEMENTS" means, collectively, any documents,
instruments or agreements entered into by the Company, any of its Restricted
Subsidiaries or any Special Purpose Entities with any Person exclusively for the
purpose of providing credit support for Special Purpose Entities or any of their
respective Indebtedness (including, without limitation, Permitted Warehouse
Debt) or asset-backed securities, including, without limitation, insurance and
indemnity agreements with FSA.
"DEALER PARTICIPATIONS" means, for any period, the cash paid or payable to
originators of Receivables and other Persons by the Company or any of its
Restricted Subsidiaries, net of payments received by the Company or any of its
Restricted Subsidiaries from such Persons with respect to defaults and
prepayments on Receivables, during such period, as participations in connection
with the purchase of Receivables, including, without limitation, commissions
paid to brokers in connection with the foregoing.
"ELIGIBLE RECEIVABLES" means, at any time, Receivables which meet the sale
or loan eligibility criteria set forth in one or more of the Warehouse
Facilities to which the Company or any of its Restricted Subsidiaries is a party
at such time and is eligible for sale in a Loan Securitization.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire such Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, such Capital Stock).
"EXCESS SPREAD" means, over the life of a pool of Receivables that have
been sold by the Company or a Restricted Subsidiary to a Special Purpose Entity
or other Person in a Loan Securitization, the rights, other than servicing
rights, retained by the Company or such Restricted Subsidiary at or subsequent
to the closing of such securitization or sale with respect to such pool, to
receive cash flows attributable to such pool.
"FINANCE INCOME RECEIVABLE" of the Company means the capitalized asset
value of Excess Spread of the Company and its Restricted Subsidiaries appearing
from time to time on the consolidated balance sheet of the Company and its
Restricted Subsidiaries (including finance income receivable and restricted cash
in spread accounts), calculated in accordance with GAAP.
"GUARANTEE means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
6
"INVESTMENT GRADE RATING" means a simultaneous ▇▇▇▇▇'▇ Investors
Service, Inc. debt rating of Baa3 or higher (or the equivalent rating of any
Substitute Rating Agency) and a Standard & Poor's debt rating of BBB or higher
(or the equivalent rating of any Substitute Rating Agency).
"INVESTMENT GRADE RATING EVENT" means, and shall be deemed to have occurred
on the first day on which, (i) the Notes have been and are assigned an
Investment Grade Rating and (ii) no Default or Event of Default has occurred and
is continuing under this Indenture.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; PROVIDED that
an acquisition of assets, Equity Interests or other securities by the Company
for consideration consisting of common equity securities of the Company shall
not be deemed to be an Investment.
"ISSUE DATE" means October 8, 1997.
"JUNIOR SUBORDINATED NOTES" means the Company's 30, 60, 90 and 180 day and
One Year Subordinated Extendible Notes and One, Two, Three, Four, Five and Ten
Year Subordinated Fixed-Term Notes issued under the Indenture dated July 1,
1994, as amended.
"LOAN SECURITIZATION" means a public or private transfer of Receivables in
the ordinary course of business of the Company and its Restricted Subsidiaries
and by which the Company or any such Restricted Subsidiary directly or
indirectly securitizes a pool of Receivables, including but not limited to any
such transaction involving the sale of specified Receivables to a Special
Purpose Entity.
"MINIMUM FINANCE INCOME RECEIVABLE" means Finance Income Receivable equal
to 200% of all Senior Indebtedness of the Company and its Restricted
Subsidiaries as of the time of creation of a Lien or the sale of Excess Spread,
as the case may be. Any determination of whether Finance Income Receivable is
greater or less than Minimum Finance Income Receivable shall be based on the
consolidated balance sheet of the Company and its Restricted Subsidiaries for
the most recently ended fiscal quarter for which financial statements are
available, after giving pro forma effect to the Asset Sale or Lien for which
such determination is being made and to any other sale of or Lien on Excess
Spread or reduction of Finance Income Receivable since the date of such balance
sheet.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate Cash Equivalent proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any Cash
7
Equivalent received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), or (b) is directly or indirectly liable (as a guarantor or
otherwise); and (ii) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"PERMITTED BUSINESSES" means any consumer or commercial finance business or
any financial service business, including but not limited to banks, savings and
loan associations, credit unions and other financial institutions operated in
conjunction therewith.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person if, as a result of such
Investment, (i) such Person becomes a Wholly-Owned Restricted Subsidiary of the
Company and a Subsidiary Guarantor that is engaged in a Permitted Business or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly-Owned Restricted Subsidiary of the Company that is a
Subsidiary Guarantor and that is engaged in a Permitted Business; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 510
hereof, (e) any Investment in Receivables, including Dealer Participations;
(f) Investments by the Company or any of its Subsidiaries in Special Purpose
Entities, in any Person owning residual interests in a Special Purpose Entity or
in repossessed assets, in each case in the ordinary course of business in
connection with or arising out of Loan Securitizations or Warehouse Facilities;
(g) purchases of all remaining outstanding asset-backed securities of any
Special Purpose Entity for the purpose of relieving the Company or a Subsidiary
of the Company of the administrative expense of servicing such Special Purpose
Entity, but only if 90% or more of the aggregate principal amount of the
original asset-backed securities of such Special Purpose Entity have previously
been retired; and (h) other Investments in any Person (other than an Affiliate
of the Company that is not also a Subsidiary of the Company) that do not exceed
$10.0 million at any time outstanding.
"PERMITTED LIENS" means (i) Liens on Receivables or other assets (other
than Excess Spread) securing Warehouse Debt or Hedging Obligations (or
Guarantees of Warehouse Debt or Hedging Obligations); (ii) Liens on Excess
Spread and on the Capital Stock of Restricted Subsidiaries of the Company
substantially all of the assets of which are Excess Spread; PROVIDED, HOWEVER,
that, unless an Investment Grade Rating Event has occurred, any such Liens may
only so encumber Excess Spread in an amount which, in the aggregate, does not
exceed 50% of the amount by which Finance Income Receivable relating to all
Excess Spread exceeds Minimum Finance Income Receivable at the time of the
incurrence of such Lien; (iii) Liens in favor of the Company or any Restricted
Subsidiary; (iv) Liens on property of a Person existing at the time such Person
is merged into or consolidated
8
with the Company or any Restricted Subsidiary of the Company; PROVIDED that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company or such Restricted Subsidiary;
(v) Liens on property existing at the time of acquisition thereof by the Company
or any Restricted Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (vi) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (1) of the second paragraph of Section 512
hereof covering only the assets acquired with such Indebtedness; (viii) Liens
existing on the Issue Date; (ix) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings, PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens (including, without limitation, Liens on spread
accounts and any Excess Spread represented thereby) in favor of a monoline
insurance company or other provider of credit enhancement pursuant to a Credit
Enhancement Agreement; (xi) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $1.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary; (xii) Liens imposed by law,
including but not limited to carriers', warehousemen's and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings or, other Liens arising out of judgments or awards against the
Company or any of its Restricted Subsidiaries with respect to which the Company
or such Restricted Subsidiary shall then be proceeding with an appeal or other
proceedings for review; (xiii) survey exceptions, easements and other
restrictions on the use of property, (xiv) Liens on assets of Unrestricted
Subsidiaries of the Company that secure Non-Recourse Debt of Unrestricted
Subsidiaries of the Company, (xv) Liens on cash collateral accounts (including
any Excess Spread represented thereby) established to satisfy the requirements
of a Warehouse Facility and (xvi) Liens on Receivables and other assets of a
Special Purpose Entity incurred in connection with a Loan Securitization.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness or Disqualified
Stock of the Company or any of its Restricted Subsidiaries issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness or Disqualified Stock of the Company or any
of its Restricted Subsidiaries; PROVIDED that: (i) the principal amount (or
accreted value, if applicable) or mandatory redemption amount of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable) or mandatory redemption amount, plus accrued interest or
dividends on, the Indebtedness or Disqualified Stock so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of contractual
prepayment charges and reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity or final
redemption date later than the final maturity or final redemption date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness or Disqualified Stock being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness or Disqualified Stock
being extended, refinanced, renewed,
9
replaced, defeased or refunded; and (iv) such Indebtedness is incurred or such
Disqualified Stock is issued either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness or Disqualified Stock being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERMITTED WAREHOUSE DEBT" means Warehouse Debt of the Company or a
Restricted Subsidiary of the Company outstanding under one or more Warehouse
Facilities (excluding any Guarantees issued by the Company or a Restricted
Subsidiary in connection therewith); PROVIDED, HOWEVER, that (i) the assets
purchased with proceeds of such Warehouse Debt are or, prior to any funding
under the Warehouse Facility with respect to such assets, were eligible to be
recorded as held for sale on the consolidated balance sheet of the Company and
its Restricted Subsidiaries in accordance with GAAP, (ii) such Warehouse Debt
will be deemed Permitted Warehouse Debt (a) in the case of a Purchase Facility,
only to the extent the holder of such Warehouse Debt has no contractual recourse
to the Company or any of its Restricted Subsidiaries to satisfy claims in
respect of such Warehouse Debt in excess of the realizable value of the Eligible
Receivables financed thereby, and (b) in the case of any other Warehouse
Facility, at the time such Warehouse Debt is incurred, only to the extent of the
lesser of (A) the amount advanced by the lender with respect to the Eligible
Receivables financed under such Warehouse Facility, and (B) 100% of the
aggregate principal amount of such Eligible Receivables (exclusive of all Dealer
Participations included therein) and (iii) any such Indebtedness incurred under
such Warehouse Facility has not been outstanding in excess of 364 days.
"PURCHASE FACILITY" means any Warehouse Facility in the form of a purchase
and sale facility pursuant to which the Company or a Restricted Subsidiary of
the Company sells Receivables to a financial institution, commercial paper
facility or conduit or Special Purpose Entity and retains a right of first
refusal or other repurchase arrangement upon the subsequent resale of such
Receivables by such financial institution, commercial paper facility or conduit
or Special Purpose Entity.
"RECEIVABLES" means installment sale contracts, loans evidenced by
promissory notes secured by assets, leases, mortgages or other finance
receivables or instruments acquired in connection with the operations of any
Permitted Business.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any Subsidiary other than an Unrestricted
Subsidiary.
"SENIOR INDEBTEDNESS" means all Indebtedness of any Person that is not
subordinated in right of payment to any other Indebtedness or other obligations
of such Person, excluding Permitted Warehouse Debt and Hedging Obligations.
"SENIOR TERM NOTES" means the Company's 11 1/2% Senior Notes due 2007
issued March 12, 1997
"SPECIAL PURPOSE ENTITY" means any Person (whether or not a Subsidiary of
the Company) established and maintained exclusively for one or more of the
following purposes: (i) purchasing or otherwise acquiring Receivables (together
with any assets related to such Receivables, including, without limitation, all
collateral securing such Receivables, all contracts and all Guarantees or other
obligations in respect of such Receivables, proceeds of such Receivables and
other assets which are customarily transferred in connection with asset
securitization transactions involving Receivables) from the Company or any of
its Restricted Subsidiaries in connection with a Loan Securitization or
10
Warehouse Facility, (ii) selling such Receivables (and related assets) to a
special purpose owner trust or other Person in connection with a Loan
Securitization or Purchase Facility, (iii) serving as a conduit for the issuance
of commercial paper in connection with the operation of any Purchase Facility,
(iv) issuing asset-backed securities, (v) serving as a corporate general partner
(or managing member of a limited liability company) of another Special Purpose
Entity, (vi) investing in and holding Investments in Special Purpose Entities
issuing securities backed by Receivables originated by the Company or any
Restricted Subsidiary of the Company, or (vii) engaging in activities that are
incidental to and necessary, suitable or convenient for the accomplishment of
the purposes specified above, PROVIDED, HOWEVER, that the obligations of such
Special Purpose Entity are without recourse to the Company and any Restricted
Subsidiary of the Company other than such Special Purpose Entity, except to the
extent of Indebtedness incurred by the Company or a Subsidiary Guarantor in
accordance with the first paragraph of Section 512 hereof. For purposes of this
definition, "without recourse" shall mean that the Indebtedness of such Special
Purpose Entity and none of the other obligations (contingent or otherwise) of a
Special Purpose Entity (i) is guaranteed by the Company or any other Restricted
Subsidiary of the Company, (ii) obligates the Company or any other Restricted
Subsidiary of the Company in any way other than pursuant to representations,
warranties, covenants (including any covenant to deliver Receivables in a
pre-funded Loan Securitization) and indemnities entered into in connection with
a Loan Securitization or Warehouse Facility, or (iii) subjects any property or
asset of the Company or any other Restricted Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to representations, warranties, covenants and indemnities entered
into in connection with a Loan Securitization or Warehouse Facility. For
purposes of the foregoing, a Permitted Investment in a Special Purpose Entity
shall not be deemed recourse. As of the Issue Date, each of Arcadia Receivables
Finance Corp., Arcadia Receivables Finance Corp. II, Arcadia Receivables Conduit
Corp., Arcadia First G.P. Inc., Arcadia Second G.P. Inc. and Special Purpose
Entities formed in connection with any Loan Securitization prior to the Issue
Date shall be deemed to satisfy the requirements of this definition.
"SUBORDINATED NOTES" means the Junior Subordinated Notes and the 10.125%
Subordinated Notes, Series 1996-A due 2001, of the Company outstanding at the
Issue Date.
"SUBSIDIARY GUARANTOR" means any Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture.
"SUBSTITUTE RATING AGENCY" means, in the event that at any time either
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's does not have a debt rating
in effect for the Notes, a nationally recognized statistical rating organization
designated by the Company with the approval of the Trustee as a substitute for
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's, as the case may be.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary that those that might be obtained at the time from Persons
who are not Affiliates of the Company; (b) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (c) has not guaranteed or
otherwise directly or indirectly
11
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and (d) has at least one director of its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 511 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under Section 512
hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to
be an incurrence of Indebtedness and issuance of preferred stock by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
and preferred stock is permitted under Section 512 hereof, (ii) such Subsidiary
becomes a Subsidiary Guarantor, and (iii) no Default or Event of Default would
be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote generally in the election of the
Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock at any date, the number of years obtained by dividing
(i) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity (or final redemption, in the
case of Disqualified Stock), in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness or mandatory redemption amount of Disqualified Stock.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person and one or more Wholly-Owned Restricted Subsidiaries
of such Person.
(d) By deleting current clause (ii) of Section 505 and adding as new clause
(ii) of Section 505 the following:
(ii) 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 504 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation reasonably satisfactory to the
Trustee) that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would lead them
to believe that the Company has violated any provisions of Sections 501, 506,
509, 510, 511, 512, 513, 514 or 515, if such covenants are then applicable, or
Article 6 of this Indenture or, if any such violation has occurred, specifying
the nature
12
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.
(e) By adding as new Section 509 the following:
Section 509. CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within ten days following any Change of Control, the Company shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than the earliest date
permitted under Rule 14e-1 under the Exchange Act ("Rule 14e-1") and no later
than 60 days from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by this Section 509 and described in
such notice. The notice, which shall govern the terms of the Change of Control
Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 509 and that all Notes tendered will be accepted for
payment;
(2) the Change of Control Payment and the Change of Control Payment
Date;
(3) that any Notes not tendered will continue to accrue interest in
accordance with the terms of this Indenture;
(4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have Notes purchased pursuant to the
Change of Control Offer will be required to surrender their
Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes 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) 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 Notes the Holder
delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must
be equal to $1,000 in principal amount or an integral multiple
thereof; and
13
(8) the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, information with respect
to PRO FORMA historical and, if available, projected 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).
The Company shall comply with the requirements of Rule 14e-1 and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section 509,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 509 by
virtue thereof.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly 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 Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; PROVIDED that each such new Note will be in a
principal amount of $1,000 or an integral multiple 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 shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 509 applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Notwithstanding the foregoing, this Section 509 shall be of no further
force or effect and shall cease to apply upon and after the occurrence of an
Investment Grade Rating Event.
(f) By adding as new Section 510 the following:
Section 510. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by an
Officers' Certificate delivered to the Trustee and, with respect to any Asset
Sale involving consideration in excess of $5.0 million, a resolution of the
Company's Board of Directors) of the assets or Equity Interests issued or sold
or otherwise disposed of and (ii) at least 85% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of Cash
Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
14
Guarantee thereof) that are expressly assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability and (y) any currencies,
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into Cash Equivalents within 30 days after receipt
(to the extent of the cash received), shall be deemed to be Cash Equivalents for
purposes of this provision.
The Company or the Restricted Subsidiary, as the case may be, within
180 days after the receipt of any Net Proceeds from an Asset Sale subject to
this Section, may apply such Net Proceeds (a) to permanently reduce Senior
Indebtedness (other than the Notes or obligations of a Special Purpose Entity)
of the Company or of any Restricted Subsidiary, or (b) to (i) an Investment
(other than in Receivables that, at the time of purchase, are not Eligible
Receivables), or (ii) the purchase of Receivables that are, at the time of
purchase, Eligible Receivables (including payment of Dealer Participations), or
(iii) the making of any capital expenditure, or (iv) the acquisition of any
other tangible assets, in each case, in or with respect to a Permitted Business.
Pending the final application of any such Net Proceeds, the Company or such
Restricted Subsidiary may temporarily reduce the principal obligations
outstanding under any Warehouse Facility or otherwise invest such Net Proceeds
in any manner that is not prohibited by this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the preceding
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
be required to make an offer to all Holders of Senior Term Notes (a "Senior Term
Note Asset Sale Offer") to purchase the maximum principal amount of Senior Term
Notes that may be purchased out of the Excess Proceeds. To the extent that,
following such Senior Term Note Asset Sale Offer, any Excess Proceeds remain
(any such remaining Excess Proceeds the "Remaining Excess Proceeds"), the
Company shall be required to make an offer (pro rata in proportion to the
principal amount (or accreted value, if applicable) outstanding in respect of
any PARI PASSU Indebtedness incurred in accordance with the Indenture, the terms
of which Indebtedness require an asset sale offer) to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Remaining Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase, in accordance with this Section 510.
Notwithstanding the foregoing, if any Excess Spread or interest therein is
sold or otherwise conveyed or disposed of in an Asset Sale subject to this
Section 510 and, immediately thereafter, Finance Income Receivable relating to
the remaining aggregate Excess Spread not sold, conveyed or disposed of pursuant
to such transaction (the "Remaining Finance Income Receivable") would be less
than Minimum Finance Income Receivable, the Company shall be required to make a
Senior Term Note Asset Sale Offer in the amount by which the Remaining Finance
Income Receivable is less than Minimum Finance Income Receivable (the "FIR Offer
Amount"), without regard to the application of the Net Proceeds of such sale by
the Company pursuant to clause (a) or (b) above. To the extent that, following
such Senior Term Note Asset Sale Offer, any of the FIR Offer Amount set aside
for such Senior Term Note Asset Sale Offer remains (any such amount, the
"Remaining FIR Offer Amount"), the Company shall be required to make an Asset
Sale Offer in the amount of the Remaining FIR Offer Amount; PROVIDED, that any
Asset Sale Offer made pursuant to this sentence shall be at an offer price of
101% of the principal amount of the Notes plus accrued and unpaid interest
thereon to the date of the purchase.
To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Remaining Excess Proceeds or Remaining FIR
Offer Amount, as applicable, the
15
Company or the Restricted Subsidiary, as the case may be, may use any remaining
Remaining Excess Proceeds or Remaining FIR Offer Amount for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Remaining Excess Proceeds or Remaining FIR Offer
Amount (after giving effect to any pro rata payment with respect to PARI PASSU
Indebtedness as aforesaid), as applicable, the Trustee shall select the Notes to
be purchased on a pro rata basis (including any principal amount (or accreted
value, if applicable) tendered in respect of any asset sale offer required by
the terms of any PARI PASSU Indebtedness incurred in accordance with the
Indenture). Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero. The FIR Offer Amount shall be determined
separately for each Asset Sale of Excess Spread. Notwithstanding the relative
rights of the Holders of the Senior Term Notes,
the Notes and any such PARI PASSU Indebtedness with respect to Asset Sale
Offers, the Notes and any such PARI PASSU Indebtedness shall constitute Senior
Indebtedness of the Company and shall not be deemed subordinate in right of
payment to the Senior Term Notes.
The Asset Sale Offer shall remain open for the minimum period of time
required by Rule 14e-1 and no longer (the "Asset Sale Offer Period"). No later
than five Business Days after the termination of the Asset Sale Offer Period
(the "Asset Sale Purchase Date"), the Company shall purchase the principal
amount of Notes required to be purchased pursuant to this Section 510 (the
"Asset Sale Offer Amount") (including any principal amount (or accreted value,
if applicable) tendered in respect of any asset sale offer required by the terms
of any PARI PASSU Indebtedness incurred in accordance with the Indenture) or, if
less than the Asset Sale Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer (including any principal amount (or accreted
value, if applicable) tendered in respect of any asset sale offer required by
the terms of any PARI PASSU Indebtedness incurred in accordance with the
Indenture).
If the Asset Sale Purchase Date is on or after an interest payment record
date and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer (including any principal amount (or accreted value, if
applicable) tendered in respect of any asset sale offer required by the terms of
any PARI PASSU Indebtedness incurred in accordance with the Indenture), or if
less than the Asset Sale Offer Amount has been tendered, all Notes tendered
(including any principal amount (or accreted value, if applicable) tendered in
respect of any asset sale offer required by the terms of any PARI PASSU
Indebtedness incurred in accordance with the Indenture), and deliver to the
Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 510. The Company, the Depositary or the Paying Agent, as the case may
be, shall, not later than five days after the Asset Sale Purchase Date, mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall issue a new Note, and the Trustee, upon delivery of an Officers'
Certificate from the Company, shall authenticate and mail or deliver such new
Note to such Holder, in a principal amount equal to any unpurchased portion of
any Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.
16
The Company shall comply, to the extent applicable, with the requirements
of Rule 14e-1 and any other securities laws or regulations in connection with
the repurchase of Notes pursuant to this Section 510. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 510, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 510 by virtue thereof.
Notwithstanding the foregoing, this Section 510 shall be of no further
force or effect and shall cease to apply upon and after the occurrence of an
Investment Grade Rating Event.
(g) By adding as new Section 511 the following:
Section 511. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
other than dividends or other payments or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or other
payments or distributions payable to the Company or any Wholly-Owned Restricted
Subsidiary of the Company; (ii) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, any payment in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company (other than any such Equity Interests owned by any Wholly-Owned
Restricted Subsidiary of the Company) or any direct or indirect parent of the
Company; (iii) make any principal payment on or with respect to, purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes (other than Hedging Obligations, Permitted
Warehouse Debt or intercompany Indebtedness payable to the Company or a
Restricted Subsidiary of the Company by any Restricted Subsidiary of the
Company), except at final maturity or in accordance with the mandatory
redemption, sinking fund, purchase or repayment provisions set forth in the
documentation governing such Indebtedness when such Indebtedness is incurred, or
when such Indebtedness is amended at any time when it could be incurred under
the test set forth in the first paragraph of Section 512; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the test set forth in
the first paragraph of Section 512 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after March 12, 1997 (excluding Restricted Payments permitted
by clauses (ii), (iii), (v), (vi) and (viii) of the next succeeding
paragraph), is less than the sum of (i) 25% of the aggregate cumulative
Consolidated Net Income of the Company for the period (taken as one
accounting period) from and after the last day of the first fiscal quarter
ending immediately following March 12,
17
1997 to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit); plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since March 12, 1997 of Equity
Interests of the Company (other than Disqualified Stock) or of Disqualified
Stock or Indebtedness represented by securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or other Indebtedness represented by
securities that have been converted into Disqualified Stock); plus (iii) to the
extent that any Restricted Investment that was made after March 12, 1997 is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of (A) any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture or (B) any regular quarterly
dividend on the Common Stock not in excess of $0.01 per share per fiscal
quarter; (ii) the purchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of other Equity Interests of the Company (other than any
Disqualified Stock); PROVIDED, that the amount of any such net cash proceeds
that are utilized for such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(iii) the payment of principal on, or purchase, redemption, defeasance or other
acquisition or retirement for value of Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
of the Company (other than Disqualified Stock); PROVIDED, that the amount of any
such net cash proceeds from any such sale of Equity Interests that are utilized
for such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iv) the redemption of
Indebtedness or preferred stock that is redeemable at the option of the Company
and convertible by its terms into Common Stock, and which was permitted to be
incurred or issued by the terms of this Indenture; PROVIDED, that at the time
such securities are called for redemption the number of shares of Common Stock
which a holder of such securities would receive upon such holder's conversion of
such securities to Common Stock multiplied by the closing bid or comparable
market price of the Common Stock on the principal securities exchange for such
Common Stock on the Business Day immediately preceding the day such Indebtedness
or preferred stock is called for redemption would exceed 120% of the redemption
price to be paid by the Company for such Indebtedness or preferred stock in
connection with such redemption; (v) in the absence of a Default or Event of
Default which has occurred or would occur as a consequence thereof, scheduled
dividends and mandatory redemptions, repurchases or sinking fund payments with
respect to Disqualified Stock or preferred stock of a Subsidiary Guarantor,
which, when issued, was permitted to be issued pursuant to the first paragraph
of Section 512; (vi) in the absence of a Default or Event of Default which has
occurred or would occur as a consequence thereof, principal payments, purchases,
redemptions, defeasance or other acquisition or retirement for value of any
Junior Subordinated Notes permitted to be incurred pursuant to clause (11) of
the second paragraph of Section 512; (vii) payments (A) in an amount not to
exceed $1.0 million in the aggregate during any fiscal year of the Company (plus
any such amount not utilized in any prior fiscal year) in connection with the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interest of the Company held by an employee or director of the Company or
any of its Subsidiaries, related to
18
compensation or severance arrangements or (B) of withholding taxes due or paying
exercise prices in connection with exercises of options for Common Stock by such
persons with such Common Stock as consideration therefor; (viii) the making and
consummation of any offer to repurchase any Indebtedness upon the occurrence of
a change of control under and as defined in the documents governing such
Indebtedness; PROVIDED, that in connection with Indebtedness incurred after
March 12, 1997, the definition of "change of control" is the same in all
material respects as the definition of "Change of Control" set forth in this
Indenture and payments pursuant thereto are not required to be made prior to the
date on which the Change of Control Payment is required to be made under this
Indenture or, with respect to any Indebtedness subordinated in right of payment
to the Notes, no sooner than 30 days after the date such Change of Control Offer
is required to be made; (ix) any purchase, redemption or other acquisition or
retirement for value of Equity Interests issued pursuant to the Company's
stockholder rights plan, as the same may be amended from time to time; and (x)
payment of cash in lieu of fractional shares of common stock that otherwise
would be issuable upon exercise of warrants to purchase common stock.
If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
second succeeding paragraph below.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of this Section 511. All such outstanding
Investments shall be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments other than cash shall be the fair
market value (evidenced by an Officers' Certificate on the date of the
Restricted Payment) of the asset(s) or securities proposed to be transferred or
issued by the Company or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment in excess of $1.0 million shall be determined by the Board of
Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 511 were
computed.
Notwithstanding the foregoing, this Section 511 shall be of no further
force or effect and shall cease to apply upon and after the occurrence of an
Investment Grade Rating Event.
(h) By adding as new Section 512 the following:
19
Section 512. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) or issue
Disqualified Stock, and that the Company shall not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock except for preferred stock
issued to and held by the Company or any Wholly-Owned Restricted Subsidiary of
the Company, PROVIDED that any subsequent issuance or transfer of Capital Stock
that results in such Wholly-Owned Restricted Subsidiary ceasing to be a
Wholly-Owned Restricted Subsidiary of the Company or any subsequent transfer of
such preferred stock (other than to the Company or any of its Wholly-Owned
Restricted Subsidiaries) shall be deemed, in each case, to constitute the
issuance of such preferred stock by the issuer thereof; PROVIDED, HOWEVER, that
the Company or any Subsidiary Guarantor may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock and any Subsidiary Guarantor may
issue preferred stock if, on the date of such incurrence or issuance and after
giving effect thereto, the Consolidated Leverage Ratio does not exceed 2.0 to
1.0.
The foregoing provisions shall not apply to:
(1) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property used in the business of the Company or such Restricted Subsidiary, in
an aggregate principal amount not to exceed $10.0 million at any time
outstanding;
(2) the existence of Warehouse Facilities, regardless of amount, and the
incurrence of Permitted Warehouse Debt by the Company or any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that to the extent any such Indebtedness of the
Company or a Restricted Subsidiary of the Company ceases to constitute Permitted
Warehouse Debt, to such extent such Indebtedness shall be deemed to be incurred
by the Company or such Restricted Subsidiary of the Company, as the case may be,
at such time;
(3) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness owing to the Company or any of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i)(A) any subsequent issuance or transfer
of any Capital Stock which results in any such Indebtedness being held by a
Person other than a Restricted Subsidiary of the Company and (B) any sale or
transfer of any such Indebtedness to a Person that is not either the Company or
a Restricted Subsidiary of the Company, shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, (ii) any Indebtedness of the Company to any
Restricted Subsidiary of the Company is permitted by the provisions of Section
511 hereof and (iii) if the Company is the obligor on such Indebtedness, such
Indebtedness is either (A) owed solely to a Special Purpose Entity in connection
with a Loan Securitization or Warehouse Facility or (B) expressly subordinated
to the prior payment in full in cash of all obligations with respect to the
Notes;
(4) the incurrence by the Company of Indebtedness represented by the Notes
and by the Subsidiary Guarantors of Subsidiary Guarantees;
(5) Indebtedness of the Company, any of its Restricted Subsidiaries or any
Special Purpose Entity outstanding on the Issue Date;
20
(6) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness with respect to Indebtedness that was
permitted by this Indenture to be incurred or that was outstanding at the Issue
Date; PROVIDED, that Permitted Refinancing Indebtedness with respect to
clauses (1), (2), (3), (7) or (12) of this paragraph (and Indebtedness of like
character outstanding on the Issue Date) would otherwise be permitted to be
incurred pursuant to such clauses, as applicable;
(7) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations directly related to (i) Indebtedness of the Company or a
Restricted Subsidiary of the Company that was permitted by this Indenture to be
incurred, (ii) Receivables held by the Company or its Restricted Subsidiaries
pending sale in a Loan Securitization, (iii) Receivables of the Company or its
Restricted Subsidiaries that have been sold pursuant to a Warehouse Facility; or
(iv) Receivables that the Company or a Restricted Subsidiary of the Company
reasonably expects to purchase or commit to purchase, finance or accept as
collateral; PROVIDED, HOWEVER, that, in the case of each of the foregoing
clauses (i) through (iv), such Hedging Obligations are eligible to receive hedge
accounting treatment in accordance with GAAP as applied by the Company and its
Restricted Subsidiaries on the Issue Date;
(8) the incurrence of Acquired Debt by the Company or any of its
Restricted Subsidiaries in an aggregate principal amount not to exceed $10.0
million at any one time outstanding (reduced by the amount of Acquired Debt
repaid with Net Proceeds of Asset Sales of the Restricted Subsidiary acquired
subject to such Acquired Debt) that is without recourse to the Company or any of
its Restricted Subsidiaries or any of their respective assets (other than the
Restricted Subsidiary acquired subject to such Acquired Debt), and is not
guaranteed by any such Person; PROVIDED, that at the time of such incurrence,
the Restricted Subsidiary acquired subject to such Acquired Debt becomes a
Subsidiary Guarantor;
(9) the Guarantee by the Company or any of the Subsidiary Guarantors of
the Indebtedness of the Company or another Subsidiary Guarantor that was
permitted to be incurred by another provision of this Section 512;
(10) the incurrence by the Company or any Subsidiary Guarantor of
Indebtedness under a Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed $10.0 million;
(11) the incurrence by the Company of Indebtedness which is expressly
subordinated in right of payment to the Notes in an aggregate principal amount
at any time outstanding not to exceed the sum of $75.0 million, PROVIDED,
HOWEVER, that the extension or roll-over of the Junior Subordinated Notes will
not reduce the amount of Indebtedness that may be incurred pursuant to this
clause (11);
(12) (A) the incurrence by a Special Purpose Entity of Indebtedness in
connection with a Loan Securitization; PROVIDED, HOWEVER, that if and to the
extent (and only to the extent) any such Indebtedness ceases to be "without
recourse" (as defined in the definition of "Special Purpose Entity"), such
Indebtedness shall be deemed to be incurred by a Restricted Subsidiary of the
Company at such time; and (B) the issuance by a Special Purpose Entity of
preferred stock representing a residual interest in such Special Purpose Entity;
and
21
(13) (A) the incurrence by an Unrestricted Subsidiary of the Company of
Non-Recourse Debt (including, without limitation, Non-Recourse Debt that would
constitute Permitted Warehouse Debt if incurred by a Restricted Subsidiary of
the Company); PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of the Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company; and (B) the issuance by an Unrestricted Subsidiary of the Company of
preferred stock.
The Company shall not, and shall not permit any Subsidiary Guarantor to,
incur any Indebtedness that is contractually subordinated to any Indebtedness of
the Company or any such Subsidiary Guarantor unless such Indebtedness is also
contractually subordinated to the Notes, or the Subsidiary Guarantee of such
Subsidiary Guarantor (as applicable), on substantially identical terms;
PROVIDED, HOWEVER, that no Indebtedness shall be deemed to be contractually
subordinated to any other Indebtedness solely by virtue of being unsecured.
For purposes of determining compliance with this Section 512, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Indebtedness described in clauses (1) through (13) above or is
entitled to be incurred pursuant to the first paragraph of this Section 512, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this Section 512 and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof.
Notwithstanding the foregoing, this Section 512 shall be of no further
force or effect and shall cease to apply upon and after the occurrence of an
Investment Grade Rating Event.
(i) By adding as new Section 513 the following:
Section 513. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens. Notwithstanding the foregoing, this Section 513 shall be
of no further force or effect and shall cease to apply upon and after the
occurrence of an Investment Grade Rating Event.
(j) By adding as new Section 514 the following:
Section 514. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(A) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (B) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Warehouse Facilities as in
effect as of the Issue Date, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, additions
22
(including additional Warehouse Facilities), replacements or refinancings
thereof, PROVIDED that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, additions, replacements or refinancings are
no more restrictive with respect to such dividend and other payment restrictions
than those contained in the Warehouse Facilities as in effect on the Issue Date,
(b) applicable law, (c) any instrument governing Acquired Debt or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Acquired Debt
was incurred or such Capital Stock was issued or its terms amended in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the property or assets of any Person, other
than the Person or the property or assets of the Person, so acquired, PROVIDED
that such Person is not taken into account in determining on a pro forma basis
whether such acquisition subject to such Acquired Debt was permitted by the
terms of this Indenture, (d) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices, (e) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (f) Credit Enhancement Agreements,
(g) the requirements of any Loan Securitization that are exclusively applicable
to any Special Purpose Entity or (h) Permitted Refinancing Indebtedness;
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced. Notwithstanding
the foregoing, this Section 514 shall be of no further force or effect and shall
cease to apply upon and after the occurrence of an Investment Grade Rating
Event.
(k) By adding as new Section 515 the following:
Section 515. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing actions, considered separately, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Company or such Restricted Subsidiary of such Affiliate Transaction from
a financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; PROVIDED that Affiliate Transactions shall
not include (A) any employment agreement, stock option, employee benefit,
indemnification, compensation (including the payment of reasonable fees to
directors of the Company or its Restricted Subsidiaries who are not employees of
the Company or its Restricted Subsidiaries), business expense reimbursement or
other employment-related agreement, arrangement or plan entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
of the Company or such Restricted Subsidiary, (B) transactions between or among
the Company and/or its Restricted Subsidiaries not otherwise prohibited by this
Indenture, (C) loans or advances to employees in the
23
ordinary course of business of the Company or its Restricted Subsidiaries, but
in any event not to exceed $500,000 in aggregate principal amount outstanding at
any one time, (D) Restricted Payments that are permitted by the provisions of
Section 511 hereof and Permitted Investments and (E) transactions, arising out
of and in connection with either a Loan Securitization or the incurrence of
Permitted Warehouse Debt, between the Company or any Restricted Subsidiary of
the Company, on the one hand, and a Special Purpose Entity or Warehouse Facility
or any Person (other than an Affiliate of the Company that is not a Subsidiary
of the Company) which owns an interest in a Special Purpose Entity or Warehouse
Facility, on the other hand. Notwithstanding the foregoing, this Section 515
shall be of no further force and effect and shall cease to apply upon and after
the occurrence of an Investment Grade Rating Event.
(l) By adding as new Section 516 the following:
Section 516. NO AMENDMENT TO SUBORDINATION PROVISIONS.
Without the consent of the Holders of 90% of the Notes outstanding, the
Company shall not amend, modify or alter the terms of the Subordinated Notes to
(i) increase the rate of or change the time for payment of interest on such
Subordinated Notes, (ii) increase the principal of, advance the final maturity
date of or shorten the maturity of such Subordinated Notes, (iii) increase the
redemption price or alter the other redemption provisions or increase the price
or modify the other terms at which the Company is required to offer to purchase
such Subordinated Notes or (iv) amend any of the provisions governing
subordination of such Subordinated Notes in a manner adverse to the Holders of
the Notes; PROVIDED, that no such consent will be required if, at the effective
time of any such amendment, modification or alteration, the Company would be
permitted to incur such amended, modified or altered Subordinated Notes under
Section 512 hereof. Notwithstanding the foregoing, this Section 516 shall be of
no further force and effect and shall cease to apply upon and after the
occurrence of an Investment Grade Rating Event.
(m) By adding as new Section 517 the following:
Section 517. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses. Notwithstanding the
foregoing, this Section 517 shall be of no further force or effect and shall
cease to apply upon and after the occurrence of an Investment Grade Rating
Event.
(n) By adding as new Section 518 the following:
Section 518. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of Notes that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement. Notwithstanding the foregoing, this Section 518 shall be of no
further force and effect and shall cease to apply on and after the occurrence of
an Investment Grade Rating Event.
24
(o) By adding the following subparagraph (v) to Section 504:
(v) So long as any Notes are outstanding and until the occurrence of an
Investment Grade Rating Event, the Company will furnish to the Holders of Notes,
either on the face of the financial statements or the footnotes thereto or in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial condition, results of operations and statements of
cash flow of the Company and its Restricted Subsidiaries separate from those of
the Company's Unrestricted Subsidiaries.
(p) By adding as new Section 519 the following:
Section 519. SUBSIDIARY GUARANTEES.
The Company shall not, and shall not permit any of the Subsidiary
Guarantors to, make any Investment in any Subsidiary of the Company that is not
a Subsidiary Guarantor unless either (i) such Investment is permitted by Section
511 (including Investments in Special Purpose Entities), or (ii) such Subsidiary
executes a Subsidiary Guarantee and delivers an opinion of counsel in accordance
with the provisions of this Indenture.
(q) By deleting current Section 601 and adding as new Section 601 the
following:
Section 601. 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 (i) the Company is
the surviving corporation 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 shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Notes and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company 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 shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto, be permitted
to incur at least $1.00 of additional Indebtedness pursuant to the first
paragraph of Section 512, if such covenant is then applicable.
(r) By deleting current Section 701 and adding as new Section 701 the
following:
Section 701. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein with respect to the
Notes, means any one of the following events (whatever the reason for such Event
of Default and whether it shall
25
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) default for 30 days in the payment when due of interest on the Notes;
(ii) default in payment when due of principal of or premium, if any, on
the Notes;
(iii) failure by the Company to comply with the provisions of Sections
509, 510, 511, 512, 513, 517 or 601 hereof;
(iv) failure by the Company for 60 days after notice to comply with any of
its other agreements in this Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days;
(vii) the Company or any Subsidiary of the Company pursuant to or within
the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case in which it is the debtor,
(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) admits in writing its inability generally to pay its debts as the
same become due;
(viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any Subsidiary of the
Company in an involuntary case in which it is the debtor,
26
(b) appoints a Custodian of the Company or any Subsidiary thereof or
for all or substantially all of the property of the Company or any
Subsidiary thereof, or
(c) orders the liquidation of the Company or any Subsidiary of the
Company, and the order or decree remains unstayed and in effect for 60
days; and
(ix) except as permitted by this Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be invalid or unenforceable or shall cease
for any reason to be in full force and effect or any Subsidiary Guarantor or any
Person acting on behalf of any Subsidiary Guarantor shall deny or disaffirm its
obligations under its Subsidiary Guarantee.
The term "BANKRUPTCY LAW" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "CUSTODIAN" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A Default under clause (iv) is not an Event of Default with respect to
the Notes until the Trustee notifies the Company in writing, or the Holders of
at least 25% in principal amount of the then outstanding Notes notify the
Company and the Trustee in writing, of the Default and the Company does not cure
the Default within 60 days after receipt of such notice. The written notice
must specify the Default, demand that it be remedied and state that the notice
is a "NOTICE OF DEFAULT."
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions contained in the form of Note attached as EXHIBIT
A hereto, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the Notes. If
an Event of Default occurs prior to March 15, 2002 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
March 15, 2002, then, in addition to all amounts otherwise payable with respect
to such Notes, a premium with respect thereto (expressed as a percentage of the
amount that would otherwise be due but for the provisions of this sentence),
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Notes if such Notes are repaid during the
12-month period beginning on March 15 of the years set forth below:
Year Percentage
---- ----------
1998 111.50
1999 110.06
2000 108.63
2001 107.19
(s) By deleting current Section 702 and adding as new Section 702 the
following:
Section 702. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (vii) or (viii) of Section 701) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes by written notice to the Company
27
and the Trustee, may declare the unpaid principal of, premium, if any, and any
accrued and unpaid interest on the Notes to be due and payable. Upon such
declaration the principal, premium, if any, and interest shall be due and
payable immediately. If an Event of Default specified in clause (vii) or (viii)
of Section 701 occurs with respect to the Company or any Subsidiary thereof such
an amount shall IPSO FACTO become and be immediately due and payable without any
declaration or other act as the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the Notes then outstanding by written
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default with respect to the Notes (except nonpayment of principal or
interest that has become due solely as a result of such acceleration) have been
cured or waived.
(t) By deleting current Section 1001 and adding as new Section 1001 the
following:
Section 1001. WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee, at any time and from time to
time, may amend this Indenture or the Notes or enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(i) to cure any ambiguity or defect in or to correct or supplement any
provision herein which may be inconsistent with any other provision in this
Indenture;
(ii) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code);
(iii) to provide for the assumption of the Company's obligations to
Holders of Notes in the case of a merger or consolidation;
(iv) to make any change that would provide any additional rights or
benefits to the Holders of Notes;
(v) to make any change that does not adversely affect the legal rights
under this Indenture of any Holder of Notes;
(vi) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA; or
(vii) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 809(b).
(u) By deleting current Section 1002 and adding as new Section 1002 the
following:
Section 1002. WITH CONSENT OF HOLDERS.
28
With the consent of the Holders of at least a majority principal amount of
the Notes then outstanding (including, without limitation, consent obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes), by
Act of said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may amend this Indenture or
the Notes or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Notes; and any existing default or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes);
provided, however, that no such amendment or supplemental indenture shall (with
respect to any Notes held by a non-consenting Holder), without the consent of
each Holder of Notes affected thereby:
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other than
provisions relating to Sections 509 and 510 hereof);
(iii) reduce the rate of or change the time for payment of interest on
any Note;
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration);
(v) make any Note payable in money other than that stated in the Notes;
(vi) make any change in the provisions of this Indenture relating to waiver
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note (other than a
payment required by Section 509 or 510 hereof); or
(viii) make any change in the foregoing amendment and waiver provisions.
(v) By renumbering current Article 12 as Article 13 and adding as new Article
12 the following:
ARTICLE 12
SUBSIDIARY GUARANTEES
Section 1201. SUBSIDIARY GUARANTEES.
Subject to the provisions of this Article 12, each Subsidiary Guarantor,
jointly and severally, hereby unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, that: (a) the principal of, and premium, if any, and
interest on the Notes shall be duly and punctually paid in full when due,
whether at maturity, by
29
acceleration or otherwise, and interest on overdue principal, and premium, if
any, on the Notes and all other obligations of the Company to the Holders or the
Trustee hereunder or under the Notes (including fees, expenses or other) shall
be promptly paid in full or performed, all in accordance with the terms hereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, the same shall be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise. Failing payment when due of
any amount so guaranteed or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be
obligated to pay, or to perform or to cause the performance of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under this Subsidiary Guarantee, and shall
entitle the Trustee or the Holders of Notes to accelerate the obligations of
each Subsidiary Guarantor hereunder in the same manner and to the same extent as
the obligations of the Company. Each Subsidiary Guarantor hereby agrees that
its obligations hereunder shall be unconditional to the extent permitted by
applicable laws, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any thereof, the
entry of any judgment against the Company, any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor
hereby waives and relinquishes: (a) any right to require the Trustee, the
Holders or the Company (each, a "Benefitted Party") to proceed against the
Company, its Subsidiaries or any other Person or to proceed against or exhaust
any security held by a Benefitted Party at any time or to pursue any other
remedy in any secured party's power before proceeding against the Subsidiary
Guarantors; (b) any defense that may arise by reason of the lack of authority of
any other Person or Persons or the failure of a Benefitted Party to file or
enforce a claim against the estate (in bankruptcy or any other proceeding) of
any other Person or Persons; (c) demand, protest and notice of any kind (except
as expressly required by this Indenture), including, but not limited to, notice
of the existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of the Subsidiary
Guarantors, the Company, the Subsidiaries of the Company, any Benefitted Party,
any creditor of the Subsidiary Guarantors, the Company or the Subsidiaries of
the Company or on the part of any other Person whomsoever in connection with any
obligations the performance of which are hereby guaranteed; (d) any defense
based upon an election of remedies by a Benefitted Party, including, but not
limited to, an election to proceed against the Subsidiary Guarantors for
reimbursement; (e) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (f) any defense
arising because of a Benefitted Party's election, in any proceeding instituted
under the Bankruptcy Law, of the application of Section 1111(b)(2) of the
Bankruptcy Code; and (g) any defense based on any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Code. The Subsidiary
Guarantors hereby covenant that the Subsidiary Guarantees shall not be
discharged except by payment in full of all principal, premium, if any, and
interest on the Notes and all other costs provided for under this Indenture, or
as provided in Section 901.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or the Subsidiary Guarantors, or any trustee or
similar official acting in relation to either the Company or the Subsidiary
Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the
Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each of the
Subsidiary Guarantors agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
30
Subsidiary Guarantor agrees that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 7 hereof
for the purposes hereof, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article 7 hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Subsidiary Guarantor for
the purpose of the Subsidiary Guarantee.
Section 1202. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
To evidence the Subsidiary Guarantees set forth in Section 1201 hereof,
each of the Subsidiary Guarantors agrees that this Indenture shall be executed
on behalf of such Subsidiary Guarantor and that a notation of such Subsidiary
Guarantee substantially in the form included in EXHIBIT B hereto shall be
endorsed on each Note thereafter authenticated and delivered by the Trustee.
Such execution and any such endorsement shall be executed on behalf of such
Subsidiary Guarantor by any two of the following officers: the Chairman of the
Board, the President, the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer or one of the Vice Presidents of the Subsidiary
Guarantor. The signature of any of these officers on the Notes may be manual or
facsimile.
Each of the Subsidiary Guarantors agrees that its Subsidiary Guarantee set
forth in this Article 12 will remain in full force and effect and apply to all
the Notes notwithstanding any failure to endorse on each Note a notation of any
such Subsidiary Guarantee.
If an Officer of a Subsidiary Guarantor whose facsimile signature is on a
Note no longer holds that office at the time the Trustee authenticates the Note
on which such Subsidiary Guarantee is endorsed, such Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Subsidiary Guarantee set forth
in this Indenture on behalf of the Subsidiary Guarantors.
Section 1203. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company or a
Wholly-Owned Restricted Subsidiary of the Company. Upon any such consolidation
or merger, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer
have any force or effect, provided that the surviving Person in any such
consolidation or merger shall be or become a Subsidiary Guarantor if such Person
would, by virtue of Investments in such Person, be required to become a
Subsidiary Guarantor pursuant to Section 519 of this Indenture.
(b) Except as provided in Section 1203(a) hereof, no Subsidiary Guarantor
may consolidate with or merge with or into (whether or not such Subsidiary
Guarantor is the surviving Person) another Person, whether or not affiliated
with such Subsidiary Guarantor, unless (i) subject to the provisions of Section
1204 hereof, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance
satisfactory to the Trustee, under this Indenture; (ii) immediately after giving
effect to such transaction no Default or Event of
31
Default exists; (iii) such Subsidiary Guarantor, or any Person formed by or
surviving any such consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction) equal to or greater than
the Consolidated Net Worth of such Subsidiary Guarantor immediately preceding
the transaction, and (iv) the Company would be permitted, immediately after
giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 512. In case of any
such consolidation or merger and upon the assumption by the successor Person, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of any Subsidiary Guarantees endorsed upon the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by such successor Person, such successor Person shall
succeed to and be substituted for such Subsidiary Guarantor with the same effect
as if it had been named herein as a Subsidiary Guarantor. Such successor Person
thereupon may cause to be signed any Subsidiary Guarantee to be endorsed upon
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) The Trustee, subject to the provisions of Section 1204 hereof, shall
be entitled to receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any such consolidation or merger and any such
assumption of obligations, comply with the provisions of this Section 1203.
Section 1204. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Subsidiary Guarantor (other than to the Company or a Wholly-Owned Restricted
Subsidiary of the Company), by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the Capital Stock of such Subsidiary
Guarantor (other than to the Company or a Wholly-Owned Restricted Subsidiary of
the Company), then such Subsidiary Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Subsidiary Guarantor) shall be released from and relieved of any
obligations under its Subsidiary Guarantee; PROVIDED that the Net Proceeds from
such sale or other disposition are applied in accordance with the provisions of
Section 510 hereof. Upon delivery by the Company to the Trustee of an Officer's
Certificate and Opinion of Counsel, to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation, Section 510 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any such Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee. Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of such Subsidiary Guarantor
under this Indenture as provided in this Article 12.
Section 1205. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the
32
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law. To effectuate the foregoing
intention, the Holders and each such Subsidiary Guarantor hereby irrevocably
agree that the obligations of such Subsidiary Guarantor under this Article 12
shall be limited to the maximum amount as will, after giving effect to all of
the liabilities of such Subsidiary Guarantor, result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee of such Subsidiary Guarantor
not constituting a fraudulent transfer or conveyance.
(w) By renumbering current Article 13 as Article 14 and adding as new Section
1412 the following:
Section 1412. NOTICES.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Arcadia Financial Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Pillsbury Center South
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
If to the Trustee:
Norwest Bank Minnesota, National Association
Norwest Center
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
33
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 answered back, if telexed; when receipt
acknowledged, if telecopied; 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 its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 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.
(x) By amending the table of contents in the Indenture to reflect the additions
described in subsections (a) through (w) of this Section 1.
SECTION 2. The Notes shall be substantially in the form of EXHIBIT A
hereto, which form is hereby incorporated in and made a part of this
Supplemental Indenture. Subject to Section 306 of the Indenture, the Notes
shall be in an aggregate principal amount of $75,000,000. Each Note shall be
dated the date of its authentication. The Notes shall be in denominations of
$1,000 and integral multiples thereof. The Notes will initially be issued in
the form of one or more Global Securities deposited with, or on behalf of, The
Depository Trust Company, as Depository, which Global Securities shall be
subject to the provisions of Section 305 of the Indenture with respect to the
circumstances under which any such Global Security may be exchanged for
Securities registered in the name of, and any transfer of such Global Security
may be registered to, a Person other than such Depository or its nominee.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Supplemental Indenture, and the Company
and the Trustee, by their execution and delivery of this Supplemental Indenture,
expressly agree to such terms and provisions and to be bound thereby.
SECTION 3. The Notes shall be subject to the defeasance provisions of
Sections 902 and 903 of the Indenture.
SECTION 4. Except as specifically supplemented and amended by this
Supplemental Indenture, the terms and provisions of the Indenture shall remain
in full force and effect. The Indenture, as supplemented and amended by the
First Supplemental Indenture thereto dated as of March 12, 1997, and this
Supplemental Indenture and all other indentures supplemental thereto, is in all
respects ratified and confirmed. The Indenture, the First Supplemental
Indenture thereto dated as of March 12, 1997, and this Supplemental Indenture
and all indentures supplemental thereto shall be read, taken and construed as
one and the same instrument.
34
SECTION 5. To the extent of any conflict between the provisions of the
Indenture and this Supplemental Indenture, the provisions of this Supplemental
Indenture shall govern. If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this
Supplemental Indenture by any of the provisions of the Trust Indenture Act, such
required provision shall control.
SECTION 6. All covenants and agreements in this Supplemental Indenture by
the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 7. In case any provision in this Supplemental Indenture or in the
Securities of any series shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions (or of the
other series of Securities) shall not in any way be affected or impaired
thereby.
SECTION 8. Nothing in this Supplemental Indenture, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Holders of the Notes, any benefit or any legal or equitable
right, remedy or claim under this Supplemental Indenture.
SECTION 9. THIS SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND THIS SUPPLEMENTAL
INDENTURE AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
SECTION 10. All terms used in this Supplemental Indenture and not
otherwise defined herein that are defined in the Indenture shall have the
meanings set forth therein.
SECTION 11. This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 12. The recitals contained herein and in the Notes, except the
certificate of authentication of the Trustee thereon, shall be taken as
statements of the Company, and the Trustee assumes no responsibility for their
accuracy or completeness. The Trustee make no representations as to the
validity or sufficiency of the Indenture, this Supplemental Indenture or of the
Notes and shall not be accountable for the use or application by the Company of
the Notes or the proceeds thereof.
35
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first written above.
ARCADIA FINANCIAL LTD.
By: /s/ ▇.▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Executive Vice President
----------------------------------
Attest
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Title: Secretary
-------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: Corporate Trust Officer
---------------------------------
S-1
EXHIBIT A
FORM OF NOTE
(Face of Note)
11 1/2% Senior Note due 2007
CUSIP Number ____________
No. $___________
ARCADIA FINANCIAL LTD.
promises to pay to _____________
or its registered assigns, the principal sum of ______________________________
on March 15, 2007.
Interest Payment Dates: Semi-annually on each March 15 and September 15,
commencing March 15, 1998.
Record Dates: March 1 and September 1 (whether or not a Business Day).
Dated: ___________ , ____
ARCADIA FINANCIAL LTD.
(SEAL) By:
---------------------------------------
By:
---------------------------------------
Trustee's Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:
------------------------------
Authorized Signature
1
(Back of Note)
11 1/2% SENIOR NOTE DUE 2007
Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇) to the
issuer or to its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of The Depository Trust
Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. INTEREST. Arcadia Financial Ltd., a Minnesota corporation (the
"COMPANY"), promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below.
The Company shall pay interest in cash on the principal amount of this
Note at the rate per annum of 11 1/2%. The Company will pay interest semi-
annually on March 15 and September 15 of each year, commencing March 15, 1998,
or if any such day is not a Business Day on the next succeeding Business Day
(each an "INTEREST PAYMENT DATE").
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Notes.
2. METHOD OF PAYMENT. Principal, premium, if any, and interest on
the Notes (except defaulted interest) will be payable at the office or agency of
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders of Notes at the close of business on the record date next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date; provided, that all
payments of principal, premium and interest with respect to the Notes the
Holders of which have given valid, timely and complete wire transfer
instructions to the Company and the Trustee will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
in such instructions. The Holder hereof must surrender this Note to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company may mail an interest check to a
Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Holder. The Company and any of its
Subsidiaries may act in any such capacity.
2
4. INDENTURE. The Company issued the Notes pursuant to the
provisions of an Indenture dated as of March 12, 1997, as supplemented by a
Second Supplemental Indenture dated as of October 8, 1997 (as so supplemented,
the "INDENTURE"), between the Company and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA") as in
effect on the date of the Indenture. The Notes are subject to all such terms,
and Holders are referred to the Indenture and such act for a statement of such
terms. The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Notes. The Notes are general unsecured obligations of the
Company. The Notes are limited to $75,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION. On or after March 15, 2002, the Company may
redeem all or any portion of Notes upon not less than 30 nor more than 60 days'
notice, as set forth in the immediately succeeding paragraph, at a redemption
price (expressed in percentages of principal amount thereof), plus accrued and
unpaid interest, if any, to the redemption date.
The redemption price as a percentage of principal amount shall be as
follows, if the Notes are redeemed during the twelve-month period beginning on
March 15 of the following years:
Year Percentage
---- ----------
2002. . . . . . . . . . . . . . . . . . . . . . 105.75%
2003. . . . . . . . . . . . . . . . . . . . . . 103.83%
2004. . . . . . . . . . . . . . . . . . . . . . 101.92%
2005 and thereafter . . . . . . . . . . . . . . 100.00%
6. MANDATORY REDEMPTION. Subject to the Company's obligation to
make an offer to repurchase Notes under certain circumstances pursuant to
Sections 509 and 510 of the Indenture (as described in paragraph 7 below), the
Company shall have no mandatory redemption or sinking fund obligations with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER. (i) If there is a Change of
Control, the Company shall be required to offer to purchase on the Change of
Control Payment Date all outstanding Notes at 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the Change
of Control Payment Date. Within ten days following any Change of Control, the
Company shall mail a notice to each Holder. Each Holder may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(ii) If the Company or a Restricted Subsidiary consummates an Asset
Sale, the Company or Restricted Subsidiary, as applicable, may apply the Net
Proceeds therefrom (a) to permanently reduce Senior Indebtedness (other than the
Notes or obligations of a Special Purpose Entity) of the Company or of any
Restricted Subsidiary, or (b) to (i) an Investment (other than in Receivables
that, at the time of purchase, are not Eligible Receivables), or (ii) the
purchase of Receivables that are, at the time of purchase, Eligible Receivables
(including payment of Dealer Participations), or (iii) the making of any capital
expenditure, or (iv) the
3
acquisition of any other tangible assets, in each case, in or with respect to a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company or such Restricted Subsidiary may temporarily reduce the principal
obligations outstanding under any Warehouse Facility or otherwise invest such
Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not so applied or invested will be deemed to
constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company shall be required to make an offer to all
Holders of Senior Term Notes (a "Senior Term Note Asset Sale Offer") to purchase
the maximum principal amount of Senior Term Notes that may be purchased out of
the Excess Proceeds. To the extent that, following such Senior Term Note Asset
Sale Offer, any Excess Proceeds remain (any such remaining Excess Proceeds, the
"REMAINING EXCESS PROCEEDS"), the Company shall be required to make an offer
(pro rata in proportion to the principal amount (or accreted value, if
applicable) outstanding in respect of any PARI PASSU Indebtedness incurred in
accordance with the Indenture, the terms of which Indebtedness require an asset
sale offer) to all Holders of Notes (an "ASSET SALE OFFER") to purchase the
maximum principal amount of Notes that may be purchased out of the Remaining
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase. Notwithstanding the foregoing, if any Excess Spread or interest
therein is sold or otherwise conveyed or disposed of in an Asset Sale and,
immediately thereafter, Finance Income Receivable relating to the remaining
aggregate Excess Spread not sold, conveyed or disposed of pursuant to such
transaction (the "REMAINING FINANCE INCOME RECEIVABLE") would be less than
Minimum Finance Income Receivable, the Company shall be required to make a
Senior Term Note Asset Sale Offer in the amount by which the Remaining Finance
Income Receivable is less than Minimum Finance Income Receivable (the "FIR OFFER
AMOUNT"), without regard to the application of the Net Proceeds of such sale by
the Company pursuant to clause (a) or (b) above. To the extent that, following
such Senior Term Note Asset Sale Offer, any of the FIR Offer Amount set aside
for such Senior Term Note Asset Sale Offer remains (any such amount, the
"REMAINING FIR OFFER AMOUNT"), the Company shall be required to make an Asset
Sale Offer in the amount of the Remaining FIR Amount; PROVIDED, that any Asset
Sale Offer made pursuant to this sentence shall be at an offer price of 101% of
the principal amount of the Notes plus accrued and unpaid interest thereon to
the date of the purchase. The Company shall mail a notice to each Holder when it
is required to make an Asset Sale Offer. Holders may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
appearing below.
8. REDEMPTION OF NOTES. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date, interest ceases to
accrue on Notes or portions of Notes called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons, and in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes 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 to pay any taxes and fees required by law or permitted
4
by the Indenture. The Registrar need not exchange or register the transfer of
any Note or portion of a Note selected for redemption. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before
the date of the mailing of a notice of redemption.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee
for registration of the transfer of this Note, the Company, the Trustee and any
agent of the Company or the Trustee may deem and treat the Person in whose name
this Note is registered as its absolute owner for the purpose of receiving
payment of principal of, premium, if any, and interest on this Note and for all
other purposes whatsoever, whether or not this Note is overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to contrary.
11. AMENDMENT, SUPPLEMENT AND WAIVERS. Except as provided in the
next two succeeding paragraphs, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Notes held by a non-consenting Holder): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than pursuant to the provisions of Sections 509 and 510 of the
Indenture), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required pursuant to Sections 509 or 510 of the Indenture), or (viii) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided
that the uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to provide for the assumption of
the Company's obligations to Holders of the Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not
5
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Securities and Exchange Commission in order to
effect or maintain the qualification of the Indenture under the TIA.
12. DEFAULTS AND REMEDIES. Events of Default under the Indenture
include: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes; (iii) failure by the Company to comply with the provisions of
Sections 509, 510, 511, 512, 513, 517 or 601 of the Indenture; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "PAYMENT DEFAULT") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Subsidiaries; and (viii) except as permitted by the
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be invalid or unenforceable or shall cease for any reason to be in full force
and effect or any Subsidiary Guarantor or any Person acting on behalf of any
Subsidiary Guarantor shall deny or disaffirm its obligations under its
Subsidiary Guarantee.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
The above description of Events of Default and remedies is qualified
by reference, and subject in its entirety, to the more complete description
thereof contained in the Indenture, which may be amended from time to time in
accordance with the terms of the Indenture.
13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to pay, among
other things, dividends or make other distributions, incur additional
indebtedness and issue preferred stock, create certain liens, create or suffer
to exist encumbrances on the ability of the Restricted Subsidiaries to pay
dividends and make distributions, enter into certain mergers and consolidations,
sell assets and enter into certain transactions with affiliates.
6
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture,
in its individual or any other capacity, may deal with the Company or its
Affiliates, as if it were not the Trustee.
15. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Indenture or the Notes or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. 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 U/G/M/A (= Uniform Gifts
to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Arcadia Financial Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Secretary
7
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
--------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Note 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 Note)
Signature Guarantee.*
------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
8
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Company pursuant to Section 509 or Section 510 of the Indenture, check the
appropriate box:
/ / Section 509 / / Section 510
(Change of Control) (Asset Sale)
If you want to have only part of the Note purchased by the Company pursuant
to Section 509 or Section 510 of the Indenture, state the amount you elect to
have purchased:
$
-------------------
Date:
------------------------
Your Signature:
-----------------------------
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.*
------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
9
EXHIBIT B
FORM OF SUBSIDIARY
GUARANTEE
SUBSIDIARY GUARANTEE
The Subsidiary Guarantor listed below (hereinafter referred to as the
"Subsidiary Guarantor," which term includes any successors or assigns under the
Indenture dated as of March 12, 1997, by and between Arcadia Financial Ltd., a
Minnesota corporation (the "Company")), and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee"), as amended by that certain Second
Supplemental Indenture dates as of October 8, 1998, by and between the Company
and the Trustee (as so amended, the "Indenture") and any additional Subsidiary
Guarantor), has irrevocably and unconditionally guaranteed (i) the due and
punctual payment of the principal of, premium, if any, and interest on the 11
1/2% Senior Notes due 2007 (the "Notes") of the Company, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on overdue
principal and premium, if any, on the Notes, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms set forth in Article 12 of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any such other obligations, the prompt payment in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by accerlation or otherwise.
The obligations of the Subsidiary Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 12 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No shareholder, officer, director, manager, member, organizer or
incorporator, as such, past, present or future of the Subsidiary Guarantor shall
have any liability under this Subsidiary Guarantee by reason of his or its
status as such shareholder, officer, director, member, manager, organizer or
incorporator.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon the Subsidiary Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders, and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the execution and delivery of the Indenture on behalf of the
Subsidiary Guarantor.
The obligations of the Subsidiary Guarantor under this Subsidiary
Guarantee shall be limited to the maximum amount as will, after giving effect to
all of the liabilities of the Subsidiary Guarantor, result in such obligations
not constituting a fraudulent conveyance.
THE TERMS OF ARTICLE 12 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
[Name of Subsidiary Guarantor]
By:
---------------------------------
Name:
Title:
Dated as of ,
------------------- ------
Attest:
2