1
Exhibit 4.1
MERITAGE CORPORATION,
THE GUARANTORS named herein
and
WELLS FARGO BANK, National Association, as Trustee
INDENTURE
Dated as of May 30, 2001
9 3/4% Senior Notes due 2011
2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -----------------
310 (a)(1)...................................... 7.10
(a)(2)...................................... 7.10
(a)(3)...................................... N.A.
(a)(4)...................................... N.A.
(a)(5)...................................... N.A.
(b)......................................... 7.08; 7.10; 12.02
(b)(1)...................................... 7.10
(c)......................................... N.A.
311 (a)......................................... 7.11
(b)......................................... 7.11
(c)......................................... N.A.
312 (a)......................................... 2.06
(b)......................................... 12.03
(c)......................................... 12.03
313 (a)......................................... 7.06
(b)(1)...................................... N.A.
(b)(2)...................................... 7.06
(c)......................................... 7.06; 12.02
(d)......................................... 7.06
314 (a)......................................... 4.02; 4.04; 12.02
(b)......................................... N.A.
(c)(1)...................................... 12.04
(c)(2)...................................... 12.04
(c)(3)...................................... N.A.
(d)......................................... N.A.
(e)......................................... 12.05
(f)......................................... N.A.
315 (a)......................................... 7.01(b)
(b)......................................... 7.05; 12.02
(c)......................................... 7.01(a)
(d)......................................... 7.01(c)
(e)......................................... 6.12
316 (a) (last sentence)......................... 2.10
(a)(1)(A)................................... 6.05
(a)(1)(B)................................... 6.04
(a)(2)...................................... N.A.
(b)......................................... 6.08
(c)......................................... 8.04
317 (a)(1)...................................... 6.09
(a)(2)...................................... 6.10
(b)......................................... 2.05; 7.12
318 (a)......................................... 12.01
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N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture
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TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.........................................................................................1
SECTION 1.02. Other Definitions..................................................................................33
SECTION 1.03. Incorporation by Reference of Trust Indenture Act..................................................34
SECTION 1.04. Rules of Construction..............................................................................34
ARTICLE TWO
THE NOTES
SECTION 2.01. Amount of Notes....................................................................................35
SECTION 2.02. Form and Dating....................................................................................36
SECTION 2.03. Execution and Authentication.......................................................................37
SECTION 2.04. Registrar and Paying Agent.........................................................................37
SECTION 2.05. Paying Agent To Hold Money in Trust................................................................38
SECTION 2.06. Holder Lists.......................................................................................38
SECTION 2.07. Transfer and Exchange..............................................................................38
SECTION 2.08. Replacement Notes..................................................................................39
SECTION 2.09. Outstanding Notes..................................................................................40
SECTION 2.10. Treasury Notes.....................................................................................40
SECTION 2.11. Temporary Notes....................................................................................41
SECTION 2.12. Cancellation.......................................................................................41
SECTION 2.13. Defaulted Interest.................................................................................41
SECTION 2.14. CUSIP Number.......................................................................................41
SECTION 2.15. Deposit of Moneys..................................................................................42
SECTION 2.16. Book-Entry Provisions for Global Notes.............................................................42
SECTION 2.17. Special Transfer Provisions........................................................................44
SECTION 2.18. Computation of Interest............................................................................46
ARTICLE THREE
REDEMPTION
SECTION 3.01. Election To Redeem; Notices to Trustee.............................................................46
SECTION 3.02. Selection by Trustee of Notes To Be Redeemed.......................................................47
SECTION 3.03. Notice of Redemption...............................................................................47
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SECTION 3.04. Effect of Notice of Redemption.....................................................................48
SECTION 3.05. Deposit of Redemption Price........................................................................48
SECTION 3.06. Notes Redeemed in Part.............................................................................49
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes...................................................................................49
SECTION 4.02. Reports to Holders.................................................................................49
SECTION 4.03. Waiver of Stay, Extension or Usury Laws............................................................50
SECTION 4.04. Compliance Certificate.............................................................................50
SECTION 4.05. Taxes..............................................................................................51
SECTION 4.06. Limitations on Additional Indebtedness.............................................................51
SECTION 4.07. Limitations on Layering Indebtedness...............................................................53
SECTION 4.08. Limitations on Restricted Payments.................................................................53
SECTION 4.09. Limitations on Asset Sales.........................................................................55
SECTION 4.10. Limitations on Transactions with Affiliates........................................................58
SECTION 4.11. Limitations on Liens...............................................................................59
SECTION 4.12. Conduct of Business................................................................................60
SECTION 4.13. Additional Note Guarantees.........................................................................60
SECTION 4.14. Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries...................61
SECTION 4.15. Limitations on Designation of Unrestricted Subsidiaries............................................62
SECTION 4.16. Maintenance of Consolidated Tangible Net Worth.....................................................64
SECTION 4.17. Maintenance of Properties; Insurance; Compliance with Law..........................................65
SECTION 4.18. Payments for Consent...............................................................................65
SECTION 4.19. Legal Existence....................................................................................65
SECTION 4.20. Change of Control Offer............................................................................66
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Limitations on Mergers, Consolidations, Etc........................................................67
SECTION 5.02. Successor Person Substituted.......................................................................69
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ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default..................................................................................69
SECTION 6.02. Acceleration.......................................................................................71
SECTION 6.03. Other Remedies.....................................................................................71
SECTION 6.04. Waiver of Past Defaults and Events of Default......................................................72
SECTION 6.05. Control by Majority................................................................................72
SECTION 6.06. Limitation on Suits................................................................................72
SECTION 6.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.....................................................................73
SECTION 6.08. Rights of Holders To Receive Payment...............................................................73
SECTION 6.09. Collection Suit by Trustee.........................................................................73
SECTION 6.10. Trustee May File Proofs of Claim...................................................................73
SECTION 6.11. Priorities.........................................................................................74
SECTION 6.12. Undertaking for Costs..............................................................................74
SECTION 6.13. Restoration of Rights and Remedies.................................................................75
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..................................................................................75
SECTION 7.02. Rights of Trustee..................................................................................76
SECTION 7.03. Individual Rights of Trustee.......................................................................77
SECTION 7.04. Trustee's Disclaimer...............................................................................77
SECTION 7.05. Notice of Defaults.................................................................................77
SECTION 7.06. Reports by Trustee to Holders......................................................................78
SECTION 7.07. Compensation and Indemnity.........................................................................78
SECTION 7.08. Replacement of Trustee.............................................................................79
SECTION 7.09. Successor Trustee by Consolidation, Merger, etc....................................................80
SECTION 7.10. Eligibility; Disqualification......................................................................80
SECTION 7.11. Preferential Collection of Claims Against Issuer...................................................80
SECTION 7.12. Paying Agents......................................................................................80
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01. Without Consent of Holders.........................................................................81
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SECTION 8.02. With Consent of Holders............................................................................82
SECTION 8.03. Compliance with Trust Indenture Act................................................................83
SECTION 8.04. Revocation and Effect of Consents..................................................................83
SECTION 8.05. Notation on or Exchange of Notes...................................................................84
SECTION 8.06. Trustee To Sign Amendments, etc....................................................................84
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Discharge of Indenture.............................................................................85
SECTION 9.02. Legal Defeasance...................................................................................86
SECTION 9.03. Covenant Defeasance................................................................................86
SECTION 9.04. Conditions to Defeasance or Covenant Defeasance....................................................86
SECTION 9.05. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous Provisions............................................88
SECTION 9.06. Reinstatement......................................................................................89
SECTION 9.07. Moneys Held by Paying Agent........................................................................89
SECTION 9.08. Moneys Held by Trustee.............................................................................89
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Guarantee..........................................................................................90
SECTION 10.02. Execution and Delivery of Guarantee................................................................91
SECTION 10.03. Limitation of Guarantee............................................................................91
SECTION 10.04. Release of Guarantor...............................................................................92
SECTION 10.05. Waiver of Subrogation..............................................................................92
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.......................................................................93
SECTION 12.02. Notices............................................................................................93
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SECTION 12.03. Communications by Holders with Other Holders.......................................................95
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.................................................95
SECTION 12.05. Statements Required in Certificate and Opinion.....................................................95
SECTION 12.06. Rules by Trustee and Agents........................................................................96
SECTION 12.07. Business Days; Legal Holidays......................................................................96
SECTION 12.08. Governing Law......................................................................................96
SECTION 12.09. No Adverse Interpretation of Other Agreements......................................................96
SECTION 12.10. No Recourse Against Others.........................................................................96
SECTION 12.11. Successors.........................................................................................97
SECTION 12.12. Multiple Counterparts..............................................................................97
SECTION 12.13. Table of Contents, Headings, etc...................................................................97
SECTION 12.14. Separability.......................................................................................97
EXHIBITS
Exhibit A. Form of Note......................................................................................A-1
Exhibit B. Form of Legend for Rule 144A Notes and Other Notes That Are Restricted Notes......................B-1
Exhibit C. Form of Legend for Regulation S Note..............................................................C-1
Exhibit D. Form of Legend for Global Note....................................................................D-1
Exhibit E. Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors..E-1
Exhibit F. Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S.........F-1
Exhibit G. Form of Guarantee.................................................................................G-1
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INDENTURE, dated as of May 30, 2001, among MERITAGE
CORPORATION, a Maryland corporation, as issuer (the "Issuer"), the Guarantors
(as hereinafter defined) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means (1) with respect to any Person
that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such
Person and its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (2) with
respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person
(other than the Issuer or a Restricted Subsidiary) existing at the time such
Person is merged with or into the Issuer or a Restricted Subsidiary, or
Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in
connection with the acquisition of an asset or assets from another Person, which
Indebtedness was not, in any case, incurred by such other Person in connection
with, or in contemplation of, such merger or acquisition.
"Additional Notes" shall mean up to $125.0 million aggregate
principal amount of Notes having identical terms and conditions to the Notes
issued pursuant to Article Two and in compliance with Section 4.06.
"Adjusted Net Assets" of a Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts and all other fixed and
contingent liabilities (after giving effect to all other fixed and contingent
liabilities and after giving effect to any collection from any Subsidiary of
such Guarantor in respect of the obligations of such Guarantor under the
Guarantee), excluding Indebtedness in respect of the Guarantee, as they become
absolute and matured.
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"Affiliate" of any Person means any other Person which
directly or indirectly controls or is controlled by, or is under direct or
indirect common control with, the referent Person. For purposes of Section 4.10,
Affiliates shall be deemed to include, with respect to any Person, any other
Person (1) which beneficially owns or holds, directly or indirectly, 10% or more
of any class of the Voting Stock of the referent Person, (2) of which 10% or
more of the Voting Stock is beneficially owned or held, directly or indirectly,
by the referent Person or (3) with respect to an individual, any immediate
family member of such Person. For purposes of this definition, "control" of a
Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent or agent for service
or notices and demands.
"amend" means to amend, supplement, restate, amend and restate
or otherwise modify; and "amendment" shall have a correlative meaning.
"asset" means any asset or property.
"Asset Acquisition" means
(1) an Investment by the Issuer or any Restricted Subsidiary
of the Issuer in any other Person if, as a result of such Investment,
such Person shall become a Restricted Subsidiary of the Issuer, or
shall be merged with or into the Issuer or any Restricted Subsidiary of
the Issuer, or
(2) the acquisition by the Issuer or any Restricted Subsidiary
of the Issuer of all or substantially all of the assets of any other
Person or any division or line of business of any other Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition by the Issuer or any Restricted Subsidiary to
any Person other than the Issuer or any Restricted Subsidiary (including by
means of a Sale and Leaseback Transaction or a merger or consolidation)
(collectively, for purposes of this definition, a "transfer"), in one
transaction or a series of related transactions, of any assets (including Equity
Interests) of the Issuer or any of its Restricted Subsidiaries other than in the
ordinary course of business. For purposes of this definition, the term "Asset
Sale" shall not include:
(1) transfers of cash or Cash Equivalents;
(2) transfers of assets (including Equity Interests) that are
governed by, and made in accordance with, Section 5.01;
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(3) Permitted Investments and Restricted Payments permitted
under Section 4.08;
(4) the creation or realization of any Permitted Lien;
(5) transactions in the ordinary course of business,
including, without limitation, sales (directly or indirectly),
dedications and other donations to governmental authorities, leases and
sales and leasebacks of (A) homes, improved land and unimproved land
and (B) real estate (including related amenities and improvements);
(6) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage lending
business; and
(7) any transfer or series of related transfers that, but for
this clause, would be Asset Sales, if after giving effect to such
transfers, the aggregate Fair Market Value of the assets transferred in
such transaction or any such series of related transactions does not
exceed $1.0 million.
"Attributable Indebtedness", when used with respect to any
Sale and Leaseback Transaction, means, as at the time of determination, the
present value (discounted at a rate equivalent to the Issuer's then-current
weighted average cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total obligations of
the lessee for rental payments during the remaining term of any Capitalized
Lease included in any such Sale and Leaseback Transaction.
"Bankruptcy Law" means Title 11 of the United States Code, as
amended, or any similar federal or state law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the
board of directors or comparable governing body of such Person.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Issuer and to be in full force and effect, and delivered to the
Trustee.
"Borrowing Base" means, at any time of determination, the sum
of the following without duplication:
(1) 100% of all cash and Cash Equivalents held by the Issuer
or any Restricted Subsidiary;
(2) 75% of the book value of Developed Land for which no
construction has occurred;
11
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(3) 95% of the cost of the land and construction costs
including capitalized interest (as reasonably allocated by the Issuer)
for all Units for which there is an executed purchase contract with a
buyer not Affiliated with the Issuer, less any deposits, down payments
or earnest money;
(4) 80% of the cost of the land and construction costs
including capitalized interest (as reasonably allocated by the Issuer)
for all Units for which construction has begun and for which there is
not an executed purchase agreement with a buyer not Affiliated with the
Issuer; and
(5) 50% of the costs of Entitled Land (other than Developed
Land) on which improvements have not commenced, less mortgage
Indebtedness (other than under a Credit Facility) applicable to such
land.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in New York are authorized or required
by law to close.
"Capitalized Lease" means a lease required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under a Capitalized
Lease, and the amount of such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Equivalents" means:
(1) marketable obligations with a maturity of 360 days or less
issued or directly and fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof;
(2) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$500 million and is assigned at least a "B" rating by Thomson Financial
BankWatch;
(3) commercial paper maturing no more than 180 days from the
date of creation thereof issued by a corporation that is not the Issuer
or an Affiliate of the Issuer, and is organized under the laws of any
state of the United States of America or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's;
12
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(4) repurchase obligations with a term of not more than ten
days for underlying securities of the types described in clause (1)
above entered into with any commercial bank meeting the specifications
of clause (2) above; and
(5) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types
described in clauses (1) through (4) above.
"Change of Control" means the occurrence of any of the
following events:
(1) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes
of this clause that person or group shall be deemed to have "beneficial
ownership" of all securities that any such person or group has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of Voting Stock
representing more than 50% of the voting power of the total outstanding
Voting Stock of the Issuer;
(2) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Issuer (together with any new directors whose election to such
Board of Directors or whose nomination for election by the stockholders
of the Issuer was approved by a vote of the majority of the directors
of the Issuer then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Issuer;
(3) (a) all or substantially all of the assets of the Issuer
and the Restricted Subsidiaries are sold or otherwise transferred to
any Person other than a Wholly-Owned Restricted Subsidiary or one or
more Permitted Holders or (b) the Issuer consolidates or merges with or
into another Person other than a Permitted Holder or any Person other
than a Permitted Holder consolidates or merges with or into the Issuer,
in either case under this clause (3), in one transaction or a series of
related transactions in which immediately after the consummation
thereof Persons owning Voting Stock representing in the aggregate 100%
of the total voting power of the Voting Stock of the Issuer immediately
prior to such consummation do not own Voting Stock representing a
majority of the total voting power of the Voting Stock of the Issuer or
the surviving or transferee Person; or
(4) the Issuer shall adopt a plan of liquidation or
dissolution or any such plan shall be approved by the stockholders of
the Issuer.
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"Consolidated Amortization Expense" for any period means the
amortization expense of the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Cash Flow Available for Fixed Charges" for any
period means, without duplication, the sum of the amounts for such period of
(1) Consolidated Net Income, plus
(2) in each case only to the extent (and in the same
proportion) deducted in determining Consolidated Net Income and with
respect to the portion of Consolidated Net Income attributable to any
Restricted Subsidiary only if a corresponding amount would be permitted
at the date of determination to be distributed to the Issuer by such
Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or
its stockholders,
(a) Consolidated Income Tax Expense,
(b) Consolidated Amortization Expense (but only to
the extent not included in Consolidated Interest Expense),
(c) Consolidated Depreciation Expense,
(d) Consolidated Interest Expense and interest and
other charges amortized to cost of home sales and cost of land
sales, and
(e) all other non-cash items reducing the
Consolidated Net Income (excluding any non-cash charge that
results in an accrual of a reserve for cash charges in any
future period) for such period,
in each case determined on a consolidated basis in accordance with
GAAP, minus
(3) the aggregate amount of all non-cash items, determined on
a consolidated basis, to the extent such items increased Consolidated
Net Income for such period.
"Consolidated Depreciation Expense" for any period means the
depreciation expense of the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
14
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"Consolidated Fixed Charge Coverage Ratio" means the ratio of
Consolidated Cash Flow Available for Fixed Charges during the most recent four
consecutive full fiscal quarters for which financial statements are available
(the "Four-Quarter Period") ending on or prior to the date of the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Interest Incurred for the
Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow
Available for Fixed Charges and Consolidated Interest Incurred shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(1) the incurrence of any Indebtedness or the issuance of any
Preferred Stock of the Issuer or any Restricted Subsidiary (and the
application of the proceeds thereof) and any repayment of other
Indebtedness or redemption of other Preferred Stock (and the
application of the proceeds therefrom) (other than the incurrence or
repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to any revolving credit arrangement)
occurring during the Four-Quarter Period or at any time subsequent to
the last day of the Four-Quarter Period and on or prior to the
Transaction Date, as if such incurrence, repayment, issuance or
redemption, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four-Quarter Period; and
(2) any Asset Sale or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Issuer or any Restricted Subsidiary
(including any Person who becomes a Restricted Subsidiary as a result
of such Asset Acquisition) incurring Acquired Indebtedness and also
including any Consolidated Cash Flow Available for Fixed Charges
(including any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Exchange Act) associated
with any such Asset Acquisition) occurring during the Four-Quarter
Period or at any time subsequent to the last day of the Four-Quarter
Period and on or prior to the Transaction Date, as if such Asset Sale
or Asset Acquisition or other disposition (including the incurrence of,
or assumption or liability for, any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four-Quarter Period.
If the Issuer or any Restricted Subsidiary directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if the
Issuer or such Restricted Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.
For purposes of calculating the Consolidated Fixed Charge
Coverage Ratio prior to the expiration of the first Four-Quarter Period
subsequent to the Issue Date, such cal-
15
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culation shall be on the same pro forma basis as the pro forma financial
statements are presented in the Offering Memorandum.
In calculating Consolidated Interest Incurred for purposes of
determining the denominator (but not the numerator) of the Consolidated Fixed
Charge Coverage Ratio:
(1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to
be so determined thereafter shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest on this Indebtedness in
effect on the Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the
Four-Quarter Period; and
(3) notwithstanding clause (1) or (2) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements with a term of at least one year
after the Transaction Date relating to Hedging Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to
the operation of these agreements.
"Consolidated Income Tax Expense" for any period means the
provision for taxes of the Issuer and the Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP.
"Consolidated Indebtedness" means, as of any date, the total
Indebtedness of the Issuer and the Restricted Subsidiaries as of such date,
determined on a consolidated basis.
"Consolidated Interest Expense" for any period means the sum,
without duplication, of the total interest expense (other than interest and
other charges amortized to cost of home sales and cost of land sales) of the
Issuer and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP and including, without duplication,
(1) imputed interest on Capitalized Lease Obligations and
Attributable Indebtedness,
(2) commissions, discounts and other fees and charges owed
with respect to letters of credit securing financial obligations,
bankers' acceptance financing and receivables financings,
16
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(3) the net costs associated with Hedging Obligations,
(4) amortization of debt issuance costs, debt discount or
premium and other financing fees and expenses,
(5) the interest portion of any deferred payment obligations,
(6) all other non-cash interest expense,
(7) the product of (a) all dividend payments on any series of
Disqualified Equity Interests of the Issuer or any Preferred Stock of
any Restricted Subsidiary (other than any such Disqualified Equity
Interests or any Preferred Stock held by the Issuer or a Wholly-Owned
Restricted Subsidiary), multiplied by (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Issuer and
the Restricted Subsidiaries, expressed as a decimal,
(8) all interest payable with respect to discontinued
operations, and
(9) all interest on any Indebtedness of any other Person
guaranteed by the Issuer or any Restricted Subsidiary.
"Consolidated Interest Incurred" for any period means the sum,
without duplication, of (1) Consolidated Interest Expense and (2) interest
capitalized for such period (including interest capitalized with respect to
discontinued operations but not including interest or other charges amortized to
cost of home sales and cost of land sales).
"Consolidated Net Income" for any period means the net income
(or loss) of the Issuer and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from such net income (to the extent otherwise included
therein), without duplication:
(1) the net income (or loss) of any Person (other than a
Restricted Subsidiary) in which any Person other than the Issuer and
the Restricted Subsidiaries has an ownership interest, except to the
extent that cash in an amount equal to any such income has actually
been received by the Issuer or any of its Restricted Subsidiaries
during such period;
(2) except to the extent includible in the consolidated net
income of the Issuer pursuant to the foregoing clause (1), the net
income (or loss) of any Person that accrued prior to the date that (a)
such Person becomes a Restricted Subsidiary or is
17
-10-
merged into or consolidated with the Issuer or any Restricted
Subsidiary or (b) the assets of such Person are acquired by the Issuer
or any Restricted Subsidiary;
(3) the net income of any Restricted Subsidiary during such
period to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income is
not permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary during such
period;
(4) for the purposes of calculating the Restricted Payments
Basket only, in the case of a successor to the Issuer by consolidation,
merger or transfer of its assets, any income (or loss) of the successor
prior to such merger, consolidation or transfer of assets;
(5) other than for purposes of calculating the Restricted
Payments Basket, any gain (or loss), together with any related
provisions for taxes on any such gain (or the tax effect of any such
loss), realized during such period by the Issuer or any Restricted
Subsidiary upon (a) the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Issuer or any Restricted
Subsidiary or (b) any Asset Sale by the Issuer or any Restricted
Subsidiary; and
(6) other than for purposes of calculating the Restricted
Payments Basket, any extraordinary gain (or extraordinary loss),
together with any related provision for taxes on any such extraordinary
gain (or the tax effect of any such extraordinary loss), realized by
the Issuer or any Restricted Subsidiary during such period.
In addition, any return of capital with respect to an
Investment that increased the Restricted Payments Basket pursuant to clause
(3)(d) of the first paragraph of Section 4.08 or decreased the amount of
Investments outstanding pursuant to clause (14) of the definition of "Permitted
Investments" shall be excluded from Consolidated Net Income for purposes of
calculating the Restricted Payments Basket.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the consolidated stockholders' equity of such Person, determined on
a consolidated basis in accordance with GAAP, less (without duplication) (1) any
amounts thereof attributable to Disqualified Equity Interests of such Person or
its Subsidiaries or any amount attributable to Unrestricted Subsidiaries and (2)
all write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business) subsequent to the Issue Date in
the book value of any asset owned by such Person or a Subsidiary of such Person.
18
-11-
"Consolidated Tangible Assets" means, as of any date, the
total amount of assets of the Issuer and the Restricted Subsidiaries on a
consolidated basis at the end of the fiscal quarter immediately preceding such
date, as determined in accordance with GAAP, less (1) Intangible Assets and (2)
any assets securing Non-Recourse Indebtedness.
"Consolidated Tangible Net Worth" means, with respect to any
Person as of any date, the Consolidated Net Worth of such Person as of such date
less (without duplication) all Intangible Assets of such Person as of such date.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution is located at Wells Fargo
Bank, National Association, Corporate Trust Department, 707 Wilshire Boulevard,
17th Floor, Los Angeles, California 90017.
"Credit Facilities" means (i) the Wells Fargo Credit Agreement
and (ii) the Master Loan Agreement dated as of January 31, 1993, as amended,
between Legacy/Monterey Homes L.P., as borrower, and Guaranty Federal Bank,
F.S.B, as lender, in each case (i) and (ii), including any notes, guarantees,
collateral and security documents, instruments and agreements executed in
connection therewith (including Hedging Obligations related to the Indebtedness
incurred thereunder), and in each case as amended or refinanced from time to
time, including any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring (including increasing the amount of borrowings or
other Indebtedness outstanding or available to be borrowed thereunder) all or
any portion of the Indebtedness under such agreements, and any successor or
replacement agreement or agreements with the same or any other agents, creditor,
lender or group of creditors or lenders.
"Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
"Default" means (1) any Event of Default or (2) any event, act
or condition that, after notice or the passage of time or both, would be an
Event of Default.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Issuer, which Person must be a clearing agency
registered under the Exchange Act.
"Designation" has the meaning given to this term in Section
4.15.
"Designation Amount" has the meaning given to this term in
Section 4.15.
"Developed Land" means all Entitled Land of the Issuer and its
Restricted Subsidiaries which is undergoing active development or is ready for
vertical construction.
19
-12-
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interests" of any Person means any Equity
Interests of such Person that, by their terms, or by the terms of any related
agreement or of any security into which they are convertible, puttable or
exchangeable, are, or upon the happening of any event or the passage of time
would be, required to be redeemed by such Person, whether or not at the option
of the holder thereof, or mature or are mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, in whole or in part, on or prior to the
date which is 91 days after the final maturity date of the Notes; provided,
however, that any class of Equity Interests of such Person that, by its terms,
authorizes such Person to satisfy in full its obligations with respect to the
payment of dividends or upon maturity, redemption (pursuant to a sinking fund or
otherwise) or repurchase thereof or otherwise by the delivery of Equity
Interests that are not Disqualified Equity Interests, and that are not
convertible, puttable or exchangeable for Disqualified Equity Interests or
Indebtedness, will not be deemed to be Disqualified Equity Interests so long as
such Person satisfies its obligations with respect thereto solely by the
delivery of Equity Interests that are not Disqualified Equity Interests;
provided, further, however, that any Equity Interests that would not constitute
Disqualified Equity Interests but for provisions thereof giving holders thereof
(or the holders of any security into or for which such Equity Interests are
convertible, exchangeable or exercisable) the right to require the Issuer to
redeem such Equity Interests upon the occurrence of a change in control
occurring prior to the final maturity date of the Notes shall not constitute
Disqualified Equity Interests if the change in control provisions applicable to
such Equity Interests are no more favorable to such holders than the provisions
of Section 4.20 and such Equity Interests specifically provide that the Issuer
will not redeem any such Equity Interests pursuant to such provisions prior to
the Issuer's purchase of the Notes as required pursuant to the provisions of
Section 4.20.
"Entitled Land" means all land of the Issuer and its
Restricted Subsidiaries (a) on which Units may be constructed or which may be
utilized for commercial, retail or industrial uses, in each case, under
applicable laws and regulations and (b) the intended use by the Issuer for which
is permissible under the applicable regional plan, development agreement or
applicable zoning ordinance.
"Equity Interests" of any Person means (1) any and all shares
or other equity interests (including common stock, preferred stock, limited
liability company interests and partnership interests) in such Person and (2)
all rights to purchase, warrants or options (whether or not currently
exercisable), participations or other equivalents of or interests in (however
designated) such shares or other interests in such Person.
20
-13-
"Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended.
"Exchange Notes" has the meaning provided in the Registration
Rights Agreement.
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such assets) that
would be negotiated in an arm's-length transaction for cash between a willing
seller and a willing and able buyer, neither of which is under any compulsion to
complete the transaction, as such price is determined in good faith by the Board
of Directors of the Issuer or a duly authorized committee thereof, as evidenced
by a resolution of such Board or committee.
"Financing Documents" means this Indenture, the Registration
Rights Agreement, the Notes and the Guarantees.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect on the Issue Date.
"guarantee" means a direct or indirect guarantee by any Person
of any Indebtedness of any other Person and includes any obligation, direct or
indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or
advance or supply funds for the purchase or payment of) Indebtedness of such
other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise); or (2) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part). "guarantee," when used as a verb, and "guaranteed" have correlative
meanings.
"Guarantors" means each Restricted Subsidiary of the Issuer on
the Issue Date, and each other Person that is required to become a Guarantor by
the terms of this Indenture after the Issue Date, in each case, until such
Person is released from its Note Guarantee.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to (1) any interest rate swap agreement, interest rate
collar agreement or other similar agreement or arrangement designed to protect
such Person against fluctuations in interest rates, (2) agreements or
arrangements designed to protect such Person against fluctuations in
21
-14-
foreign currency exchange rates in the conduct of its operations, or (3) any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices, in each case entered into in the ordinary
course of business for bona fide hedging purposes and not for the purpose of
speculation.
"Holder" means any registered holder, from time to time, of
the Notes.
"incur" means, with respect to any Indebtedness or Obligation,
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to such Indebtedness
or Obligation; provided that (1) the Indebtedness of a Person existing at the
time such Person became a Restricted Subsidiary or at the time such Person
merged with or into the Issuer or a Restricted Subsidiary shall be deemed to
have been incurred at such time and (2) neither the accrual of interest nor the
accretion of original issue discount shall be deemed to be an incurrence of
Indebtedness.
"Indebtedness" of any Person at any date means, without
duplication:
(1) all liabilities, contingent or otherwise, of such Person
for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof);
(2) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of
credit or other similar instruments (or reimbursement obligations with
respect thereto);
(4) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, except trade payables
and accrued expenses incurred by such Person in the ordinary course of
business in connection with obtaining goods, materials or services;
(5) the maximum fixed redemption or repurchase price of all
Disqualified Equity Interests of such Person;
(6) all Capitalized Lease Obligations of such Person;
(7) all Indebtedness of others secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such
Person;
(8) all Indebtedness of others guaranteed by such Person to
the extent of such guarantee; provided that Indebtedness of the Issuer
or its Subsidiaries that is
22
-15-
guaranteed by the Issuer or the Issuer's Subsidiaries shall be counted
only once in the calculation of the amount of Indebtedness of the
Issuer and its Subsidiaries on a consolidated basis;
(9) all Attributable Indebtedness;
(10) to the extent not otherwise included in this definition,
Hedging Obligations of such Person;
(11) all obligations of such Person under conditional sale or
other title retention agreements relating to assets purchased by such
Person; and
(12) the liquidation value of Preferred Stock of a Subsidiary
of such Person issued and outstanding and held by any Person other than
such Person (or one of its Wholly-Owned Restricted Subsidiaries).
Notwithstanding the foregoing, (a) earn-outs or similar profit
sharing arrangements provided for in acquisition agreements which are determined
on the basis of future operating earnings or other similar performance criteria
(which are not determinable at the time of acquisition) of the acquired assets
or entities and (b) accrued expenses, trade payables, customer deposits or
deferred income taxes arising in the ordinary course of business shall not be
considered Indebtedness. Any Indebtedness which is incurred at a discount to the
principal amount at maturity thereof shall be deemed to have been incurred in
the amount of the full principal amount at maturity thereof. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above, the maximum liability
of such Person for any such contingent obligations at such date and, in the case
of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a
Lien securing the Indebtedness of others on the date that the Lien attaches and
(b) the amount of the Indebtedness secured. For purposes of clause (5), the
"maximum fixed redemption or repurchase price" of any Disqualified Equity
Interests that do not have a fixed redemption or repurchase price shall be
calculated in accordance with the terms of such Disqualified Equity Interests as
if such Disqualified Equity Interests were redeemed on any date on which an
amount of Indebtedness outstanding shall be required to be determined pursuant
to this Indenture.
Notwithstanding the above, this Indenture does not restrict
any Unrestricted Subsidiary from incurring Indebtedness nor will Indebtedness of
any Unrestricted Subsidiaries be included in the Consolidated Fixed Charge
Coverage Ratio or the ratio of Consolidated Indebtedness to Consolidated
Tangible Net Worth hereunder, as long as the Unrestricted Subsidiary incurring
such Indebtedness remains an Unrestricted Subsidiary.
23
-16-
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Independent Director" means a director of the Issuer who
(1) is independent with respect to the transaction at issue;
(2) does not have any material financial interest in the
Issuer or any of its Affiliates (other than as a result of holding
securities of the Issuer); and
(3) has not and whose Affiliates or affiliated firm has not,
at any time during the twelve months prior to the taking of any action
hereunder, directly or indirectly, received, or entered into any
understanding or agreement to receive, compensation, payment or other
benefit, of any type or form, from the Issuer or any of its Affiliates
in excess of $60,000, other than customary directors' fees for serving
on the Board of Directors of the Issuer or any Affiliate and
reimbursement of out-of-pocket expenses for attendance at the Issuer's
or Affiliate's board and board committee meetings.
"Independent Financial Advisor" means an accounting, appraisal
or investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Issuer's Board of Directors, qualified to perform the
task for which it has been engaged and disinterested and independent with
respect to the Issuer and its Affiliates; provided, however, that the prior
rendering of service to the Issuer or an Affiliate of the Issuer shall not, by
itself, disqualify the advisor.
"Initial Purchasers" means UBS Warburg LLC and Deutsche Banc
Alex. Brown Inc.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) promulgated under the Securities Act.
"Intangible Assets" means, with respect to any Person, all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, write-ups of assets
over their carrying value (other than write-ups which occurred prior to the
Issue Date and other than, in connection with the acquisition of an asset, the
write-up of the value of such asset to its Fair Market Value in accordance with
GAAP on the date of acquisition) and all other items which would be treated as
intangibles on the consolidated balance sheet of such Person prepared in
accordance with GAAP.
24
-17-
"interest" means, with respect to the Notes, interest and
Liquidated Damages, if any, on the Notes.
"Interest Payment Dates" means each June 1 and December 1,
commencing December 1, 2001.
"Investments" of any Person means:
(1) all direct or indirect investments by such Person in any
other Person in the form of loans, advances or capital contributions or
other credit extensions constituting Indebtedness of such other Person,
and any guarantee of Indebtedness of any other Person;
(2) all purchases (or other acquisitions for consideration) by
such Person of Indebtedness, Equity Interests or other securities of
any other Person;
(3) all other items that would be classified as investments on
a balance sheet of such Person prepared in accordance with GAAP; and
(4) the Designation of any Subsidiary as an Unrestricted
Subsidiary.
Except as otherwise expressly specified in this definition, the amount of any
Investment (other than an Investment made in cash) shall be the Fair Market
Value thereof on the date such Investment is made. The amount of Investment
pursuant to clause (4) shall be the Designation Amount determined in accordance
with Section 4.15. If the Issuer or any Subsidiary sells or otherwise disposes
of any Equity Interests of any direct or indirect Subsidiary such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary, the Issuer shall be deemed to have made an Investment on the date of
any such sale or other disposition equal to the Fair Market Value of the Equity
Interests of and all other Investments in such Subsidiary not sold or disposed
of, which amount shall be determined by the Board of Directors of the Issuer.
Notwithstanding the foregoing, redemptions of Equity Interests of the Issuer
shall be deemed not to be Investments.
"Issue Date" means May 30, 2001, the date on which the Notes
are originally issued.
"Issuer" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article Five
and thereafter means the successor.
"Issuer Request" means any written request signed in the name
of the Issuer by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, any Vice
25
-18-
President, the Chief Financial Officer or the Treasurer of the Issuer and
attested to by the Secretary or any Assistant Secretary of the Issuer.
"Lien" means, with respect to any asset, any mortgage, deed of
trust, lien (statutory or other), pledge, lease, easement, restriction,
covenant, charge, security interest or other encumbrance of any kind or nature
in respect of such asset, whether or not filed, recorded or otherwise perfected
under applicable law, including any conditional sale or other title retention
agreement, and any lease in the nature thereof, any option or other agreement to
sell, and any filing of, or agreement to give, any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than
cautionary filings in respect of operating leases).
"Liquidated Damages" has the meaning set forth in the
Registration Rights Agreement.
"Moody's" means Moody's Investors Service, Inc., and its
successors.
"Net Available Proceeds" means, with respect to any Asset
Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of
(1) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel, accountants and
investment banks) of such Asset Sale;
(2) provisions for taxes payable as a result of such Asset
Sale (after taking into account any available tax credits or deductions
and any tax sharing arrangements);
(3) amounts required to be paid to any Person (other than the
Issuer or any Restricted Subsidiary) owning a beneficial interest in
the assets subject to the Asset Sale or having a Lien thereon;
(4) payments of unassumed liabilities (not constituting
Indebtedness) relating to the assets sold at the time of, or within 30
days after the date of, such Asset Sale; and
(5) appropriate amounts to be provided by the Issuer or any
Restricted Subsidiary, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset
Sale and retained by the Issuer or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including pensions and other
postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an
Officers' Certificate delivered to the Trustee; provided, however, that
26
-19-
any amounts remaining after adjustments, revaluations or liquidations
of such reserves shall constitute Net Available Proceeds.
"Non-Recourse Indebtedness" with respect to any Person means
Indebtedness of such Person for which (1) the sole legal recourse for collection
of principal and interest on such Indebtedness is against the specific property
identified in the instruments evidencing or securing such Indebtedness and such
property was acquired with the proceeds of such Indebtedness or such
Indebtedness was incurred within 90 days after the acquisition of such property
and (2) no other assets of such Person may be realized upon in collection of
principal or interest on such Indebtedness.
"Non-U.S. Person" means a Person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the 9 3/4% Senior Notes due 2011 issued by the
Issuer, including, without limitation, the Private Exchange Notes, if any, and
the Exchange Notes, treated as a single class of securities, as amended from
time to time in accordance with the terms hereof, that are issued pursuant to
this Indenture.
"Obligation" means any principal, interest, penalties, fees,
indemnification, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer
to Purchase."
"Offer Expiration Date" has the meaning set forth in the
definition of "Offer to Purchase."
"Offer to Purchase" means a written offer (the "Offer") sent
by or on behalf of the Issuer by first-class mail, postage prepaid, to each
Holder at its address appearing in the register for the Notes on the date of the
Offer offering to purchase up to the principal amount of Notes specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Offer Expiration Date") of the Offer to
Purchase, which shall be not less than 30 Business Days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
purchase of Notes to occur no later than three Business Days after the Offer
Expiration Date. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall also contain information
concerning the business of the Issuer and its Subsidiaries which the Issuer in
good faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase. Such information shall include, at a minimum,
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Re-
27
-20-
sults of Operations" contained in the document required to be delivered to
Holders pursuant to Section 4.02 (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Issuer's business subsequent to the date of the
latest of such financial statements referred to in clause (i) (including a
description of the events requiring the Issuer to make the Offer to Purchase),
(iii) if applicable, appropriate pro forma financial information concerning the
Offer to Purchase and the events requiring the Issuer to make the Offer to
Purchase and (iv) any other information required by applicable law to be
included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Offer to
Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer
to Purchase is being made;
(2) the Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes
offered to be purchased by the Issuer pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the
Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Issuer for each
$1,000 aggregate principal amount of Notes accepted for payment (the
"Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase will continue
to accrue;
(8) that on the Purchase Date the Purchase Price will become
due and payable upon each Note being accepted for payment pursuant to
the Offer to Purchase and that interest thereon shall cease to accrue
on and after the Purchase Date;
(9) that each Holder electing to tender all or any portion of
a Note pursuant to the Offer to Purchase will be required to surrender
such Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, at the place or places specified
in the Offer prior to the close of business on the Offer Expi-
28
-21-
ration Date (such Note being, if the Issuer so requires, duly endorsed
by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer duly executed by, the Holder thereof or its
attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any
portion of Notes tendered if the Issuer receives, not later than the
close of business on the fifth Business Day preceding the Offer
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note
the Holder tendered, the certificate number of the Note the holder
tendered and a statement that such Holder is withdrawing all or a
portion of its tender;
(11) that (a) if Notes in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Issuer shall purchase
all such Notes and (b) if Notes in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Issuer shall purchase Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only
Notes in denominations of $1,000 principal amount or integral multiples
thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased
only in part, the Issuer shall execute and deliver to the Holder of
such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion
of the Note so tendered.
An Offer to Purchase shall be governed by and effected in
accordance with the provisions above pertaining to any Offer.
On or before the Purchase Date, the Issuer shall (i) accept
for payment Notes or portions thereof tendered and not withdrawn pursuant to the
Offer, (ii) deposit with the Trustee U.S. Dollars sufficient to pay the Purchase
Price, plus accrued interest, if any, of all Notes to be purchased and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
stating the Notes or portions thereof being purchased by the Issuer. The Trustee
shall promptly mail to the Holders of Notes so accepted payment in an amount
equal to the Purchase Price, plus accrued interest, if any, thereon.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated May
22, 2001 pursuant to which the Notes were offered.
29
-22-
"Officer" means any of the following of the Issuer: the
Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Financial Officer, the President, any Vice President, the Treasurer or the
Secretary.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion reasonably
satisfactory in form and substance to the Trustee from legal counsel, which
counsel is reasonably acceptable to the Trustee, stating the matters required by
Section 12.05 and delivered to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Issuer
or any Guarantor that ranks pari passu as to payment with the Notes or the Note
Guarantees, as applicable.
"Permitted Business" means the businesses engaged in by the
Issuer and its Subsidiaries on the Issue Date as described in the Offering
Memorandum and businesses that are reasonably related thereto or reasonable
extensions thereof (including, without limitation, land development, home alarm,
pest control, title and other ancillary businesses).
"Permitted Holders" means Steven J. Hilton and John R. Landon,
their respective wives and children, any corporation, limited liability company
or partnership in which either of them has voting control and is the direct and
beneficial owner of a majority of the Equity Interests and any trust for the
benefit of either of them or their wives or children.
"Permitted Investment" means:
(1) Investments by the Issuer or any Restricted Subsidiary in
(a) any Restricted Subsidiary or (b) any Person that is or will become
immediately after such Investment a Restricted Subsidiary or that will
merge or consolidate into the Issuer or a Restricted Subsidiary;
(2) Investments in the Issuer by any Restricted Subsidiary;
(3) loans and advances to directors, employees and officers of
the Issuer and the Restricted Subsidiaries for bona fide business
purposes and to purchase Equity Interests of the Issuer not in excess
of $2.0 million at any one time outstanding;
(4) Hedging Obligations incurred pursuant to clause (4) of the
second paragraph of Section 4.06;
(5) Cash Equivalents;
(6) receivables owing to the Issuer or any Restricted
Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accor-
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dance with customary trade terms; provided, however, that such trade
terms may include such concessionary trade terms as the Issuer or any
such Restricted Subsidiary deems reasonable under the circumstances;
(7) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(8) Investments made by the Issuer or any Restricted
Subsidiary as a result of consideration received in connection with an
Asset Sale made in compliance with Section 4.09;
(9) lease, utility and other similar deposits in the ordinary
course of business;
(10) Investments made by the Issuer or a Restricted Subsidiary
for consideration consisting only of Qualified Equity Interests of the
Issuer;
(11) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the
Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(12) Investments in existence on the Issue Date;
(13) Investments made by the Issuer or any Restricted
Subsidiary in joint ventures in a Permitted Business with unaffiliated
third parties in an aggregate amount at any one time outstanding not to
exceed 10% of the Issuer's Consolidated Tangible Net Worth at such time
(with each Investment being valued as of the date made and without
regard to subsequent changes in value); and
(14) other Investments in an aggregate amount not to exceed
$5.0 million at any one time outstanding (with each Investment being
valued as of the date made and without regard to subsequent changes in
value).
The amount of Investments outstanding at any time pursuant to
clause (14) above shall be deemed to be reduced:
(a) upon the disposition or repayment of or return on any
Investment made pursuant to clause (14) above, by an amount equal to
the return of capital with respect to such Investment to the Issuer or
any Restricted Subsidiary (to the extent not included in the
computation of Consolidated Net Income), less the cost of the
disposition of such Investment and net of taxes; and
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(b) upon a Redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair
Market Value of the Issuer's proportionate interest in such Subsidiary
immediately following such Redesignation, and (y) the aggregate amount
of Investments in such Subsidiary that increased (and did not
previously decrease) the amount of Investments outstanding pursuant to
clause (14) above.
"Permitted Liens" means the following types of Liens:
(1) (a) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business and
(b) Liens for taxes, assessments or governmental charges or claims, in
either case, for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made in respect thereof;
(2) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(3) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(4) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other assets
relating to such letters of credit and products and proceeds thereof;
(5) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Issuer or any Restricted Subsidiary, including
rights of offset and setoff;
(6) bankers' Liens, rights of setoff and other similar Liens
existing solely with respect to cash and Cash Equivalents on deposit in
one or more accounts maintained by the Issuer or any Restricted
Subsidiary, in each case granted in the ordinary course of business in
favor of the bank or banks with which such accounts are maintained,
securing amounts owing to such bank with respect to cash management and
operating account arrangements, including those involving pooled
accounts and net-
32
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ting arrangements; provided that in no case shall any such Liens secure
(either directly or indirectly) the repayment of any Indebtedness;
(7) leases or subleases (or any Liens related thereto) granted
to others that do not materially interfere with the ordinary course of
business of the Issuer or any Restricted Subsidiary;
(8) Liens arising from filing Uniform Commercial Code
financing statements regarding leases;
(9) Liens securing all of the Notes and Liens securing any
Note Guarantee;
(10) Liens existing on the Issue Date securing Indebtedness
outstanding on the Issue Date and Liens securing Refinancing
Indebtedness with respect to Indebtedness incurred pursuant to clause
(2) of the second paragraph of Section 4.06;
(11) Liens in favor of the Issuer or a Guarantor;
(12) Liens securing Indebtedness under the Credit Facilities
incurred pursuant to clause (1) of the second paragraph of Section
4.06;
(13) without limiting any other clause in this definition of
"Permitted Liens," Liens securing Indebtedness of the Issuer or any
Restricted Subsidiary permitted to be incurred under this Indenture;
provided that the aggregate amount of all consolidated Indebtedness of
the Issuer and the Restricted Subsidiaries secured by Liens (including
all Indebtedness permitted to be secured by the other provisions of
this definition, but excluding Non-Recourse Indebtedness) shall not
exceed 40% of Consolidated Tangible Assets at any one time outstanding
(after giving effect to the incurrence of such Indebtedness and the use
of the proceeds thereof);
(14) Liens securing Non-Recourse Indebtedness of the Issuer or
any Restricted Subsidiary permitted to be incurred under this
Indenture; provided that such Liens apply only to the property financed
out of the net proceeds of such Non-Recourse Indebtedness within 90
days after the incurrence of such Non-Recourse Indebtedness;
(15) Liens securing Purchase Money Indebtedness permitted to
be incurred under this Indenture; provided that such Liens apply only
to the property acquired, constructed or improved with the proceeds of
such Purchase Money Indebtedness within 90 days after the incurrence of
such Purchase Money Indebtedness;
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(16) Liens securing Acquired Indebtedness permitted to be
incurred under this Indenture; provided that the Liens do not extend to
assets not subject to such Lien at the time of acquisition (other than
improvements thereon) and are no more favorable to the lienholders than
those securing such Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by the Issuer or a Restricted Subsidiary;
(17) Liens on assets of a Person existing at the time such
Person is acquired or merged with or into or consolidated with the
Issuer or any such Restricted Subsidiary (and not created in
anticipation or contemplation thereof);
(18) Liens to secure Attributable Indebtedness permitted to be
incurred under this Indenture; provided that any such Lien shall not
extend to or cover any assets of the Issuer or any Restricted
Subsidiary other than the assets which are the subject of the Sale and
Leaseback Transaction in which the Attributable Indebtedness is
incurred;
(19) attachment or judgment Liens not giving rise to a Default
and which are being contested in good faith by appropriate proceedings;
(20) easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially interfering with the ordinary
course of business of the Issuer and its Subsidiaries;
(21) zoning restrictions, licenses, restrictions on the use of
real property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary course
of business of the Issuer and its Subsidiaries or the value of such
real property for the purpose of such business; and
(22) any option, contract or other agreement to sell an asset;
provided such sale is not otherwise prohibited under this Indenture.
"Permitted Unrestricted Subsidiary Debt" means Indebtedness of
an Unrestricted Subsidiary:
(1) as to which neither the Issuer nor any Restricted
Subsidiary (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender;
(2) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other than the Notes) of the
Issuer or any Restricted Subsidiary to declare a default on the
34
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other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the Equity Interests or assets of
the Issuer or any Restricted Subsidiary.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof or other entity of
any kind.
"Physical Notes" means certificated Notes in registered form
in substantially the form set forth in Exhibit A.
"Plan of Liquidation" with respect to any Person, means a plan
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (1) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (2) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition of all
or substantially all of the remaining assets of such Person to creditors and
holders of Equity Interests of such Person.
"Preferred Stock" means, with respect to any Person, any and
all preferred or preference stock or other equity interests (however designated)
of such Person whether now outstanding or issued after the Issue Date.
"principal" means, with respect to the Notes, the principal
of, and premium, if any, on the Notes.
"Private Exchange" has the meaning set forth in the
Registration Rights Agreement.
"Private Exchange Notes" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Rule 144A Notes and Other Notes that are Restricted Notes in the
form set forth in Exhibit B.
"Purchase Amount" has the meaning set forth in the definition
of "Offer to Purchase."
35
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"Purchase Date" has the meaning set forth in the definition of
"Offer to Purchase."
"Purchase Money Indebtedness" means Indebtedness, including
Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary
incurred for the purpose of financing all or any part of the purchase price of
property, plant or equipment used in the business of the Issuer or any
Restricted Subsidiary or the cost of installation, construction or improvement
thereof; provided, however, that (1) the amount of such Indebtedness shall not
exceed such purchase price or cost, (2) such Indebtedness shall not be secured
by any asset other than the specified asset being financed or, in the case of
real property or fixtures, including additions and improvements, the real
property to which such asset is attached and (3) such Indebtedness shall be
incurred within 90 days after such acquisition of such asset by the Issuer or
such Restricted Subsidiary or such installation, construction or improvement.
"Purchase Price" has the meaning set forth in the definition
of "Offer to Purchase."
"Qualified Equity Interests" means Equity Interests of the
Issuer other than Disqualified Equity Interests; provided that such Equity
Interests shall not be deemed Qualified Equity Interests to the extent sold or
owed to a Subsidiary of the Issuer or financed, directly or indirectly, using
funds (1) borrowed from the Issuer or any Subsidiary of the Issuer until and to
the extent such borrowing is repaid or (2) contributed, extended, guaranteed or
advanced by the Issuer or any Subsidiary of the Issuer (including, without
limitation, in respect of any employee stock ownership or benefit plan).
"Qualified Equity Offering" means the issuance and sale of
Qualified Equity Interests of the Issuer to Persons other than any Permitted
Holder or any other Person who is not, prior to such issuance and sale, an
Affiliate of the Issuer.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Receivables" means an amount owed with respect to completed
sales of housing units, lots and parcels sold to an unaffiliated purchaser.
"redeem" means to redeem, repurchase, purchase, defease,
retire, discharge or otherwise acquire or retire for value; and "redemption"
shall have a correlative meaning.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to the terms of the
Notes.
"refinance" means to refinance, repay, prepay, replace, renew
or refund.
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"Refinancing Indebtedness" means Indebtedness of the Issuer or
a Restricted Subsidiary issued in exchange for, or the proceeds from the
issuance and sale or disbursement of which are used substantially concurrently
to redeem or refinance in whole or in part, or constituting an amendment of, any
Indebtedness of the Issuer or any Restricted Subsidiary (the "Refinanced
Indebtedness") in a principal amount not in excess of the principal amount of
the Refinanced Indebtedness so repaid or amended (plus the amount of any premium
paid and the amount of reasonable expenses incurred by the Issuer or any
Restricted Subsidiary in connection with such repayment or amendment) (or, if
such Refinancing Indebtedness refinances Indebtedness under a revolving credit
facility or other agreement providing a commitment for subsequent borrowings,
with a maximum commitment not to exceed the maximum commitment under such
revolving credit facility or other agreement); provided that:
(1) if the Refinanced Indebtedness was subordinated to or pari
passu with the Notes or the Note Guarantees, as the case may be, then
such Refinancing Indebtedness, by its terms, is expressly pari passu
with (in the case of Refinanced Indebtedness that was pari passu with)
or subordinate in right of payment to (in the case of Refinanced
Indebtedness that was subordinated to) the Notes or the Note
Guarantees, as the case may be, at least to the same extent as the
Refinanced Indebtedness;
(2) the Refinancing Indebtedness is scheduled to mature either
(a) no earlier than the Refinanced Indebtedness being repaid or amended
or (b) after the maturity date of the Notes;
(3) the portion, if any, of the Refinancing Indebtedness that
is scheduled to mature on or prior to the maturity date of the Notes
has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Refinanced Indebtedness
being repaid that is scheduled to mature on or prior to the maturity
date of the Notes; and
(4) the Refinancing Indebtedness is secured only to the
extent, if at all, and by the assets, that the Refinanced Indebtedness
being repaid, extended or amended is secured.
"Registration Rights Agreement" means the registration rights
agreement dated as of the Issue Date among the Issuer, the Guarantors and the
Initial Purchasers.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Responsible Officer" when used with respect to the Trustee,
means an officer or assistant officer assigned to the corporate trust department
of the Trustee (or any successor group of the Trustee) with direct
responsibility for the administration of this Indenture and also means,
37
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with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Note" has the same meaning as "Restricted
Security" set forth in Rule 144(a)(3) promulgated under the Securities Act;
provided, that the Trustee shall be entitled to request and conclusively rely
upon an Opinion of Counsel with respect to whether any Note is a Restricted
Note.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend or any other
distribution on Equity Interests of the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in
their capacities as such) of Equity Interests of the Issuer or any
Restricted Subsidiary, including, without limitation, any payment in
connection with any merger or consolidation involving the Issuer, but
excluding (a) dividends or distributions payable solely in Qualified
Equity Interests and (b) in the case of Restricted Subsidiaries,
dividends or distributions payable to the Issuer or to a Restricted
Subsidiary and pro rata dividends or distributions payable to minority
stockholders of any Restricted Subsidiary;
(2) the redemption of any Equity Interests of the Issuer or
any Restricted Subsidiary, including, without limitation, any payment
in connection with any merger or consolidation involving the Issuer,
but excluding any such Equity Interests held by the Issuer or any
Restricted Subsidiary;
(3) any Investment other than a Permitted Investment; or
(4) any redemption prior to the scheduled maturity or prior to
any scheduled repayment of principal or sinking fund payment, as the
case may be, in respect of Subordinated Indebtedness.
"Restricted Payments Basket" has the meaning given to such
term in clause (3) of the first paragraph of Section 4.08.
"Restricted Subsidiary" means any Subsidiary of the Issuer
other than an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"S&P" means Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, Inc., and its successors.
38
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"Sale and Leaseback Transaction" means, with respect to any
Person, an arrangement with any bank, insurance company or other lender or
investor or to which such lender or investor is a party, providing for the
leasing by such Person of any asset of such Person which has been or is being
sold or transferred by such Person to such lender or investor or to any Person
to whom funds have been or are to be advanced by such lender or investor on the
security of such asset.
"SEC" means the U.S. Securities and Exchange Commission.
"Secretary's Certificate" means a certificate signed by the
Secretary of the Issuer.
"Securities Act" means the U.S. Securities Act of 1933, as
amended.
"Significant Subsidiary" means (1) any Restricted Subsidiary
that would be a "significant subsidiary" as defined in Regulation S-X
promulgated pursuant to the Securities Act as such Regulation is in effect on
the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all
other Restricted Subsidiaries that are not otherwise Significant Subsidiaries
and as to which any event described in clause (7) or (8) of Section 6.01 has
occurred and is continuing, would constitute a Significant Subsidiary under
clause (1) of this definition.
"Subordinated Indebtedness" means Indebtedness of the Issuer
or any Restricted Subsidiary that is subordinated in right of payment to the
Notes or the Note Guarantees, respectively.
"Subsidiary" means, with respect to any Person:
(1) any corporation, limited liability company, association or
other business entity of which more than 50% of the total voting power
of the Equity Interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Board of Directors
thereof are at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or
a combination thereof); and
(2) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of
such Person or (b) the only general partners of which are such Person
or of one or more Subsidiaries of such Person (or any combination
thereof).
Unless otherwise specified, "Subsidiary" refers to a
Subsidiary of the Issuer.
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"Surviving Person" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Unit" means a residence, whether single or part of a
multifamily building, whether completed or under construction, held by the
Issuer or any Restricted Subsidiary for sale or rental in the ordinary course of
business; provided, however, that the number of Units that are rental Units at
the time of determination shall not exceed 25% of the total Units sold or rented
by the Issuer and its Restricted Subsidiaries during the immediately preceding
twelve month period.
"Unrestricted Subsidiary" means (1) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of the Issuer in accordance with Section 4.15 and (2) any
Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct non-callable
obligations of, or obligations guaranteed by, the United States of America for
the payment of which guarantee or obligations the full faith and credit of the
United States is pledged.
"Voting Stock" with respect to any Person, means securities of
any class of Equity Interests of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock or other
relevant equity interest has voting power by reason of any contingency) to vote
in the election of members of the Board of Directors of such Person.
"Weighted Average Life to Maturity" when applied to any
Indebtedness at any date, means the number of years obtained by dividing (1) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (2) the then outstanding principal
amount of such Indebtedness.
"Wells Fargo Credit Agreement" means the Loan Agreement dated
as of December 29, 1999, as amended, by and among Monterey Homes Construction,
Inc., Monterey Homes Arizona, Inc., Meritage Paseo Construction, LLC, Meritage
Homes of Northern California, Inc., Meritage Paseo Crossing, LLC, Meritage Homes
Construction, Inc. and Meritage
40
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Homes of Arizona, Inc., as borrowers, Wells Fargo Bank Arizona, National
Association, as administrative agent and a lender, and California Bank & Trust,
as documentation and syndication agent and a lender.
"Wholly-Owned Restricted Subsidiary" means a Restricted
Subsidiary of which 100% of the Equity Interests (except for directors'
qualifying shares or certain minority interests owned by other Persons solely
due to local law requirements that there be more than one stockholder, but which
interest is not in excess of what is required for such purpose) are owned
directly by the Issuer or through one or more Wholly-Owned Restricted
Subsidiaries.
SECTION 1.02. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
Term Defined in Section
"Affiliate Transaction"................................. 4.10
"Agent Members"......................................... 2.16(a)
"Business Day".......................................... 12.07
"CEDEL"................................................. 2.16(a)
"Change of Control Date"................................ 4.20
"Change of Control Offer"............................... 4.20
"Change of Control Payment Date"........................ 4.20
"Change of Control Purchase Price"...................... 4.20
"Company Bankruptcy Proceeding"......................... 11.02
"Covenant Defeasance"................................... 9.03
"Custodian"............................................. 6.01
"Designation"........................................... 4.15(a)
"Euroclear"............................................. 2.16(a)
"Events of Default"..................................... 6.01
"Excess Proceeds"....................................... 4.09
"Global Notes".......................................... 2.16(a)
"Guarantor Bankruptcy Proceeding"....................... 10.07
"Legal Defeasance"...................................... 9.02
"Legal Holiday"......................................... 12.07
"Note Portion of Excess Proceeds"....................... 4.09
"Other Debt"............................................ 4.09
"Other Notes"........................................... 2.02
"Paying Agent".......................................... 2.04
"Ratio Exception"....................................... 4.06
"Redesignation"......................................... 4.15
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"Registrar"............................................. 2.04
"Regulation S Global Notes"............................. 2.16(a)
"Regulation S Notes".................................... 2.02
"Replacement Assets..................................... 4.09
"Restricted Global Note"................................ 2.16(a)
"Restricted Payment".................................... 4.08
"Revocation"............................................ 4.15(c)
"Rule 144A Notes"....................................... 2.02
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes.
"indenture securityholder" means a Holder or Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Issuer, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and in the plural include
the singular;
42
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(4) words used herein implying any gender shall apply to both genders;
(5) "herein", "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subsection;
(6) unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to time, applied on a basis
consistent with the most recent audited consolidated financial statements of the
Issuer;
(7) "$," "U.S. Dollars" and "United States Dollars" each refer to
United States dollars, or such other money of the United States that at the time
of payment is legal tender for payment of public and private debts; and
(8) whenever in this Indenture there is mentioned, in any context,
principal, interest or any other amount payable under or with respect to any
Note, such mention shall be deemed to include mention of the payment of
Additional Interest to the extent that, in such context, Additional Interest is,
was or would be payable in respect thereof.
ARTICLE ONE
THE NOTES
SECTION 2.01. Amount of Notes.
The Trustee shall authenticate (i) Notes for original issue on
the Issue Date in the aggregate principal amount not to exceed $165,000,000 and
(ii) subject to Section 4.06, Additional Notes in the aggregate principal amount
not to exceed $125,000,000, upon a written order of the Issuer in the form of an
Officers' Certificate of the Issuer. The Officers' Certificate shall specify the
amount of Notes to be authenticated and the date on which the Notes are to be
authenticated. The aggregate principal amount of Notes outstanding at any time
may not exceed $290,000,000, except as provided in Section 2.08.
Upon receipt of a written order of the Issuer in the form of
an Officers' Certificate, the Trustee shall authenticate Notes in substitution
for Notes originally issued to reflect any name change of the Issuer. Any
Additional Notes shall be part of the same issue as the Notes being issued on
the date hereof and will vote on all matters as one class with the Notes being
issued on the date hereof, including, without limitation, waivers, amendments,
redemp-
43
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tions and Offers to Purchase. For the purposes of this Indenture, except for
Section 4.06, references to the Notes include Additional Notes, if any.
Upon receipt of an Issuer Request and an Officers' Certificate
certifying that a registration statement relating to an exchange offer specified
in the Registration Rights Agreement or any registration rights agreement
relating to the Additional Notes is effective or that the conditions precedent
to a private exchange thereunder have been met, the Trustee shall authenticate
an additional series of Notes in an aggregate principal amount not to exceed
$290,000,000 for issuance in exchange for the Notes tendered for exchange
pursuant to such exchange offer registered under the Securities Act or pursuant
to a Private Exchange. Exchange Notes or Private Exchange Notes may have such
distinctive series designations and such changes in the form thereof as are
specified in the Issuer Request referred to in the preceding sentence.
SECTION 2.02. Form and Dating.
The Notes and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form set forth in Exhibit A, which
is incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Issuer is subject. Without limiting the generality of the foregoing, Notes
offered and sold to Qualified Institutional Buyers in reliance on Rule 144A
("Rule 144A Notes") shall bear the legend and include the form of assignment set
forth in Exhibit B, Notes offered and sold in offshore transactions in reliance
on Regulation S ("Regulation S Notes") shall bear the legend and include the
form of assignment set forth in Exhibit C, and Notes offered and sold to
Institutional Accredited Investors in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A or Regulation S
("Other Notes") may be represented by a Restricted Global Note or, if such an
investor may not hold an interest in the Restricted Global Note, a Physical
Note, in each case, bearing the Private Placement Legend. Each Note shall be
dated the date of its authentication.
The terms and provisions contained in the Notes shall
constitute, and are expressly made, a part of this Indenture and, to the extent
applicable, the Issuer, the Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
agree to be bound thereby.
The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
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SECTION 2.03. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one
Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Notes for the Issuer by manual
or facsimile signature.
If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Issuer, and the Issuer shall deliver such Note to the Trustee
for cancellation as provided in Section 2.12, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuer to authenticate the Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate the 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 Issuer and Affiliates of the Issuer.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.
The Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.04. Registrar and Paying Agent.
The Issuer shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
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") and an office or agency where notices and demands to or
upon the Issuer, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Issuer may have one or more additional Paying Agents. The term
"Paying
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Agent" includes any additional Paying Agent. Neither the Issuer nor any
Affiliate thereof may act as Paying Agent.
The Issuer shall enter into an appropriate agency agreement,
which shall incorporate the provisions of the TIA, with any Agent that is not a
party to this Indenture. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Issuer shall notify the Trustee of the
name and address of any such Agent. If the Issuer fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Issuer initially appoints the Trustee as Registrar, Paying
Agent and Agent for service of notices and demands in connection with the Notes
and this Indenture.
SECTION 2.05. Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Issuer or any other obligor on the Notes or the Guarantors),
and the Issuer and the Paying Agent shall notify the Trustee of any default by
the Issuer (or any other obligor on the Notes) in making any such payment. Money
held in trust by the Paying Agent need not be segregated except as required by
law and in no event shall the Paying Agent be liable for any interest on any
money received by it hereunder. The Issuer at any time may require the Paying
Agent to pay all money held by it to the Trustee and account for any funds
disbursed and the Trustee may at any time during the continuance of any Event of
Default specified in Section 6.01 (1) or (2), upon written request to the Paying
Agent, require such Paying Agent to pay forthwith all money so held by it to the
Trustee and to account for any funds disbursed. Upon making such payment, the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.06. Holder 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 the Holders. If the Trustee is not the Registrar, the Issuer shall
furnish to the Trustee at least five Business Days before each Interest Payment
Date, and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of the Holders.
SECTION 2.07. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to
the Registrar with a request from the Holder of such Notes to register a
transfer or to exchange them for an
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equal principal amount of Notes of other authorized denominations, the Registrar
shall register the transfer as requested. Every Note presented or surrendered
for registration of transfer or exchange shall be duly endorsed or be
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar, duly executed by the Holder thereof or his attorneys
duly authorized in writing. To permit registrations of transfers and exchanges,
the Issuer shall issue and execute and the Trustee shall authenticate new Notes
(and the Guarantors shall execute the guarantee thereon) evidencing such
transfer or exchange at the Registrar's request. No service charge shall be made
to the Holder for any registration of transfer or exchange. The Issuer may
require from the Holder payment of a sum sufficient to cover any transfer taxes
or other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to Section
2.11, 3.06, 4.09, 4.20 or 8.05 (in which events the Issuer shall be responsible
for the payment of such taxes). The Registrar shall not be required to exchange
or register a transfer of any Note for a period of 15 days immediately preceding
the mailing of notice of redemption of Notes to be redeemed or of any Note
selected, called or being called for redemption except the unredeemed portion of
any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the Holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Issuer and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this Indenture
and/or applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor
the Registrar shall have any duty to monitor the Issuer's compliance with or
have any responsibility with respect to the Issuer's compliance with any Federal
or state securities laws.
SECTION 2.08. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or the
Trustee, or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Note (and the Guarantors shall execute the guarantee
thereon) if the Holder of such Note furnishes to the Issuer and the Trustee
evidence reasonably acceptable to them of the ownership and the destruction,
loss or theft of such Note and if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are met.
If required by the Trustee or the Issuer, an indemnity bond shall be posted,
sufficient in the judgment of both to protect the
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Issuer, the Guarantors, the Trustee or any Paying Agent from any loss that any
of them may suffer if such Note is replaced. The Issuer may charge such Holder
for the Issuer's reasonable out-of-pocket expenses in replacing such Note and
the Trustee may charge the Issuer for the Trustee's expenses (including, without
limitation, attorneys' fees and disbursements) in replacing such Note. Every
replacement Note shall constitute a contractual obligation of the Issuer.
SECTION 2.09. Outstanding Notes.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those cancelled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.09 as not
outstanding. Subject to Section 2.10, a Note does not cease to be outstanding
because the Issuer or one of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser in whose hands such Note is a
legal, valid and binding obligation of the Issuer.
If the Paying Agent holds, in its capacity as such, on any
maturity date, money sufficient to pay all accrued interest and principal with
respect to the Notes payable on that date and is not prohibited from paying such
money to the Holders thereof pursuant to the terms of this Indenture, then on
and after that date such Notes cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.10. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any declaration of acceleration or notice of
default or direction, waiver or consent or any amendment, modification or other
change to this Indenture, Notes owned by the Issuer or any other Affiliate of
the Issuer shall be disregarded as though they were not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Notes as to which a Responsible Officer
of the Trustee has received an Officers' Certificate stating that such Notes are
so owned shall be so disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee established to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Notes and that the
pledgee is not the Issuer, a Guarantor, any other obligor on the Notes or any of
their respective Affiliates.
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SECTION 2.11. Temporary Notes.
Until definitive Notes are prepared and ready for delivery,
the Issuer 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 Issuer considers appropriate for temporary Notes.
Without unreasonable delay, the Issuer shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.12. Cancellation.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy cancelled Notes. The
Issuer may not reissue or resell, or issue new Notes to replace, Notes that the
Issuer has redeemed or paid, or that have been delivered to the Trustee for
cancellation.
SECTION 2.13. Defaulted Interest.
If the Issuer defaults on a payment of interest on the Notes,
it shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Holders on a subsequent special record date, which date
shall be at least five Business Days prior to the payment date. The Issuer shall
fix such special record date and payment date in a manner satisfactory to the
Trustee. At least 10 days before such special record date, the Issuer shall mail
to each Holder a notice that states the special record date, the payment date
and the amount of defaulted interest, and interest payable on defaulted
interest, if any, to be paid. The Issuer may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Notes may be listed and,
upon such notice as may be required by such exchange, if, after written notice
given by the Issuer to the Trustee of the proposed payment pursuant to this
sentence, such manner of payment shall be deemed practicable by the Trustee.
SECTION 2.14. CUSIP Number.
The Issuer in issuing the Notes may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of redemption or exchange
as a convenience to Holders; provided, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reli-
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ance may be placed only on the other identification numbers printed on the
Notes. The Issuer shall promptly notify the Trustee of any such CUSIP number
used by the Issuer in connection with the issuance of the Notes and of any
change in the CUSIP number.
SECTION 2.15. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and maturity date, the Issuer shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or maturity date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the Holders on
such Interest Payment Date or maturity date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby. The principal and interest on Physical Notes
shall be payable, either in person or by mail, at the office of the Paying
Agent.
SECTION 2.16. Book-Entry Provisions for Global Notes.
(a) Rule 144A Notes initially shall be represented by one or
more notes in registered, global form without interest coupons (collectively,
the "Restricted Global Note"). Regulation S Notes initially shall be represented
by one or more notes in registered, global form without interest coupons
(collectively, the "Regulation S Global Note," and, together with the Restricted
Global Note and any other global notes representing Notes, the "Global Notes").
The Global Notes shall bear legends as set forth in Exhibit D. The Global Notes
initially shall (i) be registered in the name of the Depository or the nominee
of such Depository, in each case for credit to an account of an Agent Member
(or, in the case of the Regulation S Global Notes, of Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Exhibit
B with respect to Restricted Global Notes and Exhibit C with respect to
Regulation S Global Notes.
Members of, or direct or indirect participants in, the
Depository ("Agent Members") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the Depository may be
treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as
the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the
Trustee or any agent of the Issuer or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
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(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, a Global Note
shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Issuer that it is unwilling or unable to continue as depository for such Global
Note and the Issuer thereupon fails to appoint a successor depository or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Issuer, at its option, notifies the Trustee in writing that it elects to cause
the issuance of such Physical Notes or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes. In all cases, Physical
Notes delivered in exchange for any Global Note or beneficial interests therein
shall be registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depository (in accordance with its customary
procedures).
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Issuer
shall execute, and the Trustee shall upon receipt of a written order from the
Issuer authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Issuer
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered
in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or
(d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the Private Placement Legend or, in the case of the
Regulation S Global Note, the legend set forth in Exhibit C, in each case,
unless the Issuer determines otherwise in compliance with applicable law.
(f) On or prior to the 40th day after the later of the
commencement of the offering of the Notes represented by the Regulation S Global
Note and the issue date of such Notes (such period through and including such
40th day, the "Restricted Period"), a beneficial interest in a Regulation S
Global Note may be transferred to a Person who takes delivery in the form of an
interest in the corresponding Restricted Global Note only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being
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made (i)(a) to a Person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule 144A or
(b) pursuant to another exemption from the registration requirements under the
Securities Act which is accompanied by an Opinion of Counsel regarding the
availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The Holder of any Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors
and Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted Note
to any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after May
30, 2003 or such other date as such Note shall be freely transferable
under Rule 144 as certified in an Officers' Certificate or (y) (1) in
the case of a transfer to an Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in the form of
Exhibit E hereto or (2) in the case of a transfer to a Non-U.S. Person
(including a QIB), the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit F hereto;
provided that in the case of
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any transfer of a Note bearing the Private Placement Legend for a Note
not bearing the Private Placement Legend, the Registrar has received an
Officers' Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Registrar shall reflect on its books and records the date and an
increase in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note transferred or
the Issuer shall execute and the Trustee shall authenticate and make available
for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration or any proposed registration of transfer of a
Note constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on such Holder's Note stating, or has otherwise advised the Issuer
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on such Holder's Note stating, or has
otherwise advised the Issuer and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of
the Global Note
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in an amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) it has received the Officers'
Certificate required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuer and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Note has been sold pursuant to an
effective registration statement under the Securities Act and the Registrar has
received an Officers' Certificate from the Issuer to such effect.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of
all letters, notices and other written communications received pursuant to
Section 2.16 or this Section 2.17. The Issuer shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable notice to the Registrar.
SECTION 2.18. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE TWO
REDEMPTION
SECTION 3.01. Election To Redeem; Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to paragraph 6
of the Notes, at least 45 days prior to the Redemption Date (unless a shorter
notice shall be agreed to in writing by the Trustee) but not more than 65 days
before the Redemption Date, the Issuer shall
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notify the Trustee in writing of the Redemption Date, the principal amount of
Notes to be redeemed and the redemption price, and deliver to the Trustee an
Officers' Certificate stating that such redemption will comply with the
conditions contained in paragraph 6 of the Notes. Notice given to the Trustee
pursuant to this Section 3.01 may not be revoked after the time that notice is
given to Holders pursuant to Section 3.03.
SECTION 3.02. Selection by Trustee of Notes To Be Redeemed.
In the event that less than all of the Notes are to be
redeemed pursuant to a redemption made pursuant to paragraph 6 of the Notes,
selection of the Notes for redemption shall be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not then listed on a national
security exchange, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided, however, that no Notes of a principal
amount of $1,000 or less shall be redeemed in part. If a partial redemption is
made pursuant to the second paragraph of paragraph 6 of the Notes, selection of
the Notes or portions thereof for redemption shall be made by the Trustee only
on a pro rata basis or on as nearly a pro rata basis as is practicable (subject
to the procedures of the Depository), unless that method is otherwise
prohibited. The Trustee shall promptly notify the Issuer of the Notes selected
for redemption and, in the case of any Notes selected for partial redemption,
the principal amount thereof to be redeemed. The Trustee may select for
redemption portions of the principal of the Notes that have denominations larger
than $1,000. For all purposes of this Indenture unless the context otherwise
requires, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption. The Issuer may acquire
Notes by means other than redemption, whether pursuant to an Issuer tender
offer, open market purchase or otherwise provided such acquisition does not
otherwise violate the other terms of this Indenture.
SECTION 3.03. Notice of Redemption.
At least 30 days, and no more than 60 days, before a
Redemption Date, the Issuer shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.04.
The notice shall identify the Notes to be redeemed (including
the CUSIP numbers thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
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(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that unless the Issuer defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date;
(7) the provision of paragraph 6 of the Notes, as the case may
be, pursuant to which the Notes called for redemption are being
redeemed; and
(8) the aggregate principal amount of Notes that are being
redeemed.
At the Issuer's written request made at least five Business
Days prior to the date on which notice is to be given, the Trustee shall give
the notice of redemption in the Issuer's name and at the Issuer's sole expense.
SECTION 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date, provided that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
SECTION 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Issuer shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of, including
premium, if any, and accrued interest on all Notes to be redeemed on that date
other than Notes or portions thereof called for redemption on that date which
have been delivered by the Issuer to the Trustee for cancellation.
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On and after any Redemption Date, if money sufficient to pay
the redemption price of, including premium, if any, and accrued interest on
Notes called for redemption shall have been made available in accordance with
the preceding paragraph, the Notes called for redemption will cease to accrue
interest and the only right of the Holders of such Notes will be to receive
payment of the redemption price of and, subject to the first proviso in Section
3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any
Note surrendered for redemption shall not be so paid, interest will be paid,
from the Redemption Date until such redemption payment is made, on the unpaid
principal of the Note and any interest not paid on such unpaid principal, in
each case, at the rate and in the manner provided in the Notes.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for the Holder thereof a new Note equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE THREE
COVENANTS
SECTION 4.01. Payment of Notes.
The Issuer shall pay the principal of and interest (including
all Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is due if the Trustee or Paying Agent holds on that date money designated for
and sufficient to pay such installment.
The Issuer shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
SECTION 4.02. Reports to Holders.
Whether or not required by the SEC, so long as any Notes are
outstanding, the Issuer shall furnish to the Holders of Notes, within the time
periods specified in the SEC's rules and regulations (including any grace
periods or extensions permitted by the SEC):
(1) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and
10-K if the Issuer were re-
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quired to file these Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report on the annual
financial statements by the Issuer's certified independent accountants;
and
(2) all current reports that would be required to be filed
with the SEC on Form 8-K if the Issuer were required to file these
reports.
In addition, whether or not required by the SEC, the Issuer
shall file a copy of all of the information and reports referred to in clauses
(1) and (2) above with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept the
filing) and make the information available to securities analysts and
prospective investors upon request. For so long as any Notes remain outstanding,
the Issuer shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.03. Waiver of Stay, Extension or Usury Laws.
Each of the Issuer and the Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, or plead
(as a defense or otherwise) or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
which would prohibit or forgive any of the Issuer and the Guarantors from paying
all or any portion of the principal of, premium, if any, and/or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Indenture;
and (to the extent that they may lawfully do so) each of the Issuer and the
Guarantors hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 4.04. Compliance Certificate.
(a) The Issuer shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Issuer and its Subsidiaries during such fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Issuer and the Guarantors have kept, observed, performed
and fulfilled their obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge, the Issuer and the Guarantors have kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and are not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default shall have occurred, describing all
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such Defaults of which he or she may have knowledge and what action they are
taking or propose to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Issuer and the Guarantors is taking or propose to take with respect
thereto.
(b) The Issuer and the Guarantors shall, so long as any of the
Notes are outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of any Default, an Officers' Certificate specifying such Default
and what action the Issuer and the Guarantors are taking or propose to take with
respect thereto.
(c) The Issuer's fiscal year currently ends on December 31.
The Issuer will provide written notice to the Trustee of any change in its
fiscal year.
SECTION 4.05. Taxes.
The Issuer and the Guarantors shall, and shall cause each of
their Subsidiaries to, pay prior to delinquency all material taxes, assessments,
and governmental levies except as contested in good faith and by appropriate
proceedings.
SECTION 4.06. Limitations on Additional Indebtedness.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the
Issuer or any Restricted Subsidiary may incur additional Indebtedness (including
Acquired Indebtedness) if no Default shall have occurred and be continuing at
the time of or as a consequence of the incurrence of the Indebtedness and if,
after giving effect thereto, either (a) the Consolidated Fixed Charge Coverage
Ratio would be at least 2.00 to 1.00 or (b) the ratio of Consolidated
Indebtedness to Consolidated Tangible Net Worth would be less than 3.00 to 1.00
(either (a) or (b), the "Ratio Exception").
Notwithstanding the above, so long as no Default shall have
occurred and be continuing at the time of or as a consequence of the incurrence
of the following Indebtedness, each of the following shall be permitted (the
"Permitted Indebtedness"):
(1) Indebtedness of the Issuer and any Restricted Subsidiary
under the Credit Facilities in an aggregate amount at any time
outstanding (whether incurred under the Ratio Exception or as Permitted
Indebtedness) not to exceed the greater of (x) $165.0 million and (y)
the amount of the Borrowing Base as of the date of such incurrence;
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(2) the Notes and the Note Guarantees issued on the Issue
Date;
(3) Indebtedness of the Issuer and the Restricted Subsidiaries
to the extent outstanding on the Issue Date (other than Indebtedness
referred to in clauses (1) and (2) above, and after giving effect to
the intended use of proceeds of the Notes);
(4) Indebtedness of the Issuer and the Restricted Subsidiaries
under Hedging Obligations; provided that (a) such Hedging Obligations
relate to payment obligations on Indebtedness otherwise permitted to be
incurred by this Section 4.06, and (b) the notional -------- principal
amount of such Hedging Obligations at the time incurred does not exceed
the principal amount of the Indebtedness to which such Hedging
Obligations relate;
(5) Indebtedness of the Issuer owed to a Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary owed to the Issuer or any
other Restricted Subsidiary; provided, however, that (a) any
Indebtedness of the Issuer owed to a Restricted Subsidiary is unsecured
and subordinated, pursuant to a written agreement, to the Issuer's
obligation, under this Indenture and the Notes and (b) upon any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or such
Indebtedness being owed to any Person other than the Issuer or a
Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as
applicable, shall be deemed to have incurred Indebtedness not permitted
by this clause (5);
(6) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Issuer or any Restricted Subsidiary
in the ordinary course of business, including guarantees or obligations
of the Issuer or any Restricted Subsidiary with respect to letters of
credit supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
(7) Purchase Money Indebtedness incurred by the Issuer or any
Restricted Subsidiary, in an aggregate amount not to exceed at any time
outstanding $15.0 million;
(8) Non-Recourse Indebtedness of the Issuer or any Restricted
Subsidiary incurred for the acquisition, development and/or improvement
of real property and secured by Liens only on such real property;
(9) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within five Business
Days of incurrence;
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(10) Indebtedness arising in connection with endorsement of
instruments for deposit in the ordinary course of business;
(11) Refinancing Indebtedness with respect to Indebtedness
incurred pursuant to the Ratio Exception or clause (2) or (3) above;
and
(12) Indebtedness of the Issuer or any Restricted Subsidiary
in an aggregate amount not to exceed $15.0 million at any time
outstanding.
For purposes of determining compliance with this Section 4.06,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Indebtedness described in clauses (1) through (12)
above or is entitled to be incurred pursuant to the Ratio Exception, the Issuer
shall, in its sole discretion, classify such item of Indebtedness and may divide
and classify such Indebtedness in more than one of the types of Indebtedness
described, except that Indebtedness outstanding under the Credit Facilities on
the Issue Date shall be deemed to have been incurred under clause (1) above.
SECTION 4.07. Limitations on Layering Indebtedness.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness that is or
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) contractually subordinated to any other Indebtedness of the Issuer
or of such Restricted Subsidiary, as the case may be, unless such Indebtedness
is also by its terms (or by the terms of any agreement governing such
Indebtedness) contractually made expressly subordinate to the Notes or the Note
Guarantee of such Restricted Subsidiary, to the same extent and in the same
manner as such Indebtedness is contractually subordinated to such other
Indebtedness of the Issuer or such Restricted Subsidiary, as the case may be.
SECTION 4.08. Limitations on Restricted Payments.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted Payment if at the
time of such Restricted Payment:
(1) a Default shall have occurred and be continuing or shall
occur as a consequence thereof;
(2) the Issuer cannot incur $1.00 of additional Indebtedness
pursuant to the Ratio Exception; or
(3) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments made after the Issue
Date (other than Re-
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stricted Payments made pursuant to clause (2), (3) or (5) of the next
paragraph), exceeds the sum (the "Restricted Payments Basket") of (without
duplication):
(a) 50% of Consolidated Net Income for the period (taken as
one accounting period) commencing on the first day of the first full
fiscal quarter commencing after the Issue Date to and including the
last day of the fiscal quarter ended immediately prior to the date of
such calculation for which consolidated financial statements are
available (or, if such Consolidated Net Income shall be a deficit,
minus 100% of such aggregate deficit), plus ----
(b) 100% of the aggregate net cash proceeds or the Fair Market
Value of any assets to be used in a Permitted Business (other than
securities) received by the Issuer either (x) as contributions to the
common equity of the Issuer after the Issue Date or (y) from the
issuance and sale of Qualified Equity Interests after the Issue Date,
other than to the extent any such proceeds are used to redeem Notes in
accordance with Section 6(b) of the Notes, plus ----
(c) the aggregate amount by which Indebtedness of the Issuer
or any Restricted Subsidiary is reduced on the Issuer's balance sheet
upon the conversion or exchange (other than by a Subsidiary of the
Issuer) subsequent to the Issue Date into Qualified Equity Interests
(less the amount of any cash, or the fair value of assets, distributed
by the Issuer or any Restricted Subsidiary upon such conversion or
exchange), plus
(d) in the case of the disposition or repayment of or return
on any Investment that was treated as a Restricted Payment made after
the Issue Date, an amount (to the extent not included in the
computation of Consolidated Net Income) equal to the lesser of (i) the
return of capital with respect to such Investment and (ii) the amount
of such Investment that was treated as a Restricted Payment, in either
case, less the cost of the disposition of such Investment and net of
taxes, plus
(e) upon a Redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the lesser of (i) the Fair Market Value of the
Issuer's proportionate interest in such Subsidiary immediately
following such Redesignation, and (ii) the aggregate amount of the
Issuer's Investments in such Subsidiary to the extent such Investments
reduced the amount available for subsequent Restricted Payments under
this clause (3) and were not previously repaid or otherwise reduced,
plus
(f) $10.0 million.
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The foregoing provisions will not prohibit:
(1) the payment by the Issuer or any Restricted Subsidiary of
any dividend within 60 days after the date of declaration thereof, if
on the date of declaration the payment would have complied with the
provisions of this Indenture;
(2) so long as no Default shall have occurred and be
continuing at the time of or as a consequence of such redemption, the
redemption of any Equity Interests of the Issuer or any Restricted
Subsidiary in exchange for, or out of the proceeds of the substantially
concurrent issuance and sale of, Qualified Equity Interests;
(3) so long as no Default shall have occurred and be
continuing at the time of or as a consequence of such redemption, the
redemption of Subordinated Indebtedness of the Issuer or any Restricted
Subsidiary (a) in exchange for, or out of the proceeds of the
substantially concurrent issuance and sale of, Qualified Equity
Interests or (b) in exchange for, or out of the proceeds of the
substantially concurrent incurrence of, Refinancing Indebtedness
permitted to be incurred under Section 4.06 and the other terms of this
Indenture;
(4) so long as no Default shall have occurred and be
continuing at the time of or as a consequence of such redemption, the
redemption of Equity Interests of the Issuer held by officers,
directors or employees or former officers, directors or employees (or
their transferees, estates or beneficiaries under their estates), upon
their death, disability, retirement, severance or termination of
employment or service; provided that the aggregate cash consideration
paid for all such redemptions shall not exceed $2.0 million during any
calendar year (with unused amounts in any calendar year being carried
over to succeeding calendar years subject to a maximum of $4.0 million
in any calendar year); or
(5) repurchases of Equity Interests deemed to occur upon the
exercise of stock options if the Equity Interests represents a portion
of the exercise price thereof;
provided that no issuance and sale of Qualified Equity Interests pursuant to
clause (2) or (3) above shall increase the Restricted Payments Basket, except to
the extent the proceeds thereof exceed the amounts used to effect the
transactions described therein.
SECTION 4.09. Limitations on Asset Sales.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale unless:
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(1) the Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets included in such Asset Sale; and
(2) at least 75% of the total consideration received in such
Asset Sale or series of related Asset Sales consists of cash or Cash
Equivalents.
For purposes of clause (2), the following shall be deemed to
be cash:
(a) the amount (without duplication) of any Indebtedness
(other than Subordinated Indebtedness) of the Issuer or such Restricted
Subsidiary that is expressly assumed by the transferee in such Asset
Sale and with respect to which the Issuer or such Restricted
Subsidiary, as the case may be, is unconditionally released by the
holder of such Indebtedness,
(b) the amount of any obligations received from such
transferee that are within 30 days converted by the Issuer or such
Restricted Subsidiary to cash (to the extent of the cash actually so
received), and
(c) the Fair Market Value of any assets (other than
securities, unless such securities represent Equity Interests in an
entity engaged solely in a Permitted Business, such entity becomes a
Restricted Subsidiary and the Issuer or a Restricted Subsidiary
acquires voting and management control of such entity) received by the
Issuer or any Restricted Subsidiary to be used by it in the Permitted
Business.
If at any time any non-cash consideration received by the
Issuer or any Restricted Subsidiary of the Issuer, as the case may be, in
connection with any Asset Sale is repaid or converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then the date of such repayment, conversion or
disposition shall be deemed to constitute the date of an Asset Sale hereunder
and the Net Available Proceeds thereof shall be applied in accordance with this
Section 4.09.
If the Issuer or any Restricted Subsidiary engages in an Asset
Sale, the Issuer or such Restricted Subsidiary shall, no later than one year
following the consummation thereof, apply all or any of the Net Available
Proceeds therefrom to:
(1) repay any Indebtedness under the Credit Facilities;
(2) repay any Indebtedness which was secured by the assets
sold in such Asset Sale; and/or
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(3) invest all or any part of the Net Available Proceeds
thereof in the purchase of assets (other than securities, unless such
securities represent Equity Interests in an entity engaged solely in a
Permitted Business, such entity becomes a Restricted Subsidiary and the
Issuer or a Restricted Subsidiary acquires voting and management
control of such entity) to be used by the Issuer or any Restricted
Subsidiary in the Permitted Business.
The amount of Net Available Proceeds not applied or invested
as provided in this paragraph will constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds
$10.0 million, the Issuer shall be required to make an Offer to Purchase from
all Holders and, if applicable, redeem (or make an offer to do so) any Pari
Passu Indebtedness of the Issuer the provisions of which require the Issuer to
redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do
so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness
equal to the amount of such Excess Proceeds as follows:
(1) the Issuer shall (a) make an Offer to Purchase (a "Net
Proceeds Offer") to all Holders, and (b) redeem (or make an offer to do
so) any such other Pari Passu Indebtedness, pro rata in proportion to
the respective principal amounts of the Notes and such other
Indebtedness required to be redeemed, the maximum principal amount of
Notes and Pari Passu Indebtedness that may be redeemed out of the
amount (the "Payment Amount") of such Excess Proceeds;
(2) the offer price for the Notes shall be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest
thereon, if any, to the date such Net Proceeds Offer is consummated
(the "Offered Price"), and the redemption price for such Pari Passu
Indebtedness (the "Pari Passu Indebtedness Price") shall be as set
forth in the related documentation governing such Indebtedness;
(3) if the aggregate Offered Price of Notes validly tendered
and not withdrawn by Holders thereof exceeds the pro rata portion of
the Payment Amount allocable to the Notes, Notes to be purchased shall
be selected on a pro rata basis; and
(4) upon completion of such Net Proceeds Offer in accordance
with the foregoing provisions, the amount of Excess Proceeds with
respect to which such Net Proceeds Offer was made shall be deemed to be
zero.
To the extent that the sum of the aggregate Offered Price of
Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu
Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less
than the Payment Amount relating thereto
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(such shortfall constituting a "Net Proceeds Deficiency"), the Issuer may use
the Net Proceeds Deficiency, or a portion thereof, for general corporate
purposes, subject to the provisions of this Indenture.
In the event of the transfer of substantially all (but not
all) of the assets of the Issuer and the Restricted Subsidiaries as an entirety
to a Person in a transaction covered by and effected in accordance with Section
5.01 the successor corporation shall be deemed to have sold for cash at Fair
Market Value the assets of the Issuer and the Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale
(with such Fair Market Value being deemed to be Net Available Proceeds for such
purpose).
The Issuer shall comply with applicable tender offer rules,
including the requirements of Rule 14e-1 under the Exchange Act and any other
applicable laws and regulations in connection with the purchase of Notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.09, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.09 by virtue of
this compliance.
SECTION 4.10. Limitations on Transactions with Affiliates.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, in one transaction or a series of related
transactions, sell, lease, transfer or otherwise dispose of any of its assets
to, or purchase any assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate involving aggregate consideration in excess of $60,000 (an "Affiliate
Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Issuer or the relevant Restricted Subsidiary than
those that may have been obtained in a comparable transaction at such
time on an arm's-length basis by the Issuer or that Restricted
Subsidiary from a Person that is not an Affiliate of the Issuer or that
Restricted Subsidiary; and
(2) the Issuer delivers to the Trustee:
(a) with respect to any Affiliate Transaction
involving aggregate value of $1.0 million or more, an
Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above;
(b) with respect to any Affiliate Transaction
involving aggregate value in excess of $2.0 million, an
Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above and a Secretary's
Certificate
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which sets forth and authenticates a resolution that has been
adopted by the Independent Directors approving such Affiliate
Transaction; and
(c) with respect to any Affiliate Transaction
involving aggregate value of $10.0 million or more, the
certificates described in the preceding clause (b) and (x) a
written opinion as to the fairness of such Affiliate
Transaction to the Issuer or such Restricted Subsidiary from a
financial point of view or (y) a written appraisal supporting
the value of such Affiliate Transaction, in either case,
issued by an Independent Financial Advisor.
The foregoing restrictions shall not apply to:
(1) transactions exclusively between or among (a) the Issuer
and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries;
provided, in each case, that no Affiliate of the Issuer (other than
another Restricted Subsidiary) owns Equity Interests of any such
Restricted Subsidiary;
(2) reasonable director, officer, employee and consultant
compensation (including bonuses) and other benefits (including
retirement, health, stock and other benefit plans) and indemnification
arrangements;
(3) loans and advances permitted by clause (3) of the
definition of "Permitted Investments";
(4) any agreement as in effect as of the Issue Date (including
the Wells Fargo Credit Agreement) or any extension, amendment or
modification thereto (so long as any such extension, amendment or
modification satisfies the requirements set forth in clause (1) of the
first paragraph of this Section 4.10) or any transaction contemplated
thereby;
(5) Restricted Payments of the type described in clause (1),
(2) or (4) of the definition of "Restricted Payment" and which are made
in accordance with Section 4.08; or
(6) sales of Qualified Equity Interests for cash by the Issuer
to an Affiliate.
SECTION 4.11. Limitations on Liens.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer
to exist any Lien of any nature whatsoever against (other than Permitted Liens)
any assets of the Issuer or any Restricted Subsidiary (including Equity
Interests of a Restricted Subsidiary), whether owned at the Issue Date or
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thereafter acquired, or any proceeds therefrom, or assign or otherwise convey
any right to receive income or profits therefrom, which Lien secures
Indebtedness or trade payables, unless contemporaneously therewith:
(1) in the case of any Lien securing an obligation that ranks
pari passu with the Notes or a Note Guarantee, effective provision is
made to secure the Notes or such Note Guarantee, as the case may be, at
least equally and ratably with or prior to such obligation with a Lien
on the same collateral; and
(2) in the case of any Lien securing an obligation that is
subordinated in right of payment to the Notes or a Note Guarantee,
effective provision is made to secure the Notes or such Note Guarantee,
as the case may be, with a Lien on the same collateral that is prior to
the Lien securing such subordinated obligation, in each case, for so
long as such obligation is secured by such Lien.
SECTION 4.12. Conduct of Business.
The Issuer will not, and will not permit any Restricted
Subsidiary to, engage in any business other than the Permitted Business.
SECTION 4.13. Additional Note Guarantees.
If, after the Issue Date, (a) the Issuer or any Restricted
Subsidiary shall acquire or create another Subsidiary (other than a Subsidiary
that has been designated an Unrestricted Subsidiary) or (b) any Unrestricted
Subsidiary is redesignated a Restricted Subsidiary, then, in each such case, the
Issuer shall cause such Restricted Subsidiary to:
(1) execute and deliver to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee pursuant to
which such Restricted Subsidiary shall unconditionally guarantee all of
the Issuer's obligations under the Notes and this Indenture and (b) a
notation of guarantee in respect of its Note Guarantee; and
(2) deliver to the Trustee one or more Opinions of Counsel
that such supplemental indenture (a) has been duly authorized, executed
and delivered by such Restricted Subsidiary and (b) constitutes a valid
and legally binding obligation of such Restricted Subsidiary in
accordance with its terms.
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SECTION 4.14. Limitations on Dividend and Other Restrictions
Affecting Restricted Subsidiaries.
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on or in
respect of its Equity Interests;
(b) make loans or advances or pay any Indebtedness or other
obligation owed to the Issuer or any other Restricted Subsidiary; or
(c) transfer any of its assets to the Issuer or any other
Restricted Subsidiary;
except for:
(1) encumbrances or restrictions existing under or by reason
of applicable law;
(2) encumbrances or restrictions existing under this
Indenture, the Notes and the Note Guarantees;
(3) non-assignment provisions of any contract or any lease
entered into in the ordinary course of business;
(4) encumbrances or restrictions existing under agreements
existing on the date hereof (including, without limitation, the Credit
Facilities) as in effect on the date hereof;
(5) restrictions on the transfer of assets subject to any Lien
permitted under this Indenture imposed by the holder of such Lien;
(6) restrictions on the transfer of assets imposed under any
agreement to sell such assets permitted under this Indenture to any
Person pending the closing of such sale;
(7) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
assets of any Person, other than the Person or the assets so acquired;
(8) encumbrances or restrictions arising in connection with
Refinancing Indebtedness; provided, however, that any such encumbrances
and restrictions are not
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materially more restrictive with respect to any Restricted Subsidiary
than those in effect on the Issue Date with respect to that Restricted
Subsidiary pursuant to the agreements creating or evidencing the
Indebtedness being refinanced;
(9) customary provisions in leases, partnership agreements,
limited liability company organizational governance documents, joint
venture agreements and other similar agreements entered into in the
ordinary course of business that restrict the transfer of leasehold
interests or ownership interests in such partnership, limited liability
company, joint venture or similar Person;
(10) Purchase Money Indebtedness incurred in compliance with
Section 4.06 that impose restrictions of the nature described in clause
(c) above on the assets acquired; and
(11) any encumbrances or restrictions imposed by any
amendments or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (10) above; provided that such
amendments or refinancings are, in the good faith judgment of the
Issuer's Board of Directors, no more materially restrictive with
respect to such encumbrances and restrictions than those prior to such
amendment or refinancing.
SECTION 4.15. Limitations on Designation of Unrestricted
Subsidiaries.
The Issuer may designate any Subsidiary of the Issuer as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(1) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; and
(2) the Issuer would be permitted to make, at the time of such
Designation, (a) a Permitted Investment or (b) an Investment pursuant
to the first paragraph of Section 4.08, in either case, in an amount
(the "Designation Amount") equal to the Fair Market Value of the
Issuer's proportionate interest in such Subsidiary on such date.
No Subsidiary shall be Designated as an "Unrestricted
Subsidiary" unless such Subsidiary:
(1) has no Indebtedness other than Permitted Unrestricted
Subsidiary Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Issuer or any Restricted Subsidiary unless the
terms of the agreement, con-
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tract, arrangement or understanding are no less favorable to the Issuer
or the Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Issuer or such
Restricted Subsidiary;
(3) is a Person with respect to which neither the Issuer nor
any Restricted Subsidiary has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve the Person's financial condition or to cause the Person to
achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Issuer or any
Restricted Subsidiary, except for any guarantee given solely to support
the pledge by the Issuer or any Restricted Subsidiary of the Equity
Interests of such Unrestricted Subsidiary, which guarantee is not
recourse to the Issuer or any Restricted Subsidiary, and except to the
extent the amount thereof constitutes a Restricted Payment permitted
pursuant to Section 4.08.
If, at any time, any Unrestricted Subsidiary fails to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is
not permitted to be incurred under Section 4.06 or the Lien is not permitted
under Section 4.11, the Issuer shall be in default of the applicable covenant.
As of the Issue Date, the Issuer shall be deemed to have
Designated Texas Home Mortgage Company as an Unrestricted Subsidiary.
The Issuer may redesignate an Unrestricted Subsidiary as a
Restricted Subsidiary (a "Redesignation") only if:
(1) no Default shall have occurred and be continuing at the
time of and after giving effect to such Redesignation; and
(2) all Liens, Indebtedness and Investments of such
Unrestricted Subsidiary outstanding immediately following such
Redesignation would, if incurred or made at such time, have been
permitted to be incurred or made for all purposes of this Indenture.
All Designations and Redesignations must be evidenced by
resolutions of the Board of Directors of the Issuer, delivered to the Trustee
certifying compliance with the foregoing provisions.
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SECTION 4.16. Maintenance of Consolidated Tangible Net Worth.
If the Issuer's Consolidated Tangible Net Worth declines below
$60.0 million (the "Minimum Tangible Net Worth") at the end of any fiscal
quarter, the Issuer must deliver an Officers' Certificate to the Trustee within
55 days after the end of that fiscal quarter (110 days after the end of any
fiscal year) to notify the Trustee. If, on the last day of each of any two
consecutive fiscal quarters (the last day of the second fiscal quarter being
referred to as a "Deficiency Date"), the Issuer's Consolidated Tangible Net
Worth is less than the Minimum Tangible Net Worth of the Issuer, then the Issuer
must make an Offer to Purchase (a "Net Worth Offer") to all Holders of Notes to
purchase 10% of the aggregate principal amount of the Notes originally issued
(the "Net Worth Offer Amount") at a purchase price equal to 100% of the
principal amount of the Notes, plus accrued and unpaid interest thereon, if any,
to the date of purchase; provided, however, that no such Net Worth Offer shall
be required if, after the Deficiency Date but prior to the date the Issuer is
required to make the Net Worth Offer, capital in cash or Cash Equivalents is
contributed for Qualified Equity Interests of the Issuer sufficient to increase
the Issuer's Consolidated Tangible Net Worth after giving effect to such
contribution to an amount equal to or above the Minimum Tangible Net Worth.
The Issuer must make the Net Worth Offer no later than 65 days
after each Deficiency Date (120 days if such Deficiency Date is the last day of
the Issuer's fiscal year). The Net Worth Offer is required to remain open for a
period of 20 Business Days following its commencement or for such longer period
as required by law. The Issuer is required to purchase the Net Worth Offer
Amount of the Notes on a designated date no later than five Business Days after
the termination of the Net Worth Offer, or if less than the Net Worth Offer
Amount of Notes shall have been tendered, all Notes then tendered.
If the aggregate principal amount of Notes tendered exceeds
the Net Worth Offer Amount, the Issuer is required to purchase the Notes
tendered to it pro rata among the Notes tendered (with such adjustments as may
be appropriate so that only Notes in denominations of $1,000 and integral
multiples thereof shall be purchased).
In no event shall the failure of the Issuer's Consolidated
Tangible Net Worth to equal or exceed the Minimum Tangible Net Worth at the end
of any fiscal quarter be counted toward the requirement to make more than one
Net Worth Offer. The Issuer may reduce the principal amount of Notes to be
purchased pursuant to the Net Worth Offer by subtracting 100% of the principal
amount (excluding premium) of the Notes redeemed by the Issuer prior to the
purchase (otherwise than under this provision). The Issuer, however, may not
credit Notes that have been previously used as a credit against any obligation
to repurchase Notes pursuant to this provision.
The Issuer shall comply with applicable tender offer rules,
including the requirements of Rule 14e-1 under the Exchange Act and any other
applicable laws and regula-
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tions in connection with the purchase of Notes pursuant to a Net Worth Offer. To
the extent that the provisions of any securities laws or regulations conflict
with this Section 4.16, the Issuer shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.16 by virtue of this compliance.
SECTION 4.17. Maintenance of Properties; Insurance; Compliance with
Law.
(a) The Issuer shall, and shall cause each of its Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs, renewals,
replacements, necessary betterments and necessary improvements thereto.
(b) The Issuer shall maintain, and shall cause to be
maintained for each of its Restricted Subsidiaries, insurance covering such
risks as are usually and customarily insured against by corporations similarly
situated in the markets where the Issuer and the Restricted Subsidiaries conduct
homebuilding operations, in such amounts as shall be customary for corporations
similarly situated and with such deductibles and by such methods as shall be
customary and reasonably consistent with past practice.
(c) The Issuer shall, and shall cause each of its Subsidiaries
to, comply with all statutes, laws, ordinances or government rules and
regulations to which they are subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
financial condition of the Issuer and their Subsidiaries taken as a whole.
SECTION 4.18. Payments for Consent.
The Issuer shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all Holders which so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
SECTION 4.19. Legal Existence.
Subject to Article Five, the Issuer shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
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Subsidiary and the rights (charter and statutory), licenses and franchises of
the Issuer and its Restricted Subsidiaries; provided that the Issuer shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted Subsidiaries if the
Board of Directors of the Issuer shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Issuer and its
Restricted Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
SECTION 4.20. Change of Control Offer.
Upon the occurrence of a Change of Control, the Issuer shall
be obligated to make an Offer to Purchase (the "Change of Control Offer"), and
shall purchase, on a Business Day (the "Change of Control Payment Date") not
more than 60 nor less than 30 days following the occurrence of the Change of
Control, all of the then outstanding Notes at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the Change of Control Payment
Date. The Change of Control Offer shall remain open for at least 20 Business
Days and until the close of business on the Change of Control Payment Date.
Within 30 days following the date upon which a Change of
Control occurs (the "Change of Control Date"), the Issuer shall send, by first
class mail, a notice to each Holder, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer.
Any amounts remaining after the purchase of Notes pursuant to
a Change of Control Offer shall be returned by the Trustee to the Issuer.
The Issuer's obligation to make a Change of Control Offer will
be satisfied if a third party makes the Change of Control Offer in the manner
and at the times and otherwise in compliance with the requirements applicable to
a Change of Control Offer made by the Issuer and purchases all Notes properly
tendered and not withdrawn under the Change of Control Offer.
The Issuer shall comply with applicable tender rules,
including the requirements of Rule 14e-1 under the Exchange Act and any other
applicable laws and regulations in connection with the purchase of Notes
pursuant to a Change of Control Offer. To the extent the provisions of any
securities laws or regulations conflict with the provisions under this Section
4.20, the Issuer shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.20 by virtue thereof.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Limitations on Mergers, Consolidations, Etc.
The Issuer shall not, directly or indirectly, in a single
transaction or a series of related transactions, (a) consolidate or merge with
or into (other than a merger that satisfies the requirements of clause (1) below
with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Issuer's jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Issuer or the Issuer and the Restricted
Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation unless, in
either case:
(1) either:
(a) the Issuer will be the surviving or continuing Person; or
(b) the Person formed by or surviving such consolidation or
merger or to which such sale, lease, conveyance or other disposition
shall be made (or, in the case of a Plan of Liquidation, any Person to
which assets are transferred) (collectively, the "Successor") is a
corporation or limited liability company organized and existing under
the laws of any State of the United States of America or the District
of Columbia, and the Successor expressly assumes, by supplemental
indenture in form and substance satisfactory to the Trustee, all of the
obligations of the Issuer under the Notes, this Indenture and the
Registration Rights Agreement; provided that at any time the Successor
is a limited liability company, there shall be a co-issuer of the Notes
that is a corporation;
(2) immediately prior to and immediately after giving effect to such
transaction and the assumption of the obligations as set forth in clause (1)(b)
above and the incurrence of any Indebtedness to be incurred in connection
therewith, no Default shall have occurred and be continuing; and
(3) immediately after and giving effect to such transaction and the
assumption of the obligations set forth in clause (1)(b) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and the
use of any net proceeds therefrom on a pro forma basis, (a) the Consolidated Net
Worth of the Issuer or the Successor, as the case may be, would be at least
equal to the Consolidated Net Worth of the Issuer immediately prior to such
transaction and (b) the Issuer or the Successor,
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as the case may be, could incur $1.00 of additional Indebtedness pursuant to the
Ratio Exception.
For purposes of this Section 5.01, any Indebtedness of the
Successor which was not Indebtedness of the Issuer immediately prior to the
transaction shall be deemed to have been incurred in connection with such
transaction.
Except as provided under Section 10.04 no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person, whether or not affiliated with such Guarantor,
unless:
(1) either:
(a) such Guarantor will be the surviving or continuing Person;
or
(b) the Person formed by or surviving any such consolidation
or merger assumes, by supplemental indenture in form and substance
satisfactory to the Trustee, all of the obligations of such Guarantor
under the Note Guarantee of such Guarantor, this Indenture and the
Registration Rights Agreement; and
(2) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the assets of one or more
Restricted Subsidiaries, the Equity Interests of which constitute all or
substantially all of the assets of the Issuer, will be deemed to be the transfer
of all or substantially all of the assets of the Issuer.
Upon any consolidation, combination or merger of the Issuer or
a Guarantor, or any transfer of all or substantially all of the assets of the
Issuer in accordance with the foregoing, in which the Issuer or such Guarantor
is not the continuing obligor under the Notes or its Note Guarantee, the
surviving entity formed by such consolidation or into which the Issuer or such
Guarantor is merged or to which the conveyance, lease or transfer is made will
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer or such Guarantor under this Indenture, the Notes and the Note
Guarantees with the same effect as if such surviving entity had been named
therein as the Issuer or such Guarantor and, except in the case of a conveyance,
transfer or lease, the Issuer or such Guarantor, as the case may be, will be
released from the obligation to pay the principal of and interest on the Notes
or in respect of its Note Guarantee, as the case may be, and all of the Issuer's
or such Guarantor's other obligations and covenants under the Notes, this
Indenture and its Note Guarantee, if applicable.
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Notwithstanding the foregoing, any Restricted Subsidiary may
merge into the Issuer or another Restricted Subsidiary.
SECTION 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Issuer or any Restricted Subsidiary in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into which the Issuer is merged or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Issuer or such Restricted Subsidiary under this Indenture with the
same effect as if such successor corporation had been named as the Issuer or
such Restricted Subsidiary herein, and thereafter the predecessor corporation
shall be relieved of all obligations and covenants under this Indenture and the
Notes.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following is an "Event of Default":
(1) failure by the Issuer to pay interest on any of the Notes
when it becomes due and payable and the continuance of any such failure
for 30 days;
(2) failure by the Issuer to pay the principal on any of the
Notes when it becomes due and payable, whether at stated maturity, upon
redemption, upon purchase, upon acceleration or otherwise;
(3) failure by the Issuer to comply with Section 5.01 or in
respect of its obligations to make a Change of Control Offer;
(4) failure by the Issuer to comply with any other agreement
or covenant in this Indenture and continuance of this failure for 30
days after notice of the failure has been given to the Issuer by the
Trustee or by the Holders of at least 25% of the aggregate principal
amount of the Notes then outstanding;
(5) default under any mortgage, indenture or other instrument
or agreement under which there may be issued or by which there may be
secured or evidenced Indebtedness of the Issuer or any Restricted
Subsidiary, whether such Indebtedness now exists or is incurred after
the Issue Date, which default:
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(a) is caused by a failure to pay when due principal on such
Indebtedness within the applicable express grace period,
(b) results in the acceleration of such Indebtedness prior to
its express final maturity or
(c) results in the commencement of judicial proceedings to
foreclose upon, or to exercise remedies under applicable law or
applicable security documents to take ownership of, the assets securing
such Indebtedness, and
in each case, the principal amount of such Indebtedness, together with any other
Indebtedness with respect to which an event described in clause (a), (b) or (c)
has occurred and is continuing, aggregates $10.0 million or more;
(6) one or more judgments or orders that exceed $10.0 million in the
aggregate (net of amounts covered by insurance or bonded) for the payment of
money have been entered by a court or courts of competent jurisdiction against
the Issuer or any Restricted Subsidiary and such judgment or judgments have not
been satisfied, stayed, annulled or rescinded within 60 days of being entered;
(7) the Issuer or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its assets, or
(d) makes a general assignment for the benefit of its
creditors;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Issuer or any Significant
Subsidiary as debtor in an involuntary case,
(b) appoints a Custodian of the Issuer or any Significant
Subsidiary or a Custodian for all or substantially all of the assets of
the Issuer or any Significant Subsidiary, or
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(c) orders the liquidation of the Issuer or any Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; or
(9) any Note Guarantee of any Significant Subsidiary ceases to be in
full force and effect (other than in accordance with the terms of such Note
Guarantee and this Indenture) or is declared null and void and unenforceable or
found to be invalid or any Guarantor denies its liability under its Note
Guarantee (other than by reason of release of a Guarantor from its Note
Guarantee in accordance with the terms of this Indenture and the Note
Guarantee).
Subject to Sections 7.01 and 7.02, the Trustee shall not be
charged with knowledge of any Default, Event of Default, Change of Control or
Asset Sale or the requirement for payment of Liquidated Damages unless written
notice thereof shall have been given to a Responsible Officer at the Corporate
Trust Office of the Trustee by the Issuer or any other Person.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (7) or (8) of Section 6.01 with respect to the Issuer),
shall have occurred and be continuing, the Trustee, by written notice to the
Issuer, or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding by written notice to the Issuer and the Trustee, may
declare all amounts owing under the Notes to be due and payable immediately.
Upon such declaration of acceleration, the aggregate principal of and accrued
and unpaid interest on the outstanding Notes shall immediately become due and
payable; provided, however, that after such acceleration, but before a judgment
or decree based on acceleration, the Holders of a majority in aggregate
principal amount of such outstanding Notes may rescind and annul such
acceleration if all Events of Default, other than the nonpayment of accelerated
principal and interest, have been cured or waived as provided in this Indenture.
If an Event of Default specified in clause (7) or (8) of Section 6.01 with
respect to the Issuer occurs, all outstanding Notes shall become due and payable
without any further action or notice.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
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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 Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative. Any costs associated with
actions taken by the Trustee under this Section 6.03 shall be reimbursed to the
Trustee by the Issuer.
SECTION 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.08 and 8.02, the Holders of a majority
in aggregate principal amount of the notes then outstanding have the right to
waive any existing Default or compliance with any provision of this Indenture or
the Notes. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
SECTION 6.05. Control by Majority.
The Holders of a majority in aggregate principal amount of the Notes
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 the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another Holder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
No Holder will have any right to institute any proceeding with
respect to this Indenture or for any remedy thereunder, unless the Trustee:
(1) has failed to act for a period of 60 days after receiving written
notice of a continuing Event of Default by such Holder and a request to
act by Holders of at least 25% in aggregate principal amount of Notes
outstanding;
(2) has been offered indemnity satisfactory to it in its
reasonable judgment; and
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(3) has not received from the Holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with
such request.
However, such limitations do not apply to a suit instituted by a Holder of any
Note for enforcement of payment of the principal of or interest on such Note on
or after the due date therefor (after giving effect to the grace period
specified in clause (1) of Section 6.01).
SECTION 6.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of the
Issuer will have any liability for any obligations of the Issuer under the Notes
or this Indenture or of any Guarantor under its Note Guarantee or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Note Guarantees.
SECTION 6.08. 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 principal of, or premium, if any, and
interest of the Note (including Additional Interest) on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
SECTION 6.09. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuer or any Guarantor (or any other obligor on the Notes) for the whole amount
of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate set forth in the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.10. 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 order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its
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agents and counsel, and any other amounts due the Trustee under Section 7.07)
and the Holders allowed in any judicial proceedings relative to the Issuer or
any Guarantor (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same after deduction of its charges and expenses to the extent that any such
charges and expenses are not paid out of the estate in any such proceedings and
any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan or
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 Holder in any such proceedings.
SECTION 6.11. Priorities.
If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest (including Additional
Interest, if any) as to each, ratably, without preference or
priority of any kind, according to the amounts due and payable on
the Notes; and
THIRD: to the Issuer or, to the extent the Trustee collects
any amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 6.11.
SECTION 6.12. 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
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good faith of the claims or defenses made by the party litigant. This Section
6.12 does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.08 or a suit by Holders of more than 10% in principal amount of the
Notes then outstanding.
SECTION 6.13. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Issuer, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer
of the Trustee 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 same circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of 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 but,
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 be under a duty to examine the same to determine whether or
not they conform on their face to the requirements of this Indenture (but
need not confirm or investigate the accuracy of mathematical calculations
or other facts stated therein).
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to the terms hereof.
(4) 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 rights, powers or duties if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity satisfactory to it against such risk or liability is not
reasonably assured to it.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it in its sole discretion
against any loss, liability, expense or fee.
(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 Issuer or any
Guarantor. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by the law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(1) 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.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of
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Section 12.05. The Trustee shall be protected and shall not be liable for
any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(3) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
by it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers; provided that the Trustee's conduct does not
constitute gross negligence or wilful misconduct.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the either of the Issuer or any Guarantor,
or any Affiliates thereof, with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee, however, shall
be subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes or any Guarantee,
it shall not be accountable for the Issuer's or any Guarantor's use of the
proceeds from the sale of Notes or any money paid to the Issuer or any Guarantor
pursuant to the terms of this Indenture and it shall not be responsible for any
statement in the Notes, Guarantee or this Indenture other than its certificate
of authentication.
SECTION 7.05. Notice of Defaults.
The Trustee shall, within 30 days after the occurrence of any
Default with respect to the Notes, give the Holders notice of all uncured
Defaults thereunder known to it; provided, however, that, except in the case of
an Event of Default in payment with respect to the Notes or a Default in
complying with Section 5.01, the Trustee shall be protected in withholding such
notice if and so long as a committee of its Responsible Officers in good faith
determines that the withholding of such notice is in the interest of the
Holders.
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SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after January 1 of
any year, commencing January 1, 2000 the Trustee shall mail to each Holder a
brief report dated as of such January 1 that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c) and TIA Section
313(d).
Reports pursuant to this Section 7.06 shall be transmitted by mail:
(1) to all Holders of Notes, as the names and addresses of
such Holders appear on the Registrar's books; and
(2) to such Holders of Notes as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for
that purpose.
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Issuer shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. Compensation and Indemnity.
The Issuer and the Guarantors shall pay to the Trustee and Agents
from time to time reasonable compensation for its services hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Issuer and the Guarantors
shall reimburse the Trustee and Agents upon request for all reasonable
disbursements, expenses and advances incurred or made by it in connection with
its duties under this Indenture, including the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Issuer and the Guarantors shall indemnify each of the Trustee
and any predecessor Trustee for, and hold each of them harmless against, any and
all loss, damage, claim, liability or expense, including without limitation
taxes (other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder (including, without limitation, settlement costs). The Trustee
or Agent shall notify the Issuer and the Guarantors in writing promptly of any
claim asserted against the Trustee or Agent for which it may seek indemnity.
However, the failure by the Trustee or Agent to so notify the Issuer and the
Guarantors shall not relieve the Issuer and Guarantors of their obligations
hereunder except to the extent the Issuer and the Guarantors are prejudiced
thereby.
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Notwithstanding the foregoing, the Issuer and the Guarantors need
not reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Issuer and the Guarantors in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Issuer and
the Guarantors under this Section 7.07 to compensate and indemnify the Trustee,
Agents and each predecessor Trustee and to pay or reimburse the Trustee, Agents
and each predecessor Trustee for expenses, disbursements and advances shall be
joint and several liabilities of the Issuer and each of the Guarantors and shall
survive the resignation or removal of the Trustee and the satisfaction,
discharge or other termination of this Indenture, including any termination or
rejection hereof under any Bankruptcy Law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(7) or (8) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to this Article Seven.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Issuer and the Guarantors
in writing. The Holders of a majority in principal amount of the outstanding
Notes may remove the Trustee by notifying the Issuer and the removed Trustee in
writing and may appoint a successor Trustee with the Issuer's written consent,
which consent shall not be unreasonably withheld. The Issuer may remove the
Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer 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 Issuer or the
Holders of a majority in
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principal amount of the outstanding Notes 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 Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07, transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Holder. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuer obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Consolidation, Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
entity, subject to Section 7.10, the successor entity without any further act
shall be the successor Trustee; provided such entity shall be otherwise
qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
(together with its corporate parent) shall have a combined capital and surplus
of at least $100,000,000 as set forth in the most recent applicable published
annual report of condition. The Trustee shall comply with TIA Section 310(b),
including the provision in Section 310(b)(1).
SECTION 7.11. Preferential Collection of Claims Against Issuer.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
SECTION 7.12. Paying Agents.
The Issuer shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
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(A) that it will hold all sums held by it as agent for the payment
of principal of, or premium, if any, or interest on, the Notes (whether
such sums have been paid to it by the Issuer or by any obligor on the
Notes) in trust for the benefit of Holders or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all
sums so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuer (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if
any, or interest on, the Notes when the same shall be due and payable.
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01. Without Consent of Holders.
The Issuer and the Trustee may amend, waive or supplement this
Indenture, the Note Guarantees or the Notes without consent of any Holder:
(1) to provide for the assumption of the Issuer's obligations
to the Holders pursuant to Section 5.01;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(3) to cure any ambiguity, defect or inconsistency;
(4) to release any Guarantor from any of its obligations under its
Notes Guarantee or this Indenture (to the extent permitted by this
Indenture);
(5) to maintain the qualification of this Indenture under the
TIA; or
(6) to make any other change that does not materially adversely
affect the rights of any Holder hereunder.
The Trustee is hereby authorized to join with the Issuer and the
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this In-
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denture and to make any further appropriate agreements and stipulations which
may be therein contained, but the Trustee shall not be obligated to enter into
any such supplemental indenture which adversely affects its own rights, duties
or immunities under this Indenture.
SECTION 8.02. With Consent of Holders.
This Indenture or the Notes may be amended with the consent (which
may include consents obtained in connection with a tender offer or exchange
offer for Notes) of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default under, or
compliance with any provision of, this Indenture may be waived (other than any
continuing Default in the payment of the principal or interest on the Notes)
with the consent (which may include consents obtained in connection with a
tender offer or exchange offer for Notes) of the Holders of a majority in
aggregate principal amount of the Notes then outstanding; provided that:
(a) no such amendment may, without the consent of the Holders of
two-thirds in aggregate principal amount of Notes then outstanding, amend
the obligation of the Issuer under Section 4.20 or the related definitions
that could adversely affect the rights of any Holder; and
(b) without the consent of each Holder affected, the Issuer
and the Trustee may not:
(1) change the maturity of any Note;
(2) reduce the amount, extend the due date or otherwise
affect the terms of any scheduled payment of interest on or
principal of the Notes;
(3) reduce any premium payable upon optional redemption of the
Notes, change the date on which any Notes are subject to redemption
or otherwise alter the provisions with respect to the redemption of
the Notes;
(4) make any Note payable in money or currency other than
that stated in the Notes;
(5) modify or change any provision of this Indenture or the
related definitions to affect the ranking of the Notes or any Note
Guarantee in a manner that adversely affects the Holders;
(6) reduce the percentage of Holders necessary to consent
to an amendment or waiver to this Indenture or the Notes;
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(7) impair the rights of Holders to receive payments of
principal of or interest on the Notes;
(8) release any Guarantor from any of its obligations under its
Note Guarantee or this Indenture, except as permitted by this
Indenture; or
(9) make any change in this Section 8.02.
After an amendment, supplement or waiver under this Section 8.02
becomes effective, the Issuer shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the written request of the Issuer, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Holders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06, the Trustee shall join with
the Issuer and the Guarantors in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture, in which case the Trustee may, but shall not be
obligated to, enter into such supplemental indenture.
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 8.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.
SECTION 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
written notice of revocation before the date the amendment, supplement, waiver
or other action becomes effective.
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The Issuer 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
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date unless the consent of the requisite number of Holders has
been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Holder, unless it makes a change described in any
of clauses (1) through (9) of Section 8.02. In that case the amendment,
supplement, waiver or other action 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 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a Note,
the Trustee (in accordance with the specific written direction of the Issuer)
shall request the Holder of the Note (in accordance with the specific written
direction of the Issuer) to deliver it to the Trustee. In such case, the Trustee
shall place an appropriate notation on the Note about the changed terms and
return it to the Holder. Alternatively, if the Issuer or the Trustee so
determines, the Issuer in exchange for the Note shall issue, the Guarantors
shall endorse, and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 8.06. Trustee To Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article Eight if the amendment, supplement or waiver
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, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01, shall be fully protected in
relying upon an Officers' Certificate and an Opinion of Counsel stating, in
addition to the matters required by Section 12.04, that such amendment,
supplement or waiver is authorized or permitted by this Indenture and is a
legal, valid and binding obligation of the Issuer and Guarantors, enforceable
against the Issuer and Guarantors in accordance with its terms (subject to
customary exceptions).
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ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Discharge of Indenture.
The Issuer may terminate its obligations and the obligations of the
Guarantors under the Notes, the Guarantees and this Indenture, except the
obligations referred to in the last paragraph of this Section 9.01, if
(1) all the Notes that have been authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes
for whose payment money has been deposited in trust or segregated and held
in trust by the Issuer and thereafter repaid to the Issuer or discharged
from this trust) have been delivered to the Trustee for cancellation, or
(2) (a) all Notes not delivered to the Trustee for cancellation
otherwise have become due and payable or have been called for redemption
pursuant to paragraph 6 of the Notes, and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee trust funds in trust
in an amount of money sufficient to pay and discharge the entire
Indebtedness (including all principal and accrued interest) on the Notes
not theretofore delivered to the Trustee for cancellation,
(b) the Issuer has paid all sums payable by it under this
Indenture,
(c) the Issuer has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Notes at
maturity or on the date of redemption, as the case may be, and
(d) the Trustee, for the benefit of the Holders, has a valid,
perfected, exclusive security interest in this trust.
In addition, the Issuer must deliver an Officers' Certificate and an
Opinion of Counsel (as to legal matters) stating that all conditions precedent
to satisfaction and discharge have been complied with.
After such delivery, the Trustee shall acknowledge in writing the
discharge of the Issuer's and the Guarantors' obligations under the Notes, the
Guarantees and this Indenture except for those surviving obligations specified
below.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuer in Sections 7.07, 9.05 and 9.06 shall survive.
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SECTION 9.02. Legal Defeasance.
The Issuer may at its option, by Board Resolution of the Board of
Directors of the Issuer, be discharged from its obligations with respect to the
Notes and the Guarantors discharged from their obligations under the Guarantees
on the date the conditions set forth in Section 9.04 are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Issuer shall be deemed to have paid and discharged the entire indebtedness
represented by the Notes and to have satisfied all its other obligations under
such Notes and this Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Issuer, shall, subject to Section 9.06, execute
instruments in form and substance reasonably satisfactory to the Trustee and
Issuer acknowledging the same), except for the following which shall survive
until otherwise terminated or discharged hereunder: (A) the rights of Holders of
outstanding Notes to receive solely from the trust funds described in Section
9.04 and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (B) the Issuer's obligations with respect to such Notes under Sections
2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.11 and 4.19, (C) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07) and (D) this Article
Nine. Subject to compliance with this Article Nine, the Issuer may exercise its
option under this Section 9.02 with respect to the Notes notwithstanding the
prior exercise of its option under Section 9.03 with respect to the Notes.
SECTION 9.03. Covenant Defeasance.
At the option of the Issuer, pursuant to a Board Resolution of the
Board of Directors of the Issuer, (x) the Issuer and the Guarantors shall be
released from their respective obligations under Sections 4.02 (except for
obligations mandated by the TIA), 4.05 through 4.17, inclusive, and 4.20 and
clause (3) of the first paragraph of Section 5.01 and (y) Section 6.01 (5) and
(6) shall no longer apply with respect to the outstanding Notes on and after the
date the conditions set forth in Section 9.04 are satisfied (hereinafter,
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that
the Issuer and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
specified Section or portion thereof, whether directly or indirectly by reason
of any reference elsewhere herein to any such specified Section or portion
thereof or by reason of any reference in any such specified Section or portion
thereof to any other provision herein or in any other document, but the
remainder of this Indenture and the Notes shall be unaffected thereby.
SECTION 9.04. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of Section 9.02
or Section 9.03 to the outstanding Notes:
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(1) the Issuer must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, U.S. legal tender, U.S. Government
Obligations or a combination thereof, in such amounts as will be
sufficient (without reinvestment) in the opinion of a nationally
recognized firm of independent public accountants selected by the Issuer,
to pay the principal of and interest on the Notes on the stated date for
payment or on the redemption date of the principal or installment of
principal of or interest on the Notes, and the Trustee must have a valid,
perfected, exclusive security interest in such trust,
(2) in the case of Legal Defeasance, the Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that:
(a) the Issuer has received from, or there has been published
by the Internal Revenue Service, a ruling, or
(b) since the date hereof, there has been a change in the
applicable U.S. federal income tax law,
in either case to the effect that, and based thereon this Opinion of
Counsel shall confirm that, the Holders will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of the Legal
Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred,
(3) in the case of Covenant Defeasance, the Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if the Covenant Defeasance had not occurred,
(4) no Default shall have occurred and be continuing on the date
of such deposit (other than a Default resulting from the borrowing of
funds to be applied to such deposit and the grant of any Lien securing
such borrowing),
(5) the Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under this Indenture
or any other material agreement or instrument to which the Issuer or any
of its Subsidiaries is a party or by which the Issuer or any of its
Subsidiaries is bound,
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(6) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by it with the intent of
preferring the Holders over any other of its creditors or with the intent
of defeating, hindering, delaying or defrauding any other of its creditors
or others, and
(7) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that the conditions
provided for in, in the case of the Officers' Certificate, clauses (1)
through (6) and, in the case of the Opinion of Counsel, clauses (1) (with
respect to the validity and perfection of the security interest), (2)
and/or (3) and (5) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect Covenant
Defeasance are insufficient to pay the principal of and interest on the Notes
when due, then the Issuer's obligations and the obligations of Guarantors under
this Indenture will be revived and no such defeasance will be deemed to have
occurred.
SECTION 9.05. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.
The Issuer and the Guarantors shall (on a joint and several basis)
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
9.04 or the principal, premium, if any, and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account of
the Holders of the outstanding Notes.
Anything in this Article Nine to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time any money or U.S.
Government Obligations held by it as provided in Section 9.04 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
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SECTION 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuer's and each Guarantor's obligations under this Indenture,
the Notes and the Guarantees shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Nine until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 9.01; provided that if the Issuer or the
Guarantors have made any payment of principal of, premium, if any, or accrued
interest on any Notes because of the reinstatement of their obligations, the
Issuer or the Guarantors, as the case may be, shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
SECTION 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Issuer, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.04, to the Issuer
(or, if such moneys had been deposited by the Guarantors, to such Guarantors),
and thereupon such Paying Agent shall be released from all further liability
with respect to such moneys.
SECTION 9.08. Moneys Held by Trustee.
Subject to applicable law, any moneys deposited with the Trustee or
any Paying Agent or then held by the Issuer or the Guarantors in trust for the
payment of the principal of, or premium, if any, or interest on any Note that
are not applied but remain unclaimed by the Holder of such Note for two years
after the date upon which the principal of, or premium, if any, or interest on
such Note shall have respectively become due and payable shall be repaid to the
Issuer (or, if appropriate, the Guarantors), or if such moneys are then held by
the Issuer or the Guarantors in trust, such moneys shall be released from such
trust; and the Holder of such Note entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the Issuer and the
Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
that the Trustee or any such Paying Agent, before being required to make any
such repayment, may, at the expense of the Issuer and the Guarantors, either
mail to each Holder affected, at the address shown in the register of the Notes
maintained by the Registrar pursuant to Section 2.03, or cause to be published
once a week for two successive weeks, in a newspaper published in the English
language, customarily published each Business Day and of general circulation in
the City of New York, New York, a notice that such money remains un-
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claimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Issuer. After payment to the
Issuer or the Guarantors or the release of any money held in trust by the Issuer
or any Guarantors, as the case may be, Holders entitled to the money must look
only to the Issuer and the Guarantors for payment as general creditors unless
applicable abandoned property law designates another Person.
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Guarantee.
Subject to the provisions of this Article Ten, each Guarantor, by
execution of this Indenture, jointly and severally, unconditionally guarantees
to each Holder (i) the due and punctual payment of the principal of and interest
on each Note, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal of and interest on the Notes, to the extent lawful, and
the due and punctual payment of all other Obligations and due and punctual
performance of all obligations of the Issuer to the Holders or the Trustee all
in accordance with the terms of such Note, this Indenture and the Registration
Rights Agreement, and (ii) in the case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, at stated maturity, by acceleration or otherwise. Each
Guarantor, by execution of this Indenture, agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, any invalidity, irregularity or unenforceability of any such Note or this
Indenture, any failure to enforce the provisions of any such Note, this
Indenture or the Registration Rights Agreement, any waiver, modification or
indulgence granted to the Issuer with respect thereto by the Holder of such
Note, or any other circumstances which may otherwise constitute a legal or
equitable discharge of a surety or such Guarantor.
Each Guarantor hereby waives diligence, presentment, demand for
payment, filing of claims with a court in the event of merger or bankruptcy of
the Issuer, any right to require a proceeding first against the Issuer, protest
or notice with respect to any such Note or the Indebtedness evidenced thereby
and all demands whatsoever, and covenants that this Guarantee will not be
discharged as to any such Note except by payment in full of the principal
thereof and interest thereon. Each Guarantor hereby agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article Six for the pur-
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poses of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article Six, such Obligations (whether or not
due and payable) shall forthwith become due and payable by each Guarantor for
the purpose of this Guarantee.
SECTION 10.02. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit G hereto, shall be endorsed on each Note authenticated
and delivered by the Trustee and such Guarantee shall be executed by either
manual or facsimile signature of an Officer or an Officer of a general partner,
as the case may be, of each Guarantor. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an officer of a Guarantor whose signature is on this Indenture or
a Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 10.03. Limitation of Guarantee.
The obligations of each Guarantor are limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution obligations
under this Indenture, result in the obligations of such Guarantor under its
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
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SECTION 10.04. Release of Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) all of the assets of such Guarantor have been sold or otherwise
disposed of in a transaction in compliance with the terms of this
Indenture (including Sections 4.09, 4.20 and 5.01);
(ii) all of the Equity Interests held by the Issuer and the
Restricted Subsidiaries of such Guarantor have been sold or otherwise
disposed of in a transaction in compliance with the terms of this
Indenture (including Sections 4.20 and 5.01);
(iii) the Guarantor is designated an Unrestricted Subsidiary in
compliance with the terms of this Indenture (including Section 4.15);
and in each such case, the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with and that such release is authorized and permitted hereunder.
The Trustee shall execute any documents reasonably requested by the
Issuer or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Ten.
SECTION 10.05. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Issuer that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under its Guarantee and this Indenture, including, without limitation, any right
of subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Holder of Notes against the Issuer,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Issuer, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or Note on account of such claim or
other rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and the Notes shall not have been paid in full, such amount
shall have been deemed to have been paid to such Guarantor for the benefit of,
and held in trust for the benefit of, the Holders, and shall forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by
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this Indenture and that the waiver set forth in this Section 10.05 is knowingly
made in contemplation of such benefits.
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA Sections 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 12.02. Notices.
Except for notice or communications to Holders, any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
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If to the Issuer or any Guarantor:
MERITAGE CORPORATION
6613 North Scottsdale Road
Suite 200
Scottsdale, AZ 85260
Attention: Chief Financial Officer
Fax Number: (480) 998-9178
with, in the case of any notice furnished pursuant to Article
Six, a copy to:
SNELL & WILMER L.L.P.
One Arizona Center
400 E. Van Buren St.
Phoenix, AZ 85004
Attention: Steven D. Pidgeon, Esq.
Fax Number: (602) 382-6070
If to the Trustee:
WELLS FARGO BANK, NATIONAL ASSOCIATION
707 Wilshire Blvd.
17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Department
Fax Number: (213) 614-3355
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Issuer, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar.
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Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication to a Holder is mailed in the manner provided above, it
shall be deemed duly given, whether or not the addressee receives it.
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 12.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuer, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer or any Guarantor to
the Trustee to take any action under this Indenture, the Issuer or such
Guarantor shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance by or on
behalf of the Issuer or any Guarantor with a condition or covenant provided for
in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
SECTION 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or meetings of
Holders. The Registrar and Paying Agent may make reasonable rules for their
functions.
SECTION 12.07. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday or other day on which (i) commercial banks in
the City of New York are authorized or required by law to close or (ii) the New
York Stock Exchange is not open for trading. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK.
SECTION 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Issuer or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
SECTION 12.10. No Recourse Against Others.
No recourse for the payment of the principal of or premium, if any,
or interest, including Additional Interest, on any of the Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Issuer or any Guarantor in
this Indenture or in any supplemental indenture, or in any of the Notes, or
because of the creation of any Indebtedness represented thereby, shall be had
against any stockholder, officer, director or employee, as such, past, present
or future, of the Issuer or of any successor corporation or against the property
or assets of any such stockholder, officer, employee or director, either
directly or through the Issuer or any Guarantor, or any successor
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corporation thereof, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the Notes are solely obligations of
the Issuer and the Guarantors, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, any stockholder, officer,
employee or director of the Issuer or any Guarantor, or any successor
corporation thereof, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or the Notes or implied therefrom, and that any and
all such personal liability of, and any and all claims against every
stockholder, officer, employee and director, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issuance of the Notes. It is understood that this limitation
on recourse is made expressly for the benefit of any such shareholder, employee,
officer or director and may be enforced by any of them.
SECTION 12.11. Successors.
All agreements of the Issuer and the Guarantors in this Indenture
and the Notes shall bind their respective successors. All agreements of the
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
SECTION 12.12. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
SECTION 12.13. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 12.14. Separability.
Each provision of this Indenture shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Indenture or 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.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed all as of the date and year first written above.
MERITAGE CORPORATION
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MONTEREY HOMES ARIZONA, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
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MERITAGE PASEO CROSSING, LLC
By: Monterey Homes Arizona, Inc., its Sole Member
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MONTEREY HOMES CONSTRUCTION, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MERITAGE PASEO CONSTRUCTION, LLC
By: Monterey Homes Construction, Inc.,
its Sole Member
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
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MERITAGE HOMES OF ARIZONA, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MERITAGE HOMES CONSTRUCTION, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MTH-TEXAS GP, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
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MTH-TEXAS LP, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
LEGACY/MONTEREY HOMES L.P.
By: MTH-Texas GP, Inc., its General Partner
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
MERITAGE HOMES OF NORTHERN
CALIFORNIA, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
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HANCOCK-MTH BUILDERS, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
HANCOCK-MTH COMMUNITIES, INC.
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
LEGACY OPERATING COMPANY, L.P.
By: MTH-Texas GP, Inc., its General Partner
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
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WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By: ________________________________________________
Name:
Title:
By: ________________________________________________
Name:
Title:
111
EXHIBIT A
CUSIP
MERITAGE CORPORATION
No. $
9 3/4% SENIOR NOTE DUE 2011
MERITAGE CORPORATION, a Maryland corporation (the "Company"), for value
received, promises to pay to CEDE & CO. or registered assigns the principal sum
of $ dollars on June 1, 2011.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
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112
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
MERITAGE CORPORATION
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
Dated:
Certificate of Authentication
This is one of the 9 3/4% Senior Notes due 2011 referred to in
the within-mentioned Indenture.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By:___________________________________
Dated:
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[FORM OF REVERSE OF NOTE]
MERITAGE CORPORATION
9 3/4% SENIOR NOTE DUE 2011
1. Interest. MERITAGE CORPORATION, a Maryland corporation (the
"Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the face
hereof at a rate of 9 3/4% per annum. Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including May 30, 2001 to but excluding the
date on which interest is paid. Interest shall be payable in arrears on each
June 1 and December 1, commencing December 1, 2001. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. The Company shall pay
interest on overdue principal and on overdue interest (to the full extent
permitted by law) at a rate of 9 3/4% per annum.
2. Method of Payment. The Company will pay interest hereon (except
defaulted interest) to the Persons who are registered Holders at the close of
business on May 15 or November 15 next preceding the interest payment date
(whether or not a Business Day). Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Interest may be paid by check
mailed to the Holder entitled thereto at the address indicated on the register
maintained by the Registrar for the Notes.
3. Paying Agent and Registrar. Initially, Wells Fargo Bank, National
Association (the "Trustee") will act as a Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. Neither the
Company nor any of its Affiliates may act as Paying Agent or Registrar.
4. Indenture. The Company issued the Notes under an Indenture dated as
of May 30, 2001 (the "Indenture") among the Company, the Guarantors (as defined
in the Indenture) and the Trustee. This is one of an issue of Notes of the
Company issued, or to be issued, under the Indenture. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code Section
77aaa-77bbbb), as amended from time to time. The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
them. Capitalized and certain other terms used herein and not otherwise defined
have the meanings set forth in the Indenture. The Notes are obligations of the
Company limited in aggregate principal amount to $165,000,000.
5. [Intentionally Omitted]
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114
6. Optional Redemption. (a) The Company, at its option, may redeem the
Notes, in whole or in part, at any time on or after June 1, 2006 upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount), set forth below, together, in each case, with
accrued and unpaid interest thereon, if any, to the Redemption Date, if redeemed
during the twelve month period beginning on June 1 of each year listed below:
Year Redemption Price
---- ----------------
2006..................................... 104.875%
2007..................................... 103.250%
2008..................................... 101.625%
2009 and thereafter...................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to June 1, 2004,
the Issuer may redeem up to 35% of the aggregate principal amount of the Notes
with the net cash proceeds of one or more Qualified Equity Offerings at a
redemption price equal to 109.750% of the principal amount of the Notes to be
redeemed, plus accrued and unpaid interest thereon, if any, to the Redemption
Date; provided that (1) at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding immediately after the occurrence
of such redemption and (2) the redemption occurs within 90 days of the date of
the closing of any such Qualified Equity Offering.
(c) In the event of a redemption of fewer than all of the Notes, the
Trustee shall select the Notes to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, while such
Notes are listed, or if such Notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or in such other manner as the Trustee
shall deem fair and equitable. The Notes will be redeemable in whole or in part
upon not less than 30 nor more than 60 days' prior written notice, mailed by
first class mail to a Holder's last address as it shall appear on the register
maintained by the Registrar of the Notes. On and after any redemption date,
interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his registered address. On and after the Redemption
Date, unless the Company defaults in making the redemption payment, interest
ceases to accrue on Notes or portions thereof called for redemption.
8. Offers To Purchase. The Indenture provides that upon the occurrence
of a Change of Control or an Asset Sale and subject to further limitations
contained therein, the Company shall make an offer to purchase outstanding Notes
in accordance with the procedures set forth in the Indenture.
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9. Registration Rights. Pursuant to a Registration Rights Agreement
among the Company, the Guarantors, and UBS Warburg LLC and Deutsche Banc Alex.
Brown Inc., as selling securityholder, the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for notes of a separate series issued under
the Indenture (or a trust indenture substantially identical to the Indenture in
accordance with the terms of the Registration Rights Agreement) which have been
registered under the Securities Act, in like principal amount and having
substantially identical terms as the Notes. The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
10. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. A
Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay to it any taxes and fees required
by law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange any Notes or portion of a Note selected for redemption,
or register the transfer of or exchange any Notes for a period of 15 days before
a mailing of notice of redemption.
11. Persons Deemed Owners. The registered Holder of this Note may be
treated as the owner of this Note for all purposes.
12. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee will pay the money back to the
Company at its written request. After that, Holders entitled to the money must
look to the Company for payment as general creditors unless an "abandoned
property" law designates another Person.
13. Amendment, Supplement, Waiver, Etc. The Company, the Guarantors and
the Trustee (if a party thereto) may, without the consent of the Holders of any
outstanding Notes, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, maintaining the qualification of the Indenture under
the Trust Indenture Act of 1939, as amended, and making any change that does not
materially and adversely affect the rights of any Holder. Other amendments and
modifications of the Indenture or the Notes may be made by the Company, the
Guarantors and the Trustee with the consent of the Holders of not less than a
majority of the aggregate principal amount of the outstanding Notes, subject to
certain exceptions requiring the consent of the Holders of the particular Notes
to be affected.
14. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Equity
Interests or certain Indebtedness,
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make certain Investments, create or incur Liens, enter into transactions with
Affiliates, enter into agreements restricting the ability of Restricted
Subsidiaries to pay dividends and make distributions and on the ability of the
Company to merge or consolidate with any other Person or transfer all or
substantially all of the Company's or any Guarantor's assets. Such limitations
are subject to a number of important qualifications and exceptions. Pursuant to
Section 4.04, the Company must annually report to the Trustee on compliance with
such limitations.
15. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article Five of the Indenture, the
predecessor corporation will, except as provided in Article Five, be released
from those obligations.
16. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(7) or (8) with
respect to the Company) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the outstanding Notes may, by
written notice to the Trustee and the Company, and the Trustee upon the request
of the Holders of not less than 25% in aggregate principal amount of the
outstanding Notes shall, declare all principal of and accrued interest on all
Notes to be immediately due and payable and such amounts shall become
immediately due and payable. If an Event of Default specified in Section 6.01(7)
or (8) occurs with respect to the Company, the principal amount of and interest
on, all Notes shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment of principal, premium, if
any, or interest on the Notes or a default in the observance or performance of
any of the obligations of the Company under Article Five of the Indenture) if it
determines that withholding notice is in their best interests.
17. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
18. Discharge. The Company's obligations pursuant to the Indenture will
be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of United States dollars or U.S.
Government Obligations sufficient to pay when due principal of and interest on
the Notes to maturity or redemption, as the case may be.
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19. Guarantees. The Note will be entitled to the benefits of certain
Guarantees made for the benefit of the Holders. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
20. Authentication. This Note shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Note.
21. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York. The Trustee, the Company, the
Guarantor and the Holders agree to submit to the jurisdiction of the courts of
the State of New York in any action or proceeding arising out of or relating to
the Indenture or the Notes.
22. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
MERITAGE CORPORATION
6613 N. Scottsdale Road
Suite 200
Scottsdale, AZ 85260
Attention: Chief Financial Officer
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ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Date:______________________ Your Signature:__________________________
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:_______________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.09, Section 4.16 or Section 4.20 of the
Indenture, check the appropriate box:
[ ] Section 4.09 [ ] Section 4.16 [ ] Section 4.20
If you want to have only part of the Note purchased by the Company
pursuant to Section 4.09, Section 4.16 or Section 4.20 of the Indenture, state
the amount you elect to have purchased:
$___________________________________
(multiple of $1,000)
Date:_______________________________
Your Signature:_____________________________
(Sign exactly as your name appears on
the face of this Note)
____________________________________
Signature Guaranteed
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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EXHIBIT B
[FORM OF LEGEND FOR 144A NOTES AND OTHER NOTES THAT ARE
RESTRICTED NOTES]
The Note (or its predecessor) evidenced hereby was originally issued in a
transaction exempt from registration under Section 5 of the United States
Securities Act of 1933, and the Note evidenced hereby may not be offered, sold
or otherwise transferred in the absence of such registration or an applicable
exemption therefrom. Each purchaser of the Note evidenced hereby is hereby
notified that the seller may be relying on the exemption from the provisions of
Section 5 of the Securities Act provided by Rule 144A thereunder or another
exemption under the Securities Act. The holder of the Note evidenced hereby
agrees for the benefit of Meritage Corporation that (a) such Note may be resold,
pledged or otherwise transferred only (1)(a) to a person who the seller
reasonably believes is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act), purchasing for its own account in a transaction
meeting the requirements of Rule 144A under the Securities Act, (b) in a
transaction meeting the requirements of Rule 144 of the Securities Act, (c)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 of Regulation S under the Securities Act, (d) to an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act (an "Institutional Accredited Investor") that is
purchasing at least $100,000 of Notes for its own account or for the account of
an institutional accredited investor (and based upon an opinion of counsel if
Meritage Corporation so requests) or (e) in accordance with another exemption
from the registration requirements of the Securities Act provided that in the
case of a transfer under clause (e) such transfer is subject to the receipt by
the Trustee (and Meritage Corporation, if it so requests) of a certification of
the Transferor and an opinion of counsel to the effect that such transfer is in
compliance with the Securities Act, (2) to Meritage Corporation or any of its
subsidiaries or (3) under an effective registration statement under the
Securities Act and, in each case, in accordance with any applicable securities
laws of any state of the United States or any other applicable jurisdiction and
the indenture governing the Notes and (b) the holder will, and each subsequent
holder is required to, notify any purchaser from it of the Note evidenced hereby
of the resale restrictions set forth in (a) above. If any resale or other
transfer of any Note is proposed to be made under clause (a)(1)(d) above while
these transfer restrictions are in force then the transferor shall deliver a
letter from the transferee to Meritage and the Trustee which shall provide,
among other things, that the transferee is an institutional accredited investor
and that it is aquiring the Securities for investment purposes and not for
distribution in violation of the Securities Act.
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[FORM OF ASSIGNMENT FOR 144A NOTES AND OTHER NOTES THAT ARE
RESTRICTED NOTES]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ](b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date:_____________________ Your Signature:_________________________________
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee:____________________________________________________________
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SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:_________________________ ________________________________________
NOTICE: To be executed by
an executive officer
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EXHIBIT C
[FORM OF LEGEND FOR REGULATION S NOTE]
This Note has not been registered under the U.S. Securities Act of 1933, as
amended (the "Act"), and, unless so registered, may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. Persons
unless registered under the Act or except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Act.
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[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ](a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ](b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date:_____________________ Your Signature:_________________________________
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee:____________________________________________________________
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SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:_________________________ ________________________________________
NOTICE: To be executed by
an executive officer
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EXHIBIT D
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Note) in substantially the following form:
This Note is a Global Note within the meaning of the indenture
hereinafter referred to and is registered in the name of a depository or a
nominee of a depository. This Note is not exchangeable for Notes registered in
the name of a person other than the depository or its nominee except in the
limited circumstances described in the indenture, and no transfer of this Note
(other than a transfer of this Note as a whole by the depository to a nominee of
the depository or by a nominee of the depository to the depository or another
nominee of the depository) may be registered except in the limited circumstances
described in the Indenture.
Unless this certificate is presented by an authorized representative of
the Depository Trust Company (a New York corporation) ("DTC") to the issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of CEDE & CO. or in such other name
as it requested by an authorized representative of DTC (and any payment is made
to CEDE & CO. or such other entity as is requested by an authorized
representative of DTC), any transfer, pledge or other use hereof for value or
otherwise by or to any Person is wrongful inasmuch as the registered owner
hereof, CEDE & CO., has an interest herein.
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EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Wells Fargo Bank, National Association
Meritage Corporation
c/o Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/4% Senior Notes due
2011 (the "Notes") of Meritage Corporation, a Maryland Corporation (the
"Company"), we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture dated as of May 30, 2001 relating to the Notes and we agree
to be bound by, and not to resell, pledge or otherwise transfer the
Notes except in compliance with, such restrictions and conditions and
the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under
the Securities Act or any other applicable securities laws, have not
been and will not be qualified for sale under the securities laws of
any non-U.S. jurisdiction and that the Notes may not be offered, sold,
pledged or otherwise transferred except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that if we should sell any
Notes, we will do so only (i) to the Company or any subsidiary thereof,
(ii) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A), (iii) to an
institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the Notes, (iv) outside the United States to persons other than U.S.
persons in offshore transactions meeting the requirements of Rule 904
of Regulation S under the Securities Act, (v) pursuant to the exemption
form registration provided by Rule 144 under the Securities Act (if
applicable) or (vi) pursuant to an effective registration statement,
and we further agree to provide to any person purchasing any of the
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Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications,
legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and have
such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting each are able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account
or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We are not acquiring the Notes with a view toward the
distribution thereof in a transaction that would violate the Securities
Act or the securities laws of any state of the United States or any
other applicable jurisdiction.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_____________________________________
Name:
Title:
Date: _______________________
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EXHIBIT F
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
Wells Fargo Bank, National Association
Meritage Corporation
c/o Wells Fargo Bank, National Association
707 Wilshire Boulevard, 17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Department
Re: Meritage Corporation, a Maryland corporation (the "Company")
9 3/4% Senior Notes due 2011 (the "Notes")
Dear Sirs:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to
a person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 904(a) of
Regulation S;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
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You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:_________________________________
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EXHIBIT G
NOTATION OF GUARANTEE
Each of the undersigned (the "Guarantors") hereby jointly and severally
unconditionally guarantees, to the extent set forth in the Indenture dated as of
May 30, 2001 by and among Meritage Corporation, as issuer, the Guarantors, as
guarantors, and Wells Fargo Bank, National Association, as Trustee (as amended,
restated or supplemented from time to time, the "Indenture"), and subject to the
provisions of the Indenture, (a) the due and punctual payment of the principal
of, and premium, if any, and interest on the Notes, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on overdue principal of, and premium and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee, all in
accordance with the terms set forth in Article Ten of the Indenture, and (b) in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
Ten of the Indenture, and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee. Each Holder of the Note to
which this Guarantee is endorsed, by accepting such Note, agrees to and shall be
bound by such provisions.
[Signatures on Following Pages]
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134
IN WITNESS WHEREOF, each of the Guarantors has caused this Guarantee to
be signed by a duly authorized officer.
MONTEREY HOMES ARIZONA, INC.
By:_____________________________________________
Name:
Title:
MERITAGE PASEO CROSSING, LLC
By: Monterey Homes Arizona, Inc.,
its Sole Member
By:_____________________________________________
Name:
Title:
MONTEREY HOMES CONSTRUCTION, INC.
By:_____________________________________________
Name:
Title:
MERITAGE PASEO CONSTRUCTION, LLC
By: Monterey Homes Construction, Inc.,
its Sole Member
By:_____________________________________________
Name:
Title:
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MERITAGE HOMES OF ARIZONA, INC.
By:_____________________________________________
Name:
Title:
MERITAGE HOMES CONSTRUCTION, INC.
By:_____________________________________________
Name:
Title:
MTH-TEXAS GP, INC.
By:_____________________________________________
Name:
Title:
MTH-TEXAS LP, INC.
By:_____________________________________________
Name:
Title:
LEGACY/MONTEREY HOMES L.P.
By: MTH-Texas GP, Inc., its General Partner
By:_____________________________________________
Name:
Title:
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MERITAGE HOMES OF NORTHERN
CALIFORNIA, INC.
By:_____________________________________________
Name:
Title:
HANCOCK-MTH BUILDERS, INC.
By:_____________________________________________
Name:
Title:
HANCOCK-MTH COMMUNITIES, INC.
By:_____________________________________________
Name:
Title:
LEGACY OPERATING COMPANY, L.P.
By: MTH-Texas GP, Inc., its General Partner
By:_____________________________________________
Name:
Title:
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