HOME HOLDINGS INC.,(1)
AS ISSUER,
AND
[ ],
AS TRUSTEE
-----------------
INDENTURE
DATED AS OF ________ __, 1998
----------------
[315,000] UNITS
EARN OUT NOTES
------------------
(1) If any of the provisions in this form of Indenture conflict with the form
of the Earn Out Notes, the Earn Out Notes will govern and the Indenture
will be conformed to the Earn Out Notes.
CROSS-REFERENCE TABLE
Trust Indenture Act Section Indenture Section
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.8, 7.10, 10.2
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 10.3
(c) 10.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6, 10.2
(d) 7.6
314(a) 3.2, 10.2
(b) N.A.
(c)(1) 10.4
(c)(2) 10.4
(c)(3) N.A.
(d) N.A.
(e) 10.5
(f) N.A.
315(a) 7.1(b)
(b) 7.5, 10.2
(c) 7.1(a)
(d) 7.1(c)
(e) 6.11
316(a)(last sentence) 2.9
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
318(a) 10.1
"N.A." means not applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND INCORPORATION
BY REFERENCE.......................................... 1
Section 1.1 Definitions........................................... 1
Section 1.2 Other Definitions..................................... 3
Section 1.3 Incorporation by Reference of Trust Indenture Act..... 4
Section 1.4 Rules of Construction................................. 4
ARTICLE II THE NOTES............................................. 5
Section 2.1 Form and Dating....................................... 5
Section 2.2 Execution and Authentication.......................... 5
Section 2.3 Registrar and Paying Agent............................ 5
Section 2.4 Paying Agent to Hold Money in Trust................... 6
Section 2.5 Noteholder Lists...................................... 6
Section 2.6 Transfer and Exchange................................. 6
Section 2.7 Replacement Notes..................................... 7
Section 2.8 Outstanding Notes..................................... 7
Section 2.9 Treasury Notes........................................ 7
Section 2.10 Temporary Notes....................................... 7
Section 2.11 CUSIP Numbers......................................... 7
ARTICLE III COVENANTS............................................. 8
Section 3.1 Payment of Notes...................................... 8
Section 3.2 Commission Reports; Reports to Noteholders............ 8
Section 3.3 Compliance Certificate................................ 9
Section 3.4 [Reserved]............................................ 9
Section 3.5 Corporate Existence................................... 9
Section 3.6 Covenant of Good Faith................................ 9
ARTICLE IV SUCCESSORS............................................ 9
Section 4.1 When Company May Merge, etc........................... 9
Section 4.2 Successor Corporation Substituted..................... 10
ARTICLE V [RESERVED]............................................ 10
ARTICLE VI DEFAULTS AND REMEDIES................................. 10
[Section 6.1 Events of Default..................................... 10
Section 6.2 [Reserved]............................................ 11
Section 6.3 Remedies.............................................. 11
Section 6.4 Waiver of Past Defaults............................... 11
Section 6.5 Control by Majority................................... 12
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Page
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Section 6.6 Limitation on Suits................................... 12
Section 6.7 Rights of Holders to Receive Payment.................. 12
[Section 6.8 Collection Suit by Trustee............................ 12
Section 6.9 Trustee May File Proofs of Claim...................... 12
Section 6.10 Priorities............................................ 13
Section 6.11 Undertaking for Costs................................. 13
Section 6.12 Waiver of Stay or Extension Laws...................... 13
ARTICLE VII TRUSTEE............................................... 14
Section 7.1 Duties of Trustee..................................... 14
Section 7.2 Rights of Trustee..................................... 15
Section 7.3 Individual Rights of Trustee.......................... 15
Section 7.4 Trustee's Disclaimer.................................. 16
Section 7.5 Notice of Defaults.................................... 16
Section 7.6 Reports by Trustee to Holders......................... 16
Section 7.7 Compensation and Indemnity............................ 16
Section 7.8 Replacement of Trustee................................ 17
Section 7.9 Successor Trustee by Merger, etc...................... 18
Section 7.10 Eligibility; Disqualification......................... 18
Section 7.11 Preferential Collection of Claims Against Company..... 18
ARTICLE VIII [RESERVED]............................................ 18
ARTICLE IX AMENDMENTS AND WAIVERS................................ 18
Section 9.1 Without Consent of Holders............................ 18
Section 9.2 With Consent of Holders............................... 19
Section 9.3 Compliance with Trust Indenture Act................... 20
Section 9.4 Revocation and Effect of Consents..................... 20
Section 9.5 Notation on or Exchange of Notes...................... 20
Section 9.6 Trustee To Sign Amendments, Etc....................... 20
ARTICLE X MISCELLANEOUS......................................... 21
Section 10.1 Trust Indenture Act Controls.......................... 21
Section 10.2 Notices............................................... 21
Section 10.3 Communications by Holders with Other Holders.......... 22
Section 10.4 Certificate and Opinion as to Conditions Precedent.... 22
Section 10.5 Statements Required in Certificate or Opinion......... 22
Section 10.6 Rules by Trustee and Agents........................... 23
Section 10.7 Legal Holidays........................................ 23
Section 10.8 No Recourse Against Others............................ 23
Section 10.9 Duplicate Originals................................... 23
Section 10.10 Governing Law......................................... 23
Section 10.11 No Adverse Interpretation of Other Agreements......... 23
Section 10.12 Successors............................................ 24
Section 10.13 Severability.......................................... 24
ii
INDENTURE dated as of ________ __, 1998 between HOME HOLDINGS
INC., a Delaware corporation, as issuer (the "Company") and [ ], a ____________
banking corporation, as trustee (the "Trustee").
WHEREAS, the Notes (as defined below) have the benefit of the
security interest granted under the Assignment and Security Agreement dated
April ___, 1998, made by the Company in favor of ________, as collateral agent
for holders of the Notes.
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders (as defined below) of
the Company's Earn Out Notes (the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 Definitions. As used in this Indenture, the
following terms shall have the following meanings:
"Affiliate" means, when used with reference to any Person, any
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, that Person. For the purposes of this
definition, "control" when used with respect to any specified Person means
the power to direct or cause the direction of the management or policies
of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative of the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee thereof.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of corporate stock or any and
all equivalent ownership interests in a Person (other than a corporation).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means Capital Stock of the Company.
"Company" means Home Holdings Inc. until a successor replaces it and
thereafter means the successor.
"Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
"Effective Date" means the date on which the Plan becomes effective.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered.
"Indenture" means this Indenture, as amended, supplemented or
otherwise modified from time to time.
"Notes" means the Notes described above and issued under this
Indenture.
"Noteholder" or "Holder" means a Person in whose name a Note is
registered.
"Officer" means the Chairman of the Board of Directors, any
President, any Vice President, the Chief Financial Officer, the Treasurer,
the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers
or by an Officer and an Assistant Treasurer, Assistant Secretary or
Assistant Controller of the Company or of any other obligor upon the
Notes, as the case may be. One of the Officers signing an Officers'
Certificate pursuant to Section 3.3 shall be the Principal Executive
Officer, Principal Financial Officer or Principal Accounting Officer of
the Company.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of
or counsel to the Company, any other obligor upon the Notes or the
Trustee.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
2
"Plan" means the Plan of Reorganization of the Company filed on
January 15, 1998, under Chapter 11 of Title 11 of the United States Code,
11 U.S.C. ss. 101 et seq., Case ▇▇. ▇▇ ▇ ▇▇▇▇▇ (JHG).
"Subsidiary" of a Person means (i) a corporation at least a majority
of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned or
controlled, directly or indirectly, by such Person or (ii) any other
Person (other than a corporation) in which such Person, directly or
indirectly, at the date of determination thereof has at least a majority
ownership interest.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.
Code ▇▇.▇▇. 77aaa-77bbbb) as in effect on the date of this Indenture
except as provided in Section 9.3 hereof.
"Trustee" means [ ] until a successor replaces it and
thereafter means the successor.
"Trust Officer" means any officer or assistant officer of the
corporate trust administration department of the Trustee or otherwise
assigned by the Trustee to administer its corporate trust matters.
"Unit" means a unit into which the Notes are denominated.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment
of public and private debts and, except for purposes of Article VIII
hereof, includes a check of the Company or a bank check payable in U.S.
Legal Tender.
Section 1.2 Other Definitions. As used in this Indenture, the
following terms shall have the meanings assigned in the Sections referred
to opposite such terms below:
Term Defined in Section
---- ------------------
"Bankruptcy Default".......................................................6.1
"Bankruptcy Law"...........................................................6.1
"Custodian"................................................................6.1
"Event of Default".........................................................6.1
"Legal Holiday"...........................................................10.7
"Paying Agent".............................................................2.3
"Registrar"................................................................2.3
3
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Indenture.
The following terms used in this Indenture and defined in the Trust
Indenture Act have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company and any
other obligor upon the Notes.
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by Trust Indenture Act by reference to another statute or
defined by Commission rule under the Trust Indenture Act have the meanings
assigned to them.
Section 1.4 Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles in
effect as of the date any determination hereunder is required;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular; and
(e) provisions apply to successive events and transactions.
4
ARTICLE II
THE NOTES
Section 2.1 Form and Dating. The Notes shall be substantially in the
form of Exhibit A, which is part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication.
Section 2.2 Execution and Authentication. (a) Two Officers shall
sign the Notes for the Company by manual or facsimile signature. The Company's
seal shall be reproduced on the Notes.
(b) If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall be valid
nevertheless.
(c) A Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Note has been authenticated under this Indenture.
(d) The Trustee shall authenticate Notes for original issue up
to the total number of not more than [315,000] Units upon a written order of the
Company signed by two Officers. The total number of Units represented by Notes
outstanding at any time may not exceed that number except as provided in Section
2.7.
(e) The Trustee may appoint an authenticating agent acceptable
to the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
(f) The Notes shall be issuable only in registered form and
only in denominations of a whole Unit and integral multiples thereof.
Section 2.3 Registrar and Paying Agent. The Company shall maintain
an office or agency where Notes may be presented for registration of transfer or
for exchange (the "Registrar") and an office or agency where Notes may be
presented for payment (the "Paying Agent"). The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
5
The Company shall enter into an appropriate agency agreement with
any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the Trust Indenture Act and the relevant provisions of
this Indenture and shall not otherwise be inconsistent with this Indenture. The
Company or any Subsidiary of the Company may act in any such capacity. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of any Agent
not a party to this Indenture. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Notes. The Company may appoint and change any
Paying Agent and Registrar or co-registrar at any time without notice.
Section 2.4 Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Noteholders or the Trustee
all money held by the Paying Agent for the payment of principal of or interest
on the Notes, and will notify the Trustee of any default by the Company or any
other obligor upon the Notes in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company) shall have no further liability for the money. If
the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold as
a separate trust fund all money held by it as Paying Agent.
Section 2.5 Noteholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Company or any other obligor upon the Notes shall furnish to the Trustee on
or before each interest payment date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Noteholders.
Section 2.6 Transfer and Exchange. [When Notes are presented to the
Registrar with a request to register a transfer or to exchange them for Notes
representing an equal number of Units in other denominations, the Registrar
shall register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the
Registrar's request. Any transfer or exchange shall be without charge, except
that the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto, other than
exchanges pursuant to Section 2.10 or 9.5.]
Notwithstanding the foregoing, the Company may restrict transfers as
provided in the Notes.
6
Section 2.7 Replacement Notes. If the Holder of a Note claims that
the Note has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Note if the requirements of the
Trustee and the Company are met. If required by the Trustee or the Company, such
Holder must provide an indemnity bond, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee, any Paying Agent
or any authenticating agent from any loss which any of them may suffer if a Note
is replaced. The Company may charge for its reasonable expenses in replacing a
Note lost, destroyed or wrongfully taken.
Every replacement Note is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
Section 2.8 Outstanding Notes. The Notes outstanding at any time are
all Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding.
If a Note is replaced pursuant to Section 2.7 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.7.
Subject to Section 2.9, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note.
Section 2.9 Treasury Notes. In determining whether the Holders of
the required proportion of Units have concurred in any direction, waiver or
consent, Notes owned by the Company, any other obligor upon the Notes or an
Affiliate of the Company or such obligor shall be disregarded (including for
purposes of determining the number of outstanding Units); provided that, for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which a Trust Officer of the
Trustee knows are so owned shall be so disregarded.
Section 2.10 Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, such temporary Notes shall be entitled to the same rights, benefits
and privileges as the definitive Notes.
Section 2.11 CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers
7
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE III
COVENANTS
Section 3.1 Payment of Notes. The Company shall pay the amounts
payable on the Notes on the dates and in the manner provided in the Notes.
Payments shall be considered paid on the date due if the Paying Agent (other
than the Company or an Affiliate of the Company) holds on that date money in
immediately available funds sufficient to pay all amounts due under the Notes.
Section 3.2 Commission Reports; Reports to Noteholders. (a) The
Company shall file with the Trustee, within 15 days after it files them with the
Commission, copies of the annual reports and the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13 (other than Form
11-K) or 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of Section 314(a) of the Trust Indenture Act.
(b) So long as the Notes remain outstanding, if the Company is
required to furnish annual or quarterly reports to its stockholders pursuant to
the Exchange Act, the Company shall cause any annual reports to stockholders and
any quarterly or other financial reports furnished by it to stockholders to be
mailed to the Noteholders (no later than ten days after the date such materials
are mailed to the Company's stockholders) at their addresses appearing in the
register of Notes maintained by the Registrar. If the Company is not required to
furnish annual or quarterly reports to its stockholders pursuant to the Exchange
Act, it shall cause its financial statements, including any notes thereto, to be
so mailed to the Holders within 120 days after the end of each of the Company's
fiscal years and within 60 days after the end of each of its first three fiscal
quarters. All financial statements delivered by the Company pursuant to this
Subsection (b) shall be prepared in accordance with generally accepted
accounting principles, consistently applied, and in the case of year-end
financials, shall include either (i) if the Company's financial statements for
such year were audited by independent certified public accountants, a copy of
such auditor's report or (ii) if the Company's financial statements for such
year were not audited, a certificate signed by an Officer certifying that the
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly present the financial
position of the Company as of the date of, or for the periods covered by, such
financial statements. Upon the written request of the Trustee or any
broker-dealer who wishes
8
to publish, or submit for publication, any price quotation with respect to the
Notes, the Company shall deliver promptly in writing the information called for
by items (i) through (xiii) of Section 15c2-11(a)(5) of the Exchange Act.
Delivery of reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such reports shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 3.3 Compliance Certificate. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate complying with Section 314(a)(4) of the Trust Indenture
Act and stating whether or not the signers know of any Default that occurred
during such fiscal year. If they do, the Officers' Certificate shall describe
the Default and its status. Such compliance shall be determined without regard
to periods of grace or notice requirements.
Section 3.4 [Reserved]
Section 3.5 Corporate Existence. Subject to Article IV, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the rights (charter and statutory)
and corporate franchise of the Company; provided, however, that the Company
shall not be required to preserve any right or corporate franchise if the Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 3.6 Covenant of Good Faith. The Company shall carry out the
covenant of good faith contained in the Note.
ARTICLE IV
SUCCESSORS
Section 4.1 When Company May Merge, etc. The Company shall not
consolidate or merge with any other Person or transfer (by lease, assignment,
sale or otherwise) all or substantially all of its assets, in a single
transaction or through a series of related transactions, to another Person or
group of affiliated Persons unless (i) the Company is the surviving or
continuing Person or the Person (if other than the Company) formed by such
consolidation or merger or to which the assets of the Company are transferred
and expressly assumes, by an indenture supplemental to this Indenture, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and
9
this Indenture and (ii) immediately before and immediately after giving effect
to such transaction, no Default or Event of Default shall have occurred or be
continuing; provided that the transactions contemplated by the Plan shall not
constitute a consolidation or a merger which is subject to this Section 4.1. The
Company shall deliver to the Trustee prior to the consummation of any
consolidation, merger or transfer of assets involving the Company, an Officers'
Certificate to the foregoing effect and an Opinion of Counsel stating that the
proposed transactions and such supplemental indenture comply with this
Indenture.
Section 4.2 Successor Corporation Substituted. Upon any
consolidation, merger or transfer of assets involving the Company in accordance
with Section 4.1, any successor Person formed by such consolidation or merger or
to which such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as an original party
herein. When a successor Person assumes all of the obligations of the Company
hereunder and under the Notes, the Company shall be released from such
obligations.
ARTICLE V
[RESERVED]
ARTICLE VI
DEFAULTS AND REMEDIES
[Section 6.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of any amount due on
any Note when the same becomes due and payable and the default continues for a
period of 30 days;
(b) the Company fails to comply with any of its other
covenants or agreements in the Notes or this Indenture and the default continues
for 60 days after notice to the Company by the Trustee or to the Company and the
Trustee by the Holders of Notes representing at least 25% of the Units then
outstanding as specified below;
(c) the Company, pursuant to or within the meaning of any
Bankruptcy Law (i) becomes insolvent, (ii) fails generally to pay its debts as
they become due, (iii) admits in writing its inability to pay its debts
generally as they become due, (iv) commences a voluntary case or proceeding, (v)
consents to, or acquiesces in, the institution of a bankruptcy or an insolvency
proceeding against it or the entry of a
10
judgment, decree or order for relief against it in an involuntary case or
proceeding, (vi) applies for, consents to or acquiesces in the appointment of or
taking possession by a Custodian of the Company or of all or substantially all
of its property or (vii) makes a general assignment for the benefit of its
creditors; or
(d) a court of competent jurisdiction enters a judgment,
decree or order under any Bankruptcy Law which (i) is for relief against the
Company in an involuntary case, (ii) appoints a Custodian of the Company or a
Custodian for all or substantially all of its property or (iii) orders the
winding-up or liquidation of the Company; and such judgment, decree or order
shall remain unstayed and in effect for a period of [90] consecutive days (a
"Bankruptcy Default").
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
federal or state law for the relief, supervision, conservation, reorganization
or liquidation of debtors or for the benefit of creditors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under subsection 6.1(b) is not an Event of Default until
the Trustee or the Holders of Notes representing at least 25% of the Units then
outstanding notify the Company of the Default and the Company does not cure the
Default within the period specified in such subsection after 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". Such notice shall be given by
the Trustee if requested by the Holders of Notes representing at least 25% of
the Units then outstanding.]
Notwithstanding any Provision of this Indenture, none of the
transactions contemplated by the Plan shall constitute an Event of Default.
Section 6.2 [Reserved]
Section 6.3 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 payments payable on the Notes or to enforce the
performance of any provision of the Notes or this Indenture. The Trustee may
maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or any
Noteholder 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 6.4 Waiver of Past Defaults. Subject to Sections 6.7 and
9.2, the Holders of Notes representing a majority of the Units then outstanding,
by notice to the Trustee, may waive an existing Default and its consequences
except a Default in the payment of the amounts payable on any Note. When a
Default or Event of Default is waived, it is cured and ceases to exist.
11
Section 6.5 Control by Majority. The Holders of Notes representing a
majority of the Units then outstanding 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. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, is unduly prejudicial
to the rights of other Noteholders or would involve the Trustee in personal
liability.
Section 6.6 Limitation on Suits. A Noteholder may pursue a remedy
with respect to this Indenture or the Notes only if:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of Notes representing at least 25% of the
Units then outstanding make a request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period, the Holders of Notes
representing a majority of the Units then outstanding do not give the Trustee a
direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.7 Rights of Holders to Receive Payment. Notwithstanding
any other Provision of this Indenture, the right of any Holder of a Note to
receive payment of amounts payable on the Note, on or after the respective due
dates expressed in the Note, or to institute suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
[Section 6.8 Collection Suit by Trustee. If an Event of Default
specified in subsection 6.1(a) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor upon the Notes for [____________] and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due the Trustee under
Section 7.7.]
Section 6.9 Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in
12
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due under Section 7.7) and the Noteholders
allowed in any judicial proceedings relative to the Company (or any other
obligor upon the Notes), its creditors or its property and shall be entitled and
empowered to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute it, and any Custodian in any
such judicial proceedings is hereby authorized by each Noteholder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceeding.
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 7.7;
second, to Noteholders for amounts due and unpaid on the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes; and
third, to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any such payment to Noteholders in such manner
and procedure as the Trustee deems appropriate.
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 pursuant to Section 6.7 or a suit by Holders of
Notes representing more than 10% of the Units then outstanding.
Section 6.12 Waiver of Stay or Extension Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay
13
or extension law wherever enacted, now or at any time hereafter in force, which
materially adversely affects the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(ii) In the absence of bad faith or negligence on its
part, the Trustee may conclusively rely, as to the truth of 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. However, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall 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:
(i) This paragraph does not limit the effect of
paragraph (b) of this Section.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
14
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(iv) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to subsections 7.1(a), (b) and (c).
(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 the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.2 Rights of Trustee. (a) The Trustee may rely on any
document reasonably 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 may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
Section 7.3 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or an Affiliate of the Company with the same
rights it would have if it
15
were not Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes,
and it shall not be responsible for any statement in the Notes other than its
authentication.
Section 7.5 Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to
Noteholders a notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
Section 7.6 Reports by Trustee to Holders. Within 60 days after each
May 1 beginning with May 1, 1998, the Trustee shall mail to each Noteholder to
the extent required by Section 313(c) of the Trust Indenture Act a brief report
dated as of such date that complies with Section 313(a) of the Trust Indenture
Act. The Trustee also shall comply with Section 313(b) of the Trust Indenture
Act.
A copy of each report at the time of its mailing to Noteholders
shall be filed with the Commission and each stock exchange on which the Notes
are listed. The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
Section 7.7 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation as the Company and the Trustee shall
agree in writing for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses incurred by it. Such expenses shall include the reasonable compensation
and out-of-pocket expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any, and all loss,
damage, claim, expense or liability incurred by it except as provided below. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of one such counsel. The Company need not pay for
any settlement made without its consent.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
16
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay amounts payable on
particular Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in subsection 6.1(c) or (d) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
Section 7.8 Replacement of Trustee. A resignation or removal of the
Trustee and the appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority of the Units may remove the Trustee by so notifying the removed Trustee
and, with the Company's consent, may appoint a successor Trustee. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or public officer takes charge of the Trustee
or its property; or
(d) the Trustee 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 Company and any other obligor upon the
Notes shall promptly appoint a successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% of the Units may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the
17
retiring Trustee shall become effective and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, provided all sums owing to the Trustee hereunder have been
paid and subject to the lien provided for in Section 7.7. Notwithstanding
replacement of the Trustee, the Company's obligations under Section 7.7 shall
continue for the benefit of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification. This Indenture shall
always have a trustee who satisfies the requirements of Section 310(a)(1) of the
Trust Indenture Act. The Trustee shall always have a combined capital and
surplus of at least $50 million as set forth in its most recent published annual
report of condition. The Trustee shall comply with Section 310(b) of the Trust
Indenture Act, including the optional provision permitted by the second sentence
of Section 310(b)(9) of the Trust Indenture Act.
Section 7.11 Preferential Collection of Claims Against Company. The
Trustee is subject to Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship listed in Section 311(b) of the Trust Indenture Act. A
Trustee who has resigned or been removed is subject to Section 311(a) of the
Trust Indenture Act to the extent indicated.
ARTICLE VIII
[RESERVED]
ARTICLE IX
AMENDMENTS AND WAIVERS
Section 9.1 Without Consent of Holders. The Company and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Noteholder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article IV;
18
(c) to provide for uncertificated Notes in addition to
certificated Notes;
(d) to make any change that does not adversely affect the
rights of any Noteholder; or
(e) to comply with the Trust Indenture Act.
Section 9.2 With Consent of Holders. The Company and the Trustee may
amend or supplement any provision of either this Indenture or the Notes with the
written consent of the Holders of Notes representing a majority of the Units
then outstanding without notice to any Noteholder. The Holders of a majority of
the Units may waive compliance by the Company with any such provision without
notice to any Noteholder. However, without the consent of each Noteholder
affected, an amendment, supplement or waiver under this Section may not:
(a) change the due dates for payments on any Note;
(b) reduce the amounts payable on any Note or change the form
of payment thereof;
(c) impair the right to institute suit for the enforcement of
any payment on or with respect to any Note;
(d) reduce the percentage of Units whose Holders must consent
to an amendment, supplement or waiver; or
(e) make any change in Sections 6.4 or 6.7 or this Section
9.2.
Any amendment or supplement shall be effective upon certification to
the Trustee by the Company or an agent of the Company that such amendment or
supplement has been authorized by the Company and that the consent of the
Holders of Notes representing a majority of the Units then outstanding has been
obtained, unless such consents specify that they shall become effective at a
later date, in which case such amendment or supplement shall become effective in
accordance with the terms of such consent.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any amendment, supplement or waiver.
19
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 9.3 Compliance with Trust Indenture Act. Every amendment or
supplement to this Indenture or the Notes or waiver of the provisions hereof or
thereof shall comply with the Trust Indenture Act as then in effect.
Section 9.4 Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
a Note if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Noteholder, unless it makes a change described in any of clauses (a)
through (e) of Section 9.2. In that case, the amendment, supplement or waiver
shall bind each Holder of a Note who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note.
Section 9.5 Notation on or Exchange of Notes. The Trustee may place
an appropriate notation about an amendment or waiver on any Note thereafter
authenticated. The Company in exchange for all Notes may issue and the Trustee
shall authenticate new Notes that reflect the amendment, supplement or waiver.
Section 9.6 Trustee To Sign Amendments, Etc. The Trustee shall sign
any amendment or supplement authorized pursuant to this Article IX if the
amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign it. In signing or refusing to sign such amendment or supplement, the
Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive and, subject to Section 7.1, shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that such amendment or supplement is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the company in accordance with its terms.
20
ARTICLE X
MISCELLANEOUS
Section 10.1 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 Trust Indenture Act, the
required provision shall control.
Section 10.2 Notices. Any notice or communication by the Company or
the Trustee to the other is duly given if in writing and delivered in person or
by facsimile or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company:
Home Holdings Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
if to the Trustee:
Attention: Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
receipt is acknowledged, if facsimiled; and five calendar days after mailing if
sent by registered or certified mail (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication to a Noteholder shall be mailed by
first-class mail or other equivalent means to his address shown on the register
kept by the Registrar. Failure to mail a notice or communication to a Noteholder
or any defect in it shall not affect its sufficiency with respect to other
Noteholders.
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
21
the Company mails a notice or communication to Noteholders, it shall mail a copy
to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 10.3 Communications by Holders with Other Holders.
Noteholders may communicate pursuant to Section 312(b) of the Trust Indenture
Act with other Noteholders with respect to their rights under this Indenture or
the Notes. The Company, the Trustee, the Registrar and anyone else shall have
the protection of Section 312(c) of the Trust Indenture Act.
Section 10.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) 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
(b) an Opinion of Counsel reasonably satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Section 10.5 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:
(a) a statement that each party making such certificate or
opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of each such party, he or
she has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
22
(d) a statement as to whether or not, in the opinion of each
such party, such condition or covenant has been complied with;
provided, however, that with respect to matters of law, an Officers' Certificate
may be based upon an Opinion of Counsel, unless the signers know, or in the
exercise of reasonable care should know, that such Opinion of Counsel is
erroneous, and provided, further, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or certificates of
public officials, unless the signer knows, or in the exercise of reasonable care
should know, that any such document is erroneous.
Section 10.6 Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or at a meeting of Noteholders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
Section 10.7 Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open either
in New York City or in the city where the principal corporate trust office of
the Trustee is located. If a payment date is a Legal Holiday at a place of
payment, payment may be made at such place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
Section 10.8 No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their creation
and if any liability does exist, such liability is waived and released as
provided in the Notes.
Section 10.9 Duplicate Originals. The Parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
Section 10.10 Governing Law. The internal laws of the State of New
York shall govern this Indenture and the Notes, without regard to the conflicts
of laws rules thereof. The Company hereby irrevocably submits to the
jurisdiction of any federal or New York State court sitting in the Borough of
Manhattan in New York City in respect of any suit, action or proceeding arising
out of or relation to this Indenture, and irrevocably agrees that all claims in
respect of any such suit, action or proceeding may be heard and determined in
any such court. The Company irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 10.11 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the
23
Company or any Subsidiary. Any such indenture, loan or debt agreement may not be
used to interpret this Indenture.
Section 10.12 Successors. All agreements of the Company in this
Indenture and the Notes shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successors.
Section 10.13 Severability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
24
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and delivered as of the date first above written.
HOME HOLDINGS INC.,
as Issuer
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
[ ]
as Trustee
By:
----------------------------------
Name:
Title:
25
EXHIBIT A
EARN OUT NOTES, SERIES I
(Face of Note)
REGISTERED CUSIP No.
------------
No. Number of Units:
--------
HOME HOLDINGS INC.
Earn Out Note, Series I
Home Holdings Inc., a Delaware corporation (the "Company"), for value
received, promises to pay to _______________, or registered assigns, the amounts
payable on ________ Units on the dates and to the Persons specified on the
reverse hereof.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
or an authenticating agent under the Indenture referred to on the reverse
hereof.
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
HOME HOLDINGS INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
(SEAL)
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Notes described in the within-mentioned indenture.
[ ],
-------------------------
as Trustee
By:
-----------------------
Authorized Signatory
(Back of Note)
[HOME HOLDINGS INC.]
Earn Out Note, Series I
1. Definitions. As used in this Note, the following terms
shall have the following meanings:
"Accrual Period" with respect to a Payment Date shall mean the
period commencing on the day following the Initial Certification Date of the
year preceding the year in which the Payment Date occurs and ending on the
Initial Certification Date of the year in which the Payment Date occurs.
"Accruals" means Initial Accruals, Final Accruals and Interest
Accruals.
"Actual Payment" means any actual payment made with respect to
the Note pursuant to Sections 2 and 3 herein.
"Adjusted Taxable Income" means taxable income (as defined in
Section 63 of the Code or, in the case of a consolidated group as defined in
Treas. Reg. ss. 1.1502-1(h), Treas. Reg. ss. 1.1502-11) of the Home Group,
excluding income against which the Specified NOL Carryovers may not be offset by
reason of Treas. Reg. ss. 1.1502-21T or any successor provision of the Treasury
Regulations, determined without taking into account any deduction for the
Specified NOL Carryovers.
"Adjusted Treasury Rate" with respect to a Taxable Year means
the sum of (i) the annual yield reported on page PXI of the Bloomberg Financial
Market Services Screen for the off-the-run 5-year Treasury Note on the Payment
Date with respect to such Taxable Year and (ii) 35 basis points.
"Allocated Participation" means, with respect to a Taxable
Year of the Company, [52%] [plus General Unsecured Creditors' amount] of the Tax
Savings (including Tax Savings arising with respect to Deemed Taxable Income)
for such year.
"Business Day" means a day that is not a Legal Holiday.
"Change of Law" means a change in any federal, state or local
statute, unappealable and final court decision, regulation, ruling or other
administrative practice or order, or any lapse or reinterpretation of existing
law.
1
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute and references to Sections of the Code shall be deemed
to include successor provisions of the Code or any successor statute.
"Company" means Home Holdings Inc., a Delaware corporation or,
in the event that Home Holdings Inc. merges with another entity in which Home
Holdings Inc. is not the surviving entity, Company shall, from and after the
date of such merger, mean the successor to Home Holdings Inc. in such merger.
"Cumulative Accruals" has the meaning given to such term in
Section 2(c).
"Cumulative Adjusted Taxable Income of the Home Group" as of
any date shall mean the sum of the Adjusted Taxable Income of the Home Group
(from time to time) for each Taxable Year from the Taxable Year that includes
the Effective Date through such date.
"Cumulative Target Payment Date Accruals" has the meaning
given to such term in Section 3(c)(iii).
"Deemed Accrual" means any amount that accrues pursuant to
Section 3(c) hereof.
"Deemed Taxable Income" has the meaning given such term in
Section 3(c)(i)(A).
"Effective Date" means the date on which the Plan becomes
effective.
"Final Accrual" with respect to a Taxable Year has the meaning
given to such term in Section 2(b)(ii).
"Final Certification" with respect to the Tax Savings for a
Taxable Year has the meaning given to such term in Section 2(a)(ii).
"Final Certification Date" with respect to the Tax Savings for
a Taxable Year has the meaning given to such term in Section 2(a)(ii).
"Final Deemed Accrual" with respect to a Target has the
meaning given to such term in Section 3(c)(ii)(B).
"Final Deemed Certification" with respect to a Target has the
meaning given to such term in Section 3(c)(i)(B).
2
"Final Deemed Certification Date" with respect to a Target has
the meaning given to such term in Section 3(c)(i)(B).
"Final Determination" means, with regard to any federal tax, a
determination as defined in Section 1313(a) of the Code; with respect to any
other tax, a "Final Determination" means any final determination of liability in
respect of tax, which, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise, and shall include the
payment of tax by the Company with respect to any item disallowed by any taxing
authority.
"Final Payment Date" with respect to a Taxable Year means
October 15 following the Final Certification Date with respect to such Taxable
Year.
"Final Target Payment Date" with respect to a Target Date
means October 15 following the Final Deemed Certification Date with respect to
such Target Date.
"First Target" has the meaning given to such term in Section
3(b)(i).
"First Target Date" has the meaning given to such term in
Section 3(b)(i).
"Fourth Target" has the meaning given to such term in Section
3(b)(v).
"Fourth Target Date" was the meaning given such term in
Section 3(b)(v).
"Holder" means a person in whose name a Note is registered.
"Home Group" means the Company, and, with respect to any
period for which it joins in filing consolidated returns for Federal income tax
purposes, the consolidated group (as defined in Treas. Reg. Section 1.1502-1(h))
of which the Company is a member.
"Indenture" has the meaning given to such term in Section 8.
"Initial Accrual" with respect to a Taxable Year has the
meaning given to such term in Section 2(b)(i).
"Initial Certification" with respect to the Tax Savings as
preliminarily calculated for a Taxable Year has the meaning given to such term
in Section 2(a)(i).
3
"Initial Certification Date" with respect to the Tax Savings
as preliminarily calculated for a Taxable Year has the meaning given to such
term in Section 2(a)(i).
"Initial Deemed Accrual" with respect to a Target has the
meaning given to such term in Section 3(c)(ii)(A).
"Initial Deemed Certification" with respect to a Target has
the meaning given such term in Section 3(c)(i)(A).
"Initial Deemed Certification Date" with respect to a Target
has the meaning given to such term in Section 3(c)(i)(A).
"Initial Target Payment Date" with respect to a Target Date
means October 15 following the Initial Deemed Certification Date with respect to
such Target Date.
"Interest Accrual" has the meaning given to such term in
Section 2(b)(ii).
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions are not required to be open either in New York City or in
the city where a Payment on the Note is to be made.
"Material Change of Law" means a Change of Law that prohibits
or effectively proscribes the Zurich Group from conducting its business in the
United States of America.
"Note" or "Notes" as used herein shall refer to the Company's
Earn Out Notes, Series I.
"Payment Date" means October 15 of each year.
"Plan" means the Plan of Reorganization of the Company filed
on January 15, 1998 under Chapter 11 of Title 11 of the United States Code, Case
▇▇. ▇▇ ▇ ▇▇▇▇▇ (JHG), as amended, modified and supplemented.
"Pro Rata Allocated Participation Allocation" means the
Allocated Participation multiplied by a fraction where the numerator is equal to
the number of units represented by this Note and the denominator is equal to
[315,000].
"Second Target" has the meaning given such term in Section
3(b)(iii).
4
"Second Target Date" has the meaning given such term in
Section 3(b)(iii).
"Specified NOL Carryovers" shall mean the aggregate net
operating loss carryovers, as described in Section 172 of the Code and any
corresponding state and local income tax provisions, as the case may be,
available to the Company immediately after the Effective Date as set forth in
the Plan adjusted to take into account further reductions required as a result
of consummation of the Plan, including those reductions required pursuant to
Sections 108(b) and 382(l)(5) of the Code.
"Statute of Limitations" means the statutory period of
assessment for Federal taxes of the Company as set forth in Section 6501 of the
Code, and any corresponding provisions of state and local tax law.
"Supplemental First Target" has the meaning given such term in
Section 3(b)(ii).
"Supplemental First Target Date" has the meaning given such
term in Section 3(b)(ii).
"Target" has the meaning given to such term in Sections 3(a)
and (b).
"Target Date" means a date on which the First, Supplemental
First, Second, Third or Fourth Target occurs, as set forth in Section 3(b).
"Target Interest Accrual" has the meaning given such term in
Section 3(c)(ii)(B).
"Target Payment" has the meaning given such term in Section
3(c).
"Target Payment Date" with respect to a Target has the meaning
given such term in Section 3(c)(iii).
"Target Payment Date Accruals" with respect to a Target
Payment Date has the meaning given such term in Section 3(c)(iii).
"Tax Returns" means, with respect to a Taxable Year of the
Company, the Federal, state and local income tax returns of the Company filed
with respect to such Taxable Year.
"Tax Savings" means, with respect to a Taxable Year of the
Company, the excess, if any, of (i) the Federal, state and local income taxes
that
5
would have been payable by the Home Group if no deduction for the Specified NOL
Carryovers were available over (ii) actual Federal, state and local income taxes
payable by the Home Group in such Taxable Year. For this purpose, the term
"income taxes" shall include franchise taxes, alternative minimum taxes, and
other similar taxes.
"Taxable Year" means a taxable year of the Home Group that
ends after the Effective Date.
"Third Target" has the meaning given such term in Section
3(b)(iv).
"Third Target Date" has the meaning given such term in Section
3(b)(iv).
"Treas. Reg." means the Treasury Regulations promulgated under
the Code.
"Zurich Group" means the affiliated group of which Zurich
Insurance Company is the common parent. For this purpose, "affiliated group" has
the meaning given such term in Section 1504(a) of the Code (determined without
regard to the exceptions contained in Section 1504(b) of the Code).
2. Payments to Noteholders with respect to Tax Savings. The Company
promises to make payments on this Note in the amounts and at the times specified
in this Section.
(a) Computation And Certification of Tax Savings. The Tax
Savings shall be computed and certified as follows:
(i) For each Taxable Year, the Company shall make a
preliminary calculation of all Tax Savings for such Taxable Year based
upon the Tax Returns as filed, and on or before September 25 of the year
following such Taxable Year, or on the next Business day if such date is a
Legal Holiday (an "Initial Certification Date"), the Chief Financial
Officer of the Company shall make an initial certification substantially
in the form attached hereto as Exhibit 1 (an "Initial Certification") of
such Tax Savings as so preliminarily calculated; and
(ii) For each Taxable Year with respect to which an
Initial Certification was made, within 10 days of the earlier to occur of
(A) the expiration of the Statute of Limitations with respect to all Tax
Returns to which the Initial Certification related and (B) a Final
Determination with respect to all Tax Savings to which the Initial
Certification related with respect to which the Statute of Limitations has
not
6
expired (such earlier date, the "Final Certification Date"), the Chief
Financial Officer shall calculate the Tax Savings as finally determined,
and shall make a certification substantially in the form attached hereto
as Exhibit 2 (a "Final Certification") of such Tax Savings.
(b) Accruals. With respect to the taxable income of the
Company for each Taxable Year, the Company will, subject to the provisions of
Section 2(d) hereof, accrue the following amounts with respect to this Note to
be treated in accordance with the payment provisions of this Section:
(i) on the Initial Certification Date for each Taxable
Year, subject to Section 2(d), the Company shall accrue an amount equal to
(A) 35% of the Pro Rata Allocated Participation covered by such Initial
Certification if, and to the extent that the Cumulative Adjusted Taxable
Income of the Home Group is less than or equal to $200 million and (B) 20%
of the Pro Rata Allocated Participation covered by such Initial
Certification thereafter (the "Initial Accrual" with respect to such
taxable year); and
(ii) on the Final Certification Date with respect to any
Taxable Year, the Company shall accrue (x) an amount equal to the Pro Rata
Allocated Participation covered by such Final Certification minus the Pro
Rata Allocated Participation covered by the corresponding Initial Accrual
with respect to such Taxable Year (each a "Final Accrual", and
collectively, "Final Accruals") plus (y) interest thereon at the Adjusted
Treasury Rate with respect to such Taxable Year compounded [semi-]annually
from the Payment Date through the Final Payment Date with respect to such
Taxable Year (each, an "Interest Accrual" and collectively, "Interest
Accruals").
(c) Payments. On each Payment Date, the Company shall make a
payment with respect to the Note in an amount equal to the excess, if any, of
(i) the sum of (A) the Initial Accruals and Final Accruals pursuant to Section
2(b) (but not including Deemed Accruals, if any, with respect to Section 3(c))
that occur on or before September 25 of the year in which the Payment Date
occurs and (B) Interest Accruals with respect to Final Accruals described in
clause (c)(i)(A) that occur on or before September 25 of the year in which the
Payment Date occurs (the "Cumulative Accruals") through and including the
Payment Date over (ii) the total amount of Actual Payments previously made with
respect to the Note.
(d) Suspension of Accruals Due to Challenges. In the event
that the Internal Revenue Service (or, if applicable, any state or local taxing
authority) issues a notice of proposed adjustment (or any procedurally later
notice, such as a notice of proposed deficiency or a notice of deficiency)
which, if sustained, would disallow all or any portion of the Tax Savings
(including any Tax Savings that,
7
but for this paragraph, would be taken into account pursuant to Section 2 or
treated under Section 3 hereof as arising with respect to Deemed Taxable Income)
for a Taxable Year, Initial Accruals and Initial Deemed Accruals (pursuant to
Section 2(b) or 3(c), as the case may be) and related payments with respect to
such challenged Tax Savings and any correlative amounts for other Taxable Years
may, at the option of the Company, be suspended in their entirety until the
Company receives a Final Determination with respect to the challenged Tax
Savings to which the Initial Accruals or Initial Deemed Accruals relate;
provided, however, that with respect to Tax Savings relating to the first $200
million of Cumulative Adjusted Taxable Income of the Home Group, Initial
Accruals will not be suspended but shall be reduced to 20% of the Pro Rata
Allocated Participation until the Company receives a Final Determination
regarding such Tax Savings (at which time such Initial Accruals shall be made
taking into account such Final Determination), provided, further, that the
amount of any payment that is deferred by reason of this Section 2(d) shall be
increased by interest at the Adjusted Treasury Rate on the amount of such
payment as finally determined for the period of the suspension, and provided,
further, that this section shall not give the Company any right to reclaim any
payments previously made with respect to Initial Accruals that the Company has
not suspended.
(e) Penalty Interest. In the event that any payment due
hereunder is not made when due for any reason other than those set forth in
Section 2(d), the Company shall pay interest thereon at a rate of 8.31%,
accruing from the Payment Date to the date on which such payment is actually
made.
3. Minimum Cumulative Income Targets and Adjustments Thereto; Deemed
Accruals.
(a) Upon the terms and subject to the conditions set forth
herein and in the Indenture, the Company agrees to utilize its best efforts to
cause the Home Group to generate, after the Effective Date, Cumulative Adjusted
Taxable Income in amounts that are at least equal to the Minimum Cumulative
Operating Income Targets (the "Targets") set forth in (b) below.
(b) Targets. Subject to Section 3(d) below, the Targets are as
follows:
(i) From the Effective Date through December 31, 2000,
Cumulative Adjusted Taxable Income in an amount equal to (A) $200 million
multiplied by (B) a fraction, (x) the numerator of which is 731 minus the excess
of (i) the number of days after March 31, 1998 that the Effective Date occurs
over (ii) the number of days after May 1, 1998 that the Confirmation Date
occurs, and (y) the denominator of which is 731 (the "First Target");
8
(ii) $200 million of Cumulative Adjusted Taxable Income
(the "Supplemental First Target") from the Effective Date through December 31,
2001 (the "Supplemental First Target Date");
(iii) $400 million of Cumulative Adjusted Taxable Income
(the "Second Target") from the Effective Date through the end of the first
Taxable Year ending with or after the fifty-seventh month after the Effective
Date (the "Second Target Date");
(iv) $700 million of Cumulative Adjusted Taxable Income
(the "Third Target") from the Effective Date through the end of first Taxable
Year ending with or after the ninety-third month after the Effective Date (the
"Third Target Date");(2) and
(v) Cumulative Adjusted Taxable Income in an amount
equal to the lesser of $1 billion and 90% of the amount of Specified NOL
Carryovers (the "Fourth Target") from the Effective Date through the last year
of the NOL carryforward period of the Specified NOL Carryovers (the "Fourth
Target Date").(3)
(c) Target Payments. In the event that Cumulative Adjusted
Taxable Income of the Home Group through and including a Target Date is less
than the applicable Target, the sole remedy for the Holder shall be to receive a
payment on the Note (each a "Target Payment" and collectively "Target Payments")
determined as set forth below; provided that no payment shall be due pursuant to
this Section 3(c), and the Holder will have no remedy, in the event that a
Target is not met by reason of a Material Change in Law. No accruals or payments
shall be made pursuant to this Section 3(c) with respect to a Target if the
Cumulative Adjusted Taxable Income of the Home Group through and including a
Target Date is at least equal to such Target.
(i) Certification of Deemed Tax Savings. The deemed Tax
Savings for purposes of determining the amount of any Target Payment shall be
calculated as follows:
(A) On the Initial Certification Date following each
Target Date for which the Target is not met (an "Initial Deemed Certification
Date"), subject to Section 2(d), the Chief Financial Officer shall make an
initial
----------------
(2) Based on the current estimated amount of Specified NOL Carryovers, the
Third Target will effectively be reduced.
(3) Based on the current estimated amount of Specified NOL Carryovers, the
Fourth Target will not be operative.
9
certification in substantially the form attached hereto as Exhibit 3 (an
"Initial Deemed Certificate") of the deemed Tax Savings for the Taxable Year
ended on such Target Date (an "Initial Deemed Certification") in an amount equal
to the amount that the Tax Savings would have been if the Adjusted Taxable
Income of the Home Group for the Taxable Year ending on such Target Date were
equal to the excess, if any, of (x) the Target for such Target Date over (y) the
Cumulative Adjusted Taxable Income of the Home Group from the Effective Date
through the end of the Taxable Year of the Home Group immediately preceding the
Taxable Year ending on such Target Date (such excess with respect to such Target
Date, the "Deemed Taxable Income").
(B) For each Taxable Year for which an Initial Deemed
Certification was made, on a date (the "Final Deemed Certification Date") not
later than the date 10 days after the earlier to occur of: (x) the expiration of
the Statute of Limitations with respect to all Tax Returns for such Taxable
Year; or (y) a Final Determination with respect to the Specified NOL Carryovers
that were deemed utilized in calculating the Initial Deemed Certification with
respect to such Target Date; (a "Final Deemed Certification Date"), the Chief
Financial Officer shall calculate the deemed Tax Savings as finally determined,
and shall make a certification in substantially the form attached hereto as
Exhibit 4 (a "Final Deemed Certification") of such deemed Tax Savings; provided,
however, in the event that a Final Determination has previously occurred with
respect to any later Taxable Year(s), the deemed Tax Savings as finally
determined with respect to the relevant Target Date shall be redetermined and
reduced to the amount that would have been so determined if the Deemed Taxable
Income with respect to such Target Date were reduced by an amount equal to the
actual Adjusted Taxable Income for such later Taxable Year(s).
(C) Characteristics of Deemed Income. Deemed Taxable
Income with respect to a Target Date shall be deemed to have the following
characteristics for purposes of Section 3(c):
(x) to the extent of the actual Adjusted Taxable
Income for the taxable year that ends on the
Target Date, the same characteristics as such
actual Adjusted Taxable Income; and
(y) to the extent in excess of the amount described in
clause (x), the same characteristics as the actual
income of the Home Group from the Effective Date
through the relevant Target Date.
For avoidance of doubt, characteristics shall mean all characteristics relevant
to the taxation of an item of income, including, but not limited to, any
characteristics that
10
may be relevant to the ability of The Home Group to utilize the Specified NOL
Carryovers to offset such item of income.
(ii) Accruals. Solely for purposes of this Section 3(c),
for any Taxable Year that includes a Target Date, the Company will accrue the
following amounts with respect to this Note:
(A) on the Initial Deemed Certification Date with
respect to a Target Date, the Company shall, subject to the provisions of
Section 2(d), accrue an amount equal to the Pro Rata Allocated Participation of
the amount that such Initial Accrual would have been if the Adjusted Taxable
Income for the Target Year had equaled the Deemed Taxable Income with respect to
such Target Date (each an "Initial Deemed Accrual" and collectively, "Initial
Deemed Accruals");
(B) on the Final Deemed Certification Date with respect
to any Target Date, the Company shall accrue (x) an amount equal to the Pro Rata
Allocated Participation of the amount that such Final Accrual would have been if
the Adjusted Taxable Income for the Target Year had equaled the Deemed Taxable
Income with respect to such Target Date (determined after taking into account
the proviso in clause 3(c)(i)(B) hereof), (each a "Final Deemed Accrual" and
collectively, "Final Deemed Accruals") plus (y) interest thereon at the Adjusted
Treasury Rate compounded [semi-]annually with respect to such Target Date from
the Initial Target Payment Date with respect to such Target Date through the
Final Target Payment Date with respect to such Target Date (each, a "Target
Interest Accrual" and collectively, "Target Interest Accruals"). For purposes of
calculating Target Interest Accruals under this Section 3(c)(ii)(B), to the
extent that any redetermination and reduction of deemed Taxable Income has been
made pursuant to the proviso in Section 3(c)(i)(B) (the "Proviso"), the Target
Interest Accrual shall be determined (i) without regard to such redetermination
and reduction of Deemed Taxable Income for the period from the Payment Date for
such Target Year through the Payment Date for the later Taxable Year referred to
in the Proviso, and (ii) taking into account such redetermination and reduction
thereafter.
(iii) Payments. On each Payment Date with respect to
which an Initial Deemed Accrual or Final Deemed Accrual shall have occurred
pursuant to Section 3(b) hereof during the Accrual Period with respect to such
Payment Date (a "Target Payment Date"; such accruals with respect to a Target
Payment Date, the "Target Payment Date Accruals") the Company shall make a
payment with respect to the Note in an amount equal to the excess, if any, of
(A) the sum of (x) the Target Payment Date Accruals with respect to such Target
Payment Date and the Target Interest Accruals relating thereto plus (y) all
Initial Accruals and Final Accruals that occurred pursuant to Section 2 hereof
on or before September 25 preceding the Payment Date other than Initial or Final
Accruals that correspond to such Target Payment Date Accruals, together with any
related Interest Accruals (the "Cumulative Target Payment Date Accruals") with
respect to such Target Payment
11
Date, over (B) the sum of (x) all Actual Payments previously made with respect
to the Note and (y) any Payments due pursuant to Section 2 on such Payment Date
with respect to the Note. For avoidance of doubt, a Target Payment Date Accrual
corresponds to an Initial Accrual or a Final Accrual, as the case may be, if it
is an Initial Deemed Accrual or Final Deemed Accrual, as the case may be, that
is calculated with respect to the same taxable year as the Initial Accrual or
Final Accrual, respectively.
(d) Reduction of Targets. In the event of the disallowance, in
whole or in part, of the deductibility of the Specified NOL Carryovers, or if,
as a result of a Change of Law, the deductibility of the Specified NOL
Carryovers is limited, any Target that exceeds the amount of Specified NOL
Carryovers that can be utilized by the Company to offset its income will be
adjusted so that it does not exceed such amount of Specified NOL Carryovers. In
addition, if at any time any Target otherwise exceeds the total amount of
Specified NOL Carryovers available to the Company to offset its income, such
Target will be reduced so that it does not exceed such amount of Specified NOL
Carryovers.
(e) Deemed Specified NOL Carryovers. In the event that the
Home Group fails to generate any Adjusted Taxable Income, for purposes of
calculating Target Payments due under this Section 3, the amount of the
Specified NOL Carryovers shall be deemed to equal the amount shown as such on
the Tax Returns of the Company for the first Taxable Year ending after the
Effective Date.
4. Accruals Following an Ownership Change Caused by Transfers of
Common Stock. In the event that holders of Common Stock of the Company transfer
more than 20% of such stock during the first two years following the Effective
Date, or any such stock thereafter, and such transfer causes an ownership change
within the meaning of Section 382 of the Code, the Company shall make payments
with respect to this Note with respect to the First, Supplemental First, Second,
Third and Fourth Target Dates, as applicable, that are no less than the amounts
that would have been due if such ownership change had not occurred, and, subject
to a Material Change of Law, taxable income in the taxable year ending on the
relevant Target Date before deducting the Specified NOL Carryovers equaled the
excess of the respective Target (where appropriate) for such year over the
amount of taxable income with respect to which the Tax Savings have previously
been taken into account.
5. Method of Payment. The Company will make payments on this Note to
a registered Holder of each Note as of the close of business on the date
preceding any date on which a payment is to be made. The Company will make
payments in money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. However, the Company may
make payments by check payable in such money. It may mail a payment check to a
Holder's registered address. If a payment date is a Legal Holiday at a place of
12
payment, payment may be made at that place on the next succeeding Business Day,
and no interest on the amount payable on such payment date shall accrue for the
intervening period. Amounts payable under the Notes shall be calculated based
upon the Pro Rata Allocated Participation Allocation of a single unit of Notes
(rounded to the nearest $0.01).
6. Covenant of Good Faith. In the preparation of the Tax Returns of
the Home Group or any proceeding related thereto, the Company will seek
realization of Tax Savings relating to the Specified NOL Carryovers in good
faith, provided however, that this covenant shall not give any Noteholders or
any other person any rights with respect to the preparation or filing of any Tax
Returns of the Home Group or the conduct of any proceeding with respect thereto
or any rights to confidential information of the Home Group or its affiliates.
7. Paying Agent and Registrar. Initially, [_______________] (the
"Trustee"), __________________, New York, New York ______, will act as Paying
Agent and Registrar. The Company may appoint and change any Paying Agent and
Registrar or Co-Registrar at any time without notice. The Company or any
Subsidiary of the Company may act in any such capacity.
8. Indenture. The Company issued this Note under an Indenture dated
as of _________ __, 1998 (the "Indenture") between the Company and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ▇▇.▇▇. 77aaa-77bbbb), as in effect on the date of the Indenture. This
Note is subject to all such terms, and Noteholders are referred to the Indenture
and the Trust Indenture Act for a statement of such terms. Capitalized terms not
otherwise defined herein have the meaning attributed to them in the Indenture.
The Notes are obligations of the Company limited, in the aggregate, to the
Allocated Participation of the Tax Savings (based upon the Specified NOL
Carryovers).
9. No Sinking Fund. The Notes do not provide for any mandatory
sinking fund.
10. Denominations, Transfer, Exchange. The Notes are in registered
form denominated in integral numbers of Units. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar 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 by the Indenture.
11. Transfer of Notes. The Notes will be transferable by Holders at
all times to the extent permitted by applicable securities laws; provided,
however, that the Company shall have the right to instruct the Trustee not to
register a proposed transfer of a Note if the Company has received a written
opinion of its
13
counsel (a copy of which shall be delivered to the Trustee) to the effect that
such proposed transfer would cause an ownership change of the Company within the
meaning of Section 382(g) of the Code, and any such transfer shall be deemed
void ab initio.
12. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
14
13. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority of the Units then outstanding, and any existing Default may be
waived with the consent of the Holders of the Notes representing a majority of
the Units then outstanding. Without the consent of any Holder, the Indenture or
the Notes may be amended to cure any ambiguity, defect or inconsistency, to
provide for assumption of Company obligations to Noteholders, to provide for
uncertificated Notes in addition to certificated Notes, to make any change that
does not adversely affect the rights of any Holder or to comply with the Trust
Indenture Act.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company to, among other things, consolidate with or merge
with or into any other Person or transfer all or substantially all its
properties and assets to another Person.
15. Successor Corporation. When a successor corporation assumes all
of the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article IV of the Indenture, the
predecessor corporation will be released from those obligations.
16. Defaults and Remedies. Under the Indenture, an Event of Default
occurs if the Company defaults in the payment of amounts due on any Note when
the same becomes due and payable and the default continues for a period of ___
days [certain events of bankruptcy or insolvency of the Company, provided,
however, that none of the transactions contemplated by the Reorganization Plan
shall constitute an Event of Default]. The Company must furnish an annual
compliance certificate to the Trustee.
17. Expiration. The Notes shall expire upon the final payment made
by the Company to the Holders with respect to the last Taxable Year of the NOL
carryforward period of the Specified NOL Carryovers if, but only if, all
payments required hereunder with respect to prior Taxable Years, together with
interest accrued thereon, have been paid in full.
18. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
19. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Notes.
15
20. Unclaimed Money. If money for the payment of amounts due under
the Note remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Company at its request unless an abandoned property law
designates another person. After any such payment, Holders entitled to the money
must look only to the Company (unless an abandoned property law designates
another person) and not to the Trustee for payment.
21. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= as tenants in common), TEN ENT
(= as tenants by the entireties), JT TEN (= as joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
22. Governing Law. The internal laws of the State of New York shall
govern the Indenture and the Notes, without regard to the conflicts of laws
rules thereof. The Company hereby irrevocably submits to the jurisdiction of any
federal or New York State court sitting in the Borough of Manhattan in New York
City in respect of any suit, action or proceeding arising out of or relation to
the Indenture or the Notes, and irrevocably agrees that all claims in respect of
any such suit, action or proceeding may be heard and determined in any such
court. The Company irrevocably waives, to the fullest extent it may effectively
do so under applicable law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
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ASSIGNMENT FORM
To assign this Note, fill in the form below: I or we assign and transfer this
Note to
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(Insert assignee's soc. sec. or tax I.D. no.)
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(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.
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Date: Your Signature
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(Sign exactly as your name appears on the
other side of this security)
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Signature Guarantee
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