Exhibit No. 3.6
________________________________________________
GENESIS FINANCIAL GROUP, INC.
a Virginia Corporation
___________________________
Indenture
Dated as of March 28, 1997
___________________________
$7,500,000
Promissory Notes and Installment Sales Contracts
with Corporate Guarantees
3 1/2 Year Maturity Date For Notes
3 1/2 Year Average Term for Contracts
_______________________________________________
TABLE OF CONTENTS
Article Section Heading Page
1 DEFINITIONS AND INCORPORATION 1
BY REFERENCE
1.01 Definitions 1
1.02 Other Definitions 2
1.03 Incorporation by Reference of Trust 3
Indenture Act
1.04 Rules of Construction 3
2 THE SECURITIES 3
2.01 Form and Dating 3
2.02 Execution and Authentication 3
2.03 ▇▇▇▇▇▇▇▇▇ ▇
2.04 Corporation to Hold Money in Trust 4
2.05 Securityholder Lists 4
2.06 Registration, Transfer and Exchange 4
2.07 Replacement of Lost or Stolen 5
Securities
2.08 Outstanding Securities 5
2.09 Cancellation 5
2.10 Defaulted Interest 6
3 PREPAYMENT OF NOTES 6
3.01 Notices to ▇▇▇▇▇▇▇▇▇ ▇
3.02 Selection of Notes to be Prepaid 6
3.03 Notice of Prepayment 6
3.04 Deposit of Prepayment Amount 7
3.05 Effect of Notice of Prepayment 7
3.06 Notes Prepaid in Part 7
4 COVENANTS 7
4.01 Certain Definitions 7
4.02 Payment of Securities 8
4.03 Limitation on Liens 8
4.04 Payment of Dividends 10
4.05 Corporate Existence 10
4.06 Maintenance of Principal Properties 10
4.07 Ownership of Restricted Subsidiaries 11
4.08 SEC Reports 11
4.09 No Lien Created 11
4.10 Compliance Certificate 11
5 SUCCESSOR CORPORATION 12
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5.01 When Corporation May Merge, etc. 12
5.02 When Securities Must Be Secured 12
6 DEFAULTS AND REMEDIES 12
6.01 Events of Default 12
6.02 Acceleration 14
6.03 Other Remedies 14
6.04 Waiver of Past Defaults 14
6.05 Control by Majority 14
6.06 Limitation on Suits 15
6.07 Rights of Holders to Receive Payment 15
6.08 Collection Suit by Trustee 15
6.09 Trustee May File Proofs of Claim 15
6.10 Priorities 16
6.11 Undertaking for Costs 16
7 TRUSTEE 16
7.01 Duties of the Trustee 16
7.02 Rights of Trustee 17
7.03 Trustee's Disclaimer 18
7.04 Individual Rights of Trustee, etc. 18
7.05 Notice of Defaults 18
7.06 Reports by Trustee to Holders 18
7.07 Compensation and Indemnity 18
7.08 Replacement of Trustee 19
7.09 Successor Trustee by Merger, etc. 20
7.10 Preferential Collection of Claims 20
Against Corporation
8 DISCHARGE OF INDENTURE 20
9 AMENDMENTS, SUPPLEMENTS AND WAIVERS 20
9.01 Without Consent of Holders 20
9.02 With Consent of Holders 20
9.03 Compliance with Trust Indenture Act 21
9.04 Revocation and Effect of Consents 21
9.05 Notation on or Exchange of Securities 21
9.06 Trustee to Sign Amendments, etc.
10 MISCELLANEOUS 22
10.01 Trust Indenture Act Controls 22
10.02 Notices 22
10.03 Communication by Holders with Other 23
Holders
10.04 Certificate and Opinion as to 23
Conditions Precedent
ii
10.05 Statements Required in Certificate or 23
Opinion
10.06 When Treasury Securities Disregarded 24
10.07 Rules by Trustee and ▇▇▇▇▇▇▇▇▇ ▇▇
10.08 Legal Holidays 24
10.09 Governing Law 24
10.10 No Adverse Interpretation of Other 24
Agreements
10.11 Successors 24
SIGNATURES 25
iii
INDENTURE dated as of March 28, 1997, is entered into by and between
Genesis Financial Group, Inc. ("Corporation"), and ▇▇▇▇▇ ▇▇▇▇▇▇
("Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Corporation's Promissory Notes
and Installment Sales Contracts with corporate Guarantees (hereinafter
collectively referred to as the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.01. Definitions.
-----------
"Contract" means the Corporation's Installment Sales Contracts issued
pursuant to this Indenture and the Registration Statement.
"Contract Securityholder" means any person who at the time is the holder of
any Contract.
"Corporation" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"Default" means any event which is, or after notice or lapse of time or
both would be, an Event of Default.
"Guarantee" means the Corporation's guarantee to satisfy all obligations
arising under a defaulted Contract until such time as a replacement Contract is
substituted therefor.
"Holder" or "Securityholder" means the person who is the holder of any
Security and the person in whose name a Registered Security is registered on the
Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Note" means the Corporation's Promissory Notes issued pursuant to this
Indenture and the Registration Statement.
"Noteholder" means any person who at the time is the holder of any Note.
"Officer" means the Chairman of the Board, the President, any Vice-
President, the Treasurer or the Secretary of the Corporation.
"Officers' Certificate" means a certificate signed by two Officers or by an
Officer and an Assistant Treasurer or Assistant Secretary of the Corporation.
(See Sections 10.04 and 10.05.)
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"Principal" of a Security means the amount stated as principal on the face
of the Security.
"Prospectus" means either the Notes Prospectus or Contracts Prospectus, as
the context dictates, being a part of the Corporation's SB-1 Registration
Statement filed with the SEC pursuant to which this Indenture has been issued.
"Registered Security" means Securities of the Corporation issued pursuant
to this Indenture and fully registered on the Registrar's books.
"Registered Securityholder" means the registered holder of any Registered
Security.
"Registration Statement" means the SB-1 Registration Statement filed by the
Corporation with the SEC pursuant to the Corporation's offer to sell up to
$7,500,000.00 in Notes and Contacts to investors.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes and Contracts with Guarantees, collectively,
issued pursuant to this Indenture and the Registration Statement, and as amended
or supplemented from time to time.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa et
seq.) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a successor
replaces him and thereafter means the successor.
Section 1.02. Other Definitions.
-----------------
Term Defined in Section
"Bankruptcy Law" 6.01
"Board of Directors" 4.01
"Consolidated Net Tangible Assets" 4.01
"Custodian" 6.01
"Debt" 4.01
"Event of Default" 6.01
"Legal Holiday" 10.08
"Lien" 4.01
"Principal Property" 4.01
"Registrar" 2.03
"Restricted Property" 4.01
"Restricted Subsidiary" 4.01
"Subsidiary" 4.01
2
Section 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" means the Trustee.
"obligor" on the indenture securities means the Corporation.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural include
the singular.
ARTICLE 2
THE SECURITIES
--------------
Section 2.01. Form and Dating.
---------------
The Securities shall be comprised of the Notes and Contracts, a copy of
which documents are appended hereto in Exhibits A and B, respectively. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Corporation shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security shall
be dated the date of its authentication.
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Section 2.02. Execution and Authentication.
----------------------------
One Officer shall sign the Securities for the Corporation. With respect to
the Contracts, the Officer shall sign the Assignment Of Sales Contract or the
Partial Assignment Of Sales Contract (hereinafter the "Assignment") to evidence
the transfer of this Security, all as more particularly described in the
Contracts Prospectus. The Corporation's seal shall be reproduced on the
Securities, if deemed necessary by the Trustee.
No Security shall be valid until the Officer manually signs the Note or the
Assignment. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
The Corporation shall authenticate Securities for original issue in the
aggregate principal amount of up to $7,500,000 as provided for in the
Registration Statement. The aggregate principal amount of Securities outstanding
at any time may not exceed that amount except as provided in Section 2.07.
Section 2.03. Registrar.
---------
The Corporation shall maintain an office where Securities may be presented
for registration of transfer or for exchange ("Registrar") and for payment. The
Registrar shall keep a register of the Registered Securities and of their
transfer and exchange. The Corporation may have one or more Co-Registrars, any
one or all of whom may be Officers.
Section 2.04. Corporation to Hold Money in Trust.
----------------------------------
The Corporation shall hold in trust for the benefit of Securityholders all
money held by the Corporation for the payment of principal and/or interest on
the Securities and shall notify the Trustee of any default by the Corporation in
making any such payment. The Corporation shall segregate the money and hold it
as a separate trust fund.
Section 2.05. Securityholder Lists.
--------------------
The Corporation shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Registered Securityholders and provide the Trustee with a copy of the list as
updated upon request in writing.
Section 2.06. Registration, Transfer and Exchange.
-----------------------------------
The Corporation will issue fully Registered Securities in the forms of
Exhibit A and Exhibit B attached hereto. With respect to the Contracts, the
Corporation will also issue an executed Assignment form.
4
When a Contract is presented to the Registrar or a Co-Registrar with a
request to exchange it for a replacement Contract in the event of a default, the
Registrar shall register the exchange as requested. The obligations of the
Corporation to effectuate such exchanges is more particularly described in the
Contracts Prospectus. To permit exchanges, the Corporation shall authenticate
Securities at the Registrar's and/or Trustee's request. The Corporation will
not charge a fee for any such exchange.
Section 2.07. Replacement of Lost or Stolen Securities.
----------------------------------------
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Corporation shall issue and authenticate a
replacement Security corresponding to the Security that was lost, destroyed or
wrongfully taken, if the requirements of the Virginia Uniform Commercial Code
are met. In the event any lost, destroyed or wrongfully taken Security shall
have matured or is about to mature, the Corporation may pay the same if the
requirements of the applicable provisions of the Virginia Uniform Commercial
Code are met. An indemnity bond must be sufficient in the judgment of the
Corporation and Trustee to protect the Corporation, Trustee, the Registrar or
any Co-Registrar from any loss which any of them may suffer if a Security is
replaced. The Corporation may charge for its expenses in replacing a Security
for the reasons set forth herein.
Section 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities authenticated by the
Corporation except for those canceled by it and those described in this Section.
Securities outstanding include those held by the Corporation or its affiliates.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Corporation receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Corporation pays in cash, by wire transfer, or by certified funds,
either by personal delivery or by certified mail to the last known address of
the Securityholder on a maturity date in an amount sufficient to pay Securities
payable on that date, then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue. Such Securities carry no
rights except the right to receive payment.
Section 2.09. Cancellation.
------------
The Corporation at any time may deliver Securities to the Registrar for
cancellation. The Registrar shall cancel and destroy all Securities surrendered
for exchange, except defaulted
5
Contracts, payment or cancellation. The Corporation may not issue new
Securities to replace Securities it has paid and delivered to the Registrar for
cancellation.
Section 2.10. Defaulted Interest.
------------------
If and to the extent the Corporation defaults in a payment of any principal
and/or interest due under any Registered Security, it shall pay the defaulted
installment plus interest to the persons who are Registered Securityholders in
accordance with the respective terms set forth under the Notes and Contracts.
ARTICLE 3
PREPAYMENT OF NOTES
-------------------
Section 3.01. Notices to Registrar.
--------------------
If the Corporation wants to prepay the Notes as provided therein, it shall
notify the Registrar and Trustee of the prepayment date and the principal amount
of Notes to be prepaid.
If the Corporation wants to prepay a portion of the principal amount of the
Notes on a pro-rata basis, it shall notify the Registrar and Trustee of the
amount of the reduction and the basis for it.
Section 3.02. Selection of Notes to be Prepaid.
--------------------------------
If less than all Notes are to be prepaid, the Registrar and Trustee shall
select the Notes to be prepaid by a method the Registrar and Trustee consider
fair and appropriate. The Registrar and Trustee shall make the selection from
Notes outstanding not previously prepaid in part. The Registrar and Trustee may
select for prepayment portions of the principal of Notes that have an
outstanding principal balance larger than $1,000. Notes and portions of them
they select shall be in amounts of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Notes selected for prepayment in full
also apply to portions of Notes selected for prepayment.
Section 3.03. Notice of Prepayment.
--------------------
At least 5 days but not more than 30 days before a prepayment date, the
Corporation shall mail and first publish notice of prepayment as provided in
Section 9.02.
The notice shall identify the Notes to be prepaid and shall state:
(1) the prepayment date;
(2) the prepayment amount;
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(3) the name and address of the Registrar;
(4) that Notes prepaid in full must be surrendered to the Registrar to
collect the prepayment amount;
(5) that interest on Notes prepaid in full ceases to accrue on and after
the prepayment date; and
(6) the remaining principal indebtedness outstanding under Notes to be
prepaid in part.
The Registrar shall give the notice of prepayment in the Corporation's name
and at its expense.
Section 3.04. Deposit of Prepayment Amount.
----------------------------
On or before the prepayment date, the Corporation shall deposit in a
separate corporate account money sufficient to pay the prepayment amount on all
Notes to be prepaid, in full or in part, on that date.
Section 3.05. Effect of Notice of Prepayment.
------------------------------
Once notice of prepayment is given, Notes called for prepayment in full
become due and payable on the prepayment date and at the prepayment amount
stated in the notice, unless a Noteholder shall provide Corporation with a
written objection as to the prepayment amount within five (5) days after receipt
of the notice of prepayment. Upon receipt of a written objection, the
Corporation shall recalculate the principal and interest outstanding under the
Note and shall pay the amount agreed upon by the Corporation and Noteholder.
Upon surrender of the Notes to the Registrar and after any prepayment adjustment
is made to a Note as provided herein, such Notes shall be paid as stated in the
notice.
Section 3.06. Notes Prepaid in Part.
---------------------
Upon prepayment of a Note in part only, the Registrar shall certify for the
Noteholder the principal balance remaining under the Note.
ARTICLE 4
COVENANTS
---------
Section 4.01. Certain Definitions.
-------------------
"Board of Directors" means the Board of Directors of the Corporation or any
committee of the Board.
"Consolidated Net Tangible Assets" means the consolidated net worth of the
Corporation, as determined under generally acceptable
7
accounting principles, all as shown on the Corporation's most recent
consolidated balance sheet.
"Debt" means any debt for borrowed money or any guarantee of such a debt.
"Lien" means any mortgage, pledge, security interest or lien.
"Principal Property" means any property owned by the Corporation or a
Restricted Subsidiary except any such property which, in the opinion of the
Board of Directors, is not of material importance to the total business
conducted by the Corporation and its Subsidiaries.
"Restricted Property" means:
(1) any Principal Property,
(2) any Debt of a Restricted Subsidiary, or
(3) any shares of stock of a Restricted Subsidiary, not owned or hereafter
acquired by the Corporation or a Restricted Subsidiary.
"Restricted Subsidiary" means a Subsidiary deemed to be a significant
subsidiary under the Rules and Regulations of the SEC in effect at the time the
determination is made.
"Subsidiary" means a corporation of which the Corporation, the Corporation
and one or more Subsidiaries, or one or more Subsidiaries at the time own a
majority of the corporation's outstanding stock having voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors.
Section 4.02. Payment of Securities.
---------------------
The Corporation shall promptly pay the principal of, interest on and
amounts owing under the Securities on the dates and in the manner provided in
the Securities. An installment of principal, interest or other obligation due
and owing shall be considered paid on the date it is due if the Registrar pays
on that date money designated for and sufficient to pay the installment in the
manner provided in Section 2.08 of this Indenture. The Corporation shall pay
interest on overdue principal installments or on such other obligations owed by
the Corporation at the rate borne by the applicable Security.
Section 4.03. Limitation on Liens.
-------------------
The Corporation shall not, and it shall not permit any Restricted
Subsidiary to, create, incur or assume a Lien on Restricted Property to secure a
Debt unless:
8
(1) the Lien equally and ratably secures the Securities and the Debt. The
Lien may equally and ratably secure the Securities and any other
obligation of the Corporation or a Subsidiary. The Lien may not secure
an obligation of the Corporation that is subordinated to the
Securities;
(2) the Lien is on property, Debt or shares of stock of a corporation at
the time the corporation becomes a Restricted Subsidiary;
(3) the Lien is on property at the time the Corporation or a Restricted
Subsidiary acquires the property. The Lien may not extend to any
other property owned by the Corporation or a Restricted Subsidiary at
the time the Lien is created, incurred or assumed;
(4) the Lien secures Debt incurred to finance all or some of the purchase
price or cost of construction of property of the Corporation or a
Restricted Subsidiary. The Lien may not extend to any other property
owned by the Corporation or a Restricted Subsidiary at the time the
Lien is created, incurred or assumed. In the case of any
construction, however, the Lien may extend to unimproved real property
for the construction. The Debt secured by the Lien may not be
incurred more than 120 days after the later of the acquisition,
completion of construction or commencement of full operation of the
property subject to the Lien;
(5) the Lien secures Debt of a Restricted Subsidiary owing to the
Corporation or another Restricted Subsidiary;
(6) the Lien is on property of a corporation at the time the corporation
merges into or consolidates with the Corporation or a Restricted
Subsidiary;
(7) the Lien is on property of a person at the time the person transfers
or leases all or substantially all of its assets to the Corporation or
a Restricted Subsidiary;
(8) the Lien is in favor of a government or governmental entity and
secures payments pursuant to a contract or statute or secures Debt
incurred to finance all or some of the purchase price or cost of
construction of the property subject to the Lien;
(9) the Lien extends, renews or replaces in whole or in part a Lien
("existing Lien") enumerated in Clauses (1) though (8) above. The
Lien may not extend beyond (i) the property subject to the existing
Lien, and (ii) improvements and construction on such property. The
Debt
9
secured by the Lien may not exceed the Debt secured at the time by the
existing Lien;
(10) the Lien arises out of a judgment, decree or court order, so long as
any appropriate legal proceeding which may have been initiated for
review shall not have been finally terminated or so long as the period
within which such proceeding may be initiated shall not have expired;
(11) the Lien secures Debt of the Corporation or a Restricted Subsidiary if
such Debt plus all other Debt of the Corporation and its Restricted
Subsidiaries secured by Liens on Restricted Property, excluding Debt
secured by a Lien existing as of the date of this Indenture or
permitted by clauses (1) through (10) above, at the time does not
exceed 5% of Consolidated Net Tangible Assets; or
(12) the Lien pertains to the underlying vehicles securing the Contracts,
as more particularly described in the Contracts Prospectus.
Section 4.04. Payment of Dividends.
--------------------
The Corporation shall not: (a) declare or pay any dividend or make any
distribution on its capital stock or to its stockholders (other than dividends
or distributions payable solely in shares of the capital stock of the
Corporation); (b) purchase, redeem or otherwise acquire or retire for value any
shares of its capital stock; or (c) permit a Subsidiary to purchase, redeem or
otherwise acquire or retire for value any share of capital stock of the
Corporation until the Securities are satisfied in full.
Section 4.05. Corporate Existence.
-------------------
Subject to Article 5, the Corporation will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights and franchises; provided, however, that the Corporation shall
not be required to preserve any right or franchise if it shall determine that
the preservation is no longer desirable in the conduct of the Corporation's
business and that the loss will not be disadvantageous in any material respect
to the Holders.
Section 4.06. Maintenance of Principal Properties.
-----------------------------------
The Corporation will cause all Principal Properties to be maintained and
kept in good condition, repair and working order and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the
10
judgment of the Corporation may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that neither the Corporation nor any Restricted Subsidiary
shall be prevented from discontinuing the operation and maintenance of any of
such Principal Properties or from omitting to make any repairs, renewals,
replacements, betterments or improvements thereof if such discontinuance or
omission is, in the judgment of the Corporation, desirable in the conduct of the
business of the Corporation and its Restricted Subsidiaries taken as a whole.
Section 4.07. Ownership of Restricted Subsidiaries.
------------------------------------
So long as any of the Securities shall be outstanding:
(a) the Corporation will own directly, or indirectly, through one or
more wholly-owned Subsidiaries, more than 80% of the voting shares, of each
Restricted Subsidiary; and
(b) the Corporation will not permit any Restricted Subsidiary to
merge or consolidate with or into, or to sell, assign, transfer or
otherwise dispose of the assets of such Restricted Subsidiary substantially
as an entirety to any corporation or other person, except where the
corporation surviving in such merger or consolidation, or the person to
which such sale, assignment, transfer or other disposition is made, upon
consummation of such transaction, will be a Restricted Subsidiary.
Section 4.08. SEC Reports.
-----------
The Corporation shall file with the Trustee within 15 days after it files
them with the SEC copies of the annual reports, information, documents, and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Corporation is required to file
with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. The Corporation also shall comply with the other provisions of TIA (S)
314(a) to the extent applicable.
Section 4.09. No Lien Created.
---------------
This Indenture and the Securities do not create a Lien, charge or
encumbrance on any property of the Corporation or any Subsidiary.
Section 4.10. Compliance Certificate.
----------------------
The Corporation shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Corporation an Officers' Certificate stating whether
or not the signers know of any default by the Corporation in performing its
covenants in Article 4. If
11
they do know of such a default, the Certificate shall describe the default. The
Certificate need not comply with Section 10.05. The first Certificate shall be
delivered to the Trustee by April 30, 1998.
ARTICLE 5
SUCCESSOR CORPORATION
---------------------
Section 5.01. When Corporation May Merge, etc.
--------------------------------
The Corporation shall not consolidate with or merge into, or transfer all
or substantially all of its assets to another corporation unless the resulting,
surviving or transferee corporation assumes by supplemental indenture all the
obligations of the Corporation under the Securities and this Indenture.
Thereafter all such obligations of the predecessor corporation shall terminate.
Section 5.02. When Securities Must Be Secured.
-------------------------------
If, upon any such consolidation, merger or transfer, a Restricted Property
would become subject to an attaching Lien that secures Debt, then before the
consolidation, merger, or transfer occurs, the Corporation by supplemental
indenture shall secure the Securities by a direct Lien on the Restricted
Property. The direct Lien shall have priority over all Liens on the Restricted
Property except those already on it. The direct Lien may equally and ratably
secure the Securities and any other obligation of the Corporation or a
Subsidiary. The Corporation, however, need not comply with this Section if:
(a) upon the consolidation, merger or transfer the attaching Lien will
secure the Securities equally and ratably with Debt secured by the
attaching Lien; or
(b) The Corporation or a Restricted Subsidiary under clauses (2) through
(11) of Section 4.03 could create a Lien on the Restricted Property to
secure Debt at least equal in amount to that secured by the attaching
Lien.
ARTICLE 6
DEFAULTS AND REMEDIES
---------------------
Section 6.01. Events of Default.
-----------------
Subject to Section 6.02, an "Event of Default" occurs if:
(1) the Corporation defaults in the payment of an installment due under
any Note when the same becomes due and payable, whether of maturity or
otherwise, and the default continues after the expiration of any cure
period provided for under the terms of the Note;
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(2) the Corporation defaults in the payment of any principal installment
and/or other financial obligation due under any Contract when the same
becomes due and payable, whether at maturity or otherwise, and the
default continues after the expiration of any cure period provided for
under the terms of the Contract;
(3) the Corporation fails to comply with any of its other agreements in
the Securities or this Indenture and the default continues for the
period and after the notice specified below;
(4) the Corporation 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;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors; or
(E) fails generally to pay its debts as they become due; or
(5) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Corporation in an involuntary case;
(B) appoints a Custodian of the Corporation or for any substantial
part of its property; or
(C) orders the liquidation of the Corporation;
and the order or decree remains unstayed and in effect for 90
days.
The term "Bankruptcy Law" means title ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 (3) above is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Securities
notify the Corporation of the default and the Corporation does not cure the
default within 90 days after
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receipt of the notice. The notice must specify the default, demand that it be
remedied and state that the notice is a "Notice of Default."
Section 6.02. Acceleration.
------------
If an Event of Default occurs and is continuing, the Trustee by notice to
the Corporation or the Holders of at least 25% in principal amount of the
Security of the type in default may declare the principal of and accrued
interest on all of the Securities of the type in default to be due and payable
immediately. Notwithstanding anything herein to the contrary, no Event of
Default shall occur if the Corporation and the effected Securityholders shall
negotiate a settlement of any outstanding default.
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal, interest and/or other financial obligations due under the terms of
the applicable Securities or to enforce the performance of any provision of the
applicable Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults.
-----------------------
Subject to Section 9.02, the Holders of a majority in principal amount of
the Securities of the type in default by notice to the Trustee may waive an
existing Default or Event of Default and its consequences. When a Default or
Even of Default is waived, it is cured and stops continuing.
Section 6.05 Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities may direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on it. The Trustee,
however, may refuse to follow any direction that conflicts with law or this
Indenture, that is unduly prejudicial to the rights of other Securityholders or
that may involve the Trustee in personal liability.
14
Section 6.06. Limitation on Suits.
-------------------
Subject to Section 6.02, the Securityholders of the Security of the type in
default may not pursue any remedy with respect to this Indenture or the
applicable Security unless:
(1) the Securityholder(s) holding the Security in default gives the
Trustee written notice of a continuing Event of Default as may be
provided for under the terms of the applicable Security;
(2) the applicable Securityholders holding at least 25% in principal
amount of the Security of the type in default make a written request
to the Trustee to pursue the remedy;
(3) such Securityholder or Securityholders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
and
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder holding a similar Security or to obtain a preference or
priority over such a Securityholder.
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal and/or interest on any
Security, or to bring suit for the enforcement of any such payment on or after
the respective due dates, shall not be impaired or affected without the consent
of the Holder of the Security.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of interest, principal, or any other
obligation as specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Corporation for the whole amount of principal and interest remaining
unpaid to all Securityholders of the Security of the type in default.
Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proof of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Securityholders
allowed in any judicial proceedings relative to the Corporation, its creditors
or its property.
15
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to the applicable Securityholders for amounts due and unpaid on the
Securities of the type in default for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal and interest, respectively; and
Third: to the Corporation.
The Trustee may fix a record date and payment date for any payment to
Registered Securityholders.
Section 6.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of Securities pursuant to
Section 6.07, or a suit by Holders of more than 10% in principal amount of the
Securities.
ARTICLE 7
TRUSTEE
-------
Section 7.01 Duties of the Trustee.
---------------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise its rights and powers and use the same degree of care
and skill in its exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of
16
the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section.
(2) The Trustee shall not be liable for any error of judgment made in
good faith, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as otherwise agreed with the Corporation.
Section 7.02. Rights of Trustee.
-----------------
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an opinion of counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on the Certificate or opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers.
Section 7.03. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Corporation's
use of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities, other than its certificate of authentication, or in
any prospectus used in the sale of the Securities, other than statements
provided in writing by the Trustee for use in such prospectus.
Section 7.04. Individual Rights of Trustee, etc.
----------------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Corporation with the same
rights it would have if it were not Trustee. Any Registrar or Co-registrar may
do the same with like rights. The Trustee, however, must comply with Section
7.10.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail and first publish as provided in Section 10.02 notice of
the Default within 90 days after it occurs. Except in the case of a default in
payment on any Security, the Trustee may withhold the notice if it in good faith
determines that withholding the notice is in the interests of Securityholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, the Trustee shall provide to the
Securityholders specified in TIA (S) 313(c) a brief report dated as of such
December 31 that complies with TIA (S) 313(a). The Trustee also shall comply
with TIA (S) 313(b).
Section 7.07. Compensation and Indemnity.
--------------------------
The Corporation may pay to the Trustee from time to time reasonable
compensation for its services as negotiated between the Trustee and the
Corporation. The Corporation shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses may include the
reasonable
18
compensation and expenses of the Trustee's agents and attorneys. The Corporation
shall indemnify the Trustee against any loss or liability incurred by it. The
Trustee shall notify the Corporation promptly of any claim for which it may seek
indemnity. The Corporation shall defend the claims and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the
Corporation shall pay the reasonable fees and expenses of such counsel. The
Corporation need not pay for any settlement made without its consent. The
Corporation need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Corporation's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
Section 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Corporation. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the removed Trustee and may appoint a successor Trustee with the
Corporation's consent. The Corporation may remove the Trustee if:
(1) the Trustee is adjudged a bankrupt or an insolvent;
(2) a receiver or other public officer takes charge of the Trustee or its
property; or
(3) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Corporation shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Corporation. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers an
duties of the Trustee under this Indenture. A successor Trustee shall give
notice of its succession to each Securityholder as provided in Section 10.02.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Corporation or
the Holders of a majority in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
19
Section 7.09. Successor Trustee by Merger, etc.
---------------------------------
If a corporate Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
Section 7.10. Preferential Collection of Claims Against Corporation.
------------------------------------------------------
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S)311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE
----------------------
This Indenture and all obligations of the Corporation hereunder shall
terminate upon the payment of all obligations due and owing under the
Securities, as the same may be amended and/or adjusted from time to time.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
Section 9.01. Without Consent of Holders.
--------------------------
The Corporation may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in place of
certificated Securities; or
(4) to make any change that does not adversely affect the rights of any
Securityholder.
Section 9.02. With Consent of Holders.
-----------------------
The Corporation may amend or supplement this Indenture or the Securities
without notice to any Securityholder but with the written consent of the Holders
of not less than a majority in principal amount of the Securities. The Holders
of a majority in principal amount of the Securities may waive compliance by the
Corporation with any provision of this Indenture or the Securities without
notice to any Securityholder. Without the consent of each
20
Securityholder specifically affected, however, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal of or extend the fixed maturity of any Security;
(4) make any Security payable in money other than that stated in the
Security; or
(5) waive a default in payment of principal or interest on any Security.
Section 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect, if applicable.
Section 9.04. Revocation and Effect of Consents.
---------------------------------
A consent to an amendment, supplement or waive by a Holder of a Security
shall bind the Holder and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holer's Security, even
if notation of the consent is not made on any Security. Any such Holder or
subsequent Holder, however, may revoke the consent as to his Security or portion
of a Security. The Trustee must receive the notice of revocation before the
date the amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective, it shall bind every Securityholder.
Section 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Corporation or the
Trustee so determine, the Corporation in exchange for the Security shall issue
and the Trustee shall authorize a new Security that reflects the changed
terms.
21
Section 9.06. Trustee to Sign Amendments, etc.
--------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article if the amendment, supplement or waiver does not
adversely affect the rights of the Trustee. If it does, the Trustee may but
need not sign it. The Corporation may not sign an amendment or supplement until
the Board of Directors approves it.
ARTICLE 10
MISCELLANEOUS
-------------
Section 10.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
Section 10.02. Notices.
-------
Any notice or communication shall be sufficiently given if in writing and
delivered in person or mailed by first-class mail addressed as follows:
If to the Corporation: Genesis Financial Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
If to the Registrar: Genesis Financial Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Registrar
If to the Trustee: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any notice or communication to Securityholders shall be sufficiently given
if mailed by first-class mail to each Registered Securityholder at his address
as it appears on the lists or registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to give notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the Securityholder receives or reads it.
22
Section 10.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S)312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Corporation, the Trustee, the Registrar and anyone else shall
have the protection of TIA (S)312(c).
Section 10.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Corporation to the Trustee to take
any action under this Indenture, the Corporation shall furnish to the
Trustee:
(1) an Officers' Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an opinion of counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Each opinion of counsel shall be in writing. The legal counsel who renders
it may be an employee of or counsel to the Corporation. The legal counsel shall
be acceptable to the Trustee.
Section 10.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinions of such person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been complied with.
23
Section 10.06. When Treasury Securities Disregarded.
------------------------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Corporation or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation
shall be disregarded, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
Section 10.07. Rules by Trustee and Registrar.
------------------------------
The Trustee may make reasonable rules for the administration of this
Indenture. Such rules may cover matters relating to action by or a meeting of
Securityholders. The Registrar may make reasonable rules for its
functions.
Section 10.08. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday, a legal holiday or a day on
which banking institutions are not required to be open. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
Section 10.09. Governing Law.
-------------
This Indenture and the Securities shall be governed by the laws of the
State of Virginia.
Section 10.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Corporation or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 10.11. Successors.
----------
All agreements of the Corporation in this Indenture and the Securities
shall bind its successors.
24
Dated: March ___, 1997 Genesis Financial Group, Inc.,
a Virginia corporation
By: ___________________________
Its: __________________________
Attest: _________________________
Secretary
25