OFFICERS' CERTIFICATE
Thomas H. Potts, President, and Lynn K. Geurin, Secretary, of Dynex
Capital, Inc., ("Company"), pursuant to Section 301 of the Indenture dated as of
July 14, 1997 between the Company and Texas Commerce Bank National Association,
as Trustee (the "Indenture"), hereby certify that a series of Securities with
the following terms has been established by a Board Resolution, and we further
certify as follows with respect to such series of the Securities (unless
otherwise defined herein, capitalized terms shall have the meanings set forth in
the Indenture):
1. The title of the series of Securities established hereby shall be
"7.875% Senior Notes Due July 15, 2002" ("Senior Notes"). The Senior Notes shall
constitute a series of Securities as defined in the Indenture and be senior,
unsecured obligations of the Company and will rank prior to all subordinated
indebtedness of the Company and pari passu with all other senior unsecured
indebtedness of the Company outstanding on the date of the issuance of the
Senior Notes.
2. The maximum aggregate principal amount of Senior Notes that may be
authenticated and delivered under the Indenture shall be $100,000,000 (except
for Senior Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of other Senior Notes pursuant to Section 304,
305, 306, 906, 1107 or 1305 of the Indenture).
3. The outstanding principal amount of the Senior Notes shall be
payable on July 15, 2002.
4. The Interest Payment Dates shall be July 15 and January 15
commencing January 15, 1998 and at Maturity and the Regular Record Date for
interest payable on any Interest Payment Date shall be July 1 and January 1.
Interest is payable in semi-annually in arrears from July 15, 1997 at a rate of
7.875% per annum. Interest on overdue principal shall be paid at the rate borne
by the Senior Noes (the "Overdue Rate"); interest on Defaulted Interest (as
defined in the Indenture) shall be payable at the Overdue Rate to the extent
lawful.
5. Principal, interest and Make-Whole Amounts, if any, payable in
respect of the Senior Notes shall be payable, and subject to Section 305 of the
Indenture, Senior Notes may be surrendered for registration of transfer and
exchange at the Corporate Trust Office, (as defined in the Indenture) and
notices or demands to or upon the Company in respect of the Senior Notes and the
Indenture may be served at 10900 Nuckols Road, Glen Allen, Virginia 23060 Attn:
President or at such other address as the Company may notify the Trustee in
writing.
6. The Senior Notes are redeemable at any time at the option of the
Company, in whole or from time to time in part, at a redemption price payable in
U.S. Dollars equal to the sum of: (i) the principal amount of the Senior Notes
being redeemed plus accrued interest thereon to the Redemption Date; and (ii)
the Make-Whole Amount (as defined below), if any, with respect to such Senior
Notes in accordance with the Article Eleven of the Indenture.
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Definitions: As used herein:
"Make-Whole Amount" means, in connection with any optional redemption
of any of the Senior Notes, the excess in U.S. Dollars, if any, of (i) the
aggregate present value as of the date of such redemption of each dollar of
principal being redeemed and the amount of interest (exclusive of interest
accrued to the date of redemption) that would have been payable in respect of
each such dollar if such redemption had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
notice of such redemption is given) from the respective dates on which such
principal and interest would have been payable if such redemption had not been
made, to the date of redemption; over (ii) the aggregate principal amount of the
Senior Notes being redeemed.
"Reinvestment Rate" means the yield on Treasury securities at a
constant maturity corresponding to the remaining life (as of the date of
redemption, and rounded to the nearest month) to Stated Maturity of the
principal being redeemed (the "Treasury Yield"), plus 0.25%. For purposes
hereof, the Treasury Yield shall be equal to the arithmetic mean of the yields
published in the Statistical Release (as defined below) under the heading "Week
Ending" for "U.S. Government Securities -- Treasury Constant Maturities" with a
maturity equal to such remaining life; provided, that if no published maturity
exactly corresponds to such remaining life, then the Treasury Yield shall be
interpolated or extrapolated on a straight-line basis from the arithmetic means
of the yields for the next shortest and next longest published maturities. For
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount
shall be used. If the format or
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content of the Statistical Release changes in a manner that precludes
determination of the Treasury Yield in the above manner, then the Treasury yield
shall be determined in the manner that most closely approximates the above
manner, as reasonably determined by the Company.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which reports yields on actively traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by the
Company.
7. Except as provided in Section 14 hereof, the Securities are not
redeemable at the option of the Holder thereof and the Company is not obligated
to redeem, repay or purchase the Securities pursuant to any sinking fund or
analogous provision.
8. Events of Default - in addition to the Events of Default set forth
in Article Five of the Indenture, each of the following shall constitute an
Event of Default:
(i) failure by the Company for 60 days after notice to comply with any
of its other agreements in the Indenture or the Notes; (ii) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company, any of its Subsidiaries or any of its Affiliates in an amount in excess
of $10 million, which results in the acceleration of such Indebtedness; (iii)
failure by the Company, any of its Subsidiaries or any of its Affiliates to pay
final judgments aggregating in excess of $10 million, which judgments are not
paid, discharged or stayed for a period of 60 days.
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9. Payments of all principal, interest and Make-Whole Amounts, if any,
shall be made solely in U.S. Dollars and shall be made in immediately available
funds.
10. The Senior Notes shall be subject to the following covenants in
addition to the covenants set forth in Article 10:
(i) Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock.
(A) The Company will not, and will not permit any of
its Subsidiaries or Affiliates to incur any Indebtedness
(including Acquired Indebtedness), other than Permitted
Indebtedness, or issue any shares of Disqualified Stock,
unless immediately after giving effect to the incurrence of
such Indebtedness or the issuance of such Disqualified
Stock, the Company's Adjusted Consolidated Indebtedness
would not exceed 150% of the Company's Adjusted
Consolidated Tangible Net Worth.
(B) The Company may not and will not permit any of
its Subsidiaries or Affiliates to incur any Unsecured
Indebtedness if the ratio of Income Available for Interest
Payments to Interest Expense for the four consecutive fiscal
quarters most recently ended prior to the date such additional
Indebtedness is to be incurred shall have been less than 2 to
1 on a pro forma basis, after giving effect thereto and the
application of proceeds therefrom.
(ii) Limitation on Restricted Payments. The Company will not,
and will not permit any of its Subsidiaries or Affiliates, to directly
or indirectly, make any Restricted Payments unless (i) at the time of
such Restricted Payments after giving pro forma effect to such
Restricted Payments, no Default or Event of Default shall have
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occurred and be continuing or would occur as a consequence thereof
under any Indebtedness of the Company, including under the Indenture
and (ii) the aggregate amount of all such Restricted Payments does not
exceed the sum of (a) the cumulative real estate investment trust
taxable income of the Company earned for tax years ending after
December 31, 1996 as determined by Section 857(b)(2) of the Code, but
without giving effect to the dividends paid deduction defined in
Section 561 of the Code, (b) the aggregate net proceeds to the Company
from sales of its Capital Stock since the date of the Indenture and (c)
$25 million; provided, however, that the foregoing limitations shall
not apply to any distribution which is necessary to maintain the
Company's status as a real estate investment trust under the Code.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at the date of declaration such payment
would have complied with the provisions of the Indenture;
(ii)(a) the redemption, repurchase, retirement or other
acquisition of any Equity Interests (the "Retired Capital Stock") or
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of the substantially concurrent sale of, Equity Interests of
the Company (other than any Disqualified Stock) (the "Refunding Capital
Stock"), and (b) the declaration and payment of dividends on the
Refunding Capital Stock in an aggregate amount per year no greater than
the aggregate amount of dividends per annum that was declarable and
payable on such Retired Capital Stock immediately prior to such
retirement;
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(iii) the redemption, repurchase or other acquisition or
retirement of any Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, new Indebtedness of the Company so long as (A) the principal
amount of such new Indebtedness does not exceed the principal amount of
the Subordinated Indebtedness being so redeemed, repurchased, acquired
or retired for value (plus the amount of any premium required to be
paid under the terms of the instrument governing the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired), (B)
such Indebtedness is subordinated to the Notes at least to the same
extent as such Subordinated Indebtedness so redeemed, repurchased,
acquired or retired for value, (C) such Indebtedness has a final
scheduled maturity date equal to or later than the final scheduled
maturity date of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired and (D) such Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the
remaining Weighted Average Life to Maturity of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired; and
(iv) (A) the declaration and payment of dividends to holders
of any class or series of Preferred Stock (including Disqualified
Stock) and (B) the declaration and payment of dividends on Refunding
Capital Stock in excess of the dividends declarable and payable thereon
pursuant to clause (ii); provided, however, that for the most recently
ended four consecutive fiscal quarters immediately preceding the date
of the declaration of such dividends, after giving effect to such
declaration on a pro forma basis, the Company on a consolidated basis
would have had a Coverage Ratio of at least 2 to 1;
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provided however, that at the time of and after giving effect to any
Restricted Payment permitted under clauses (ii), (iii) and (iv) of this
paragraph, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and provided
further, that for purposes of determining the aggregate amount expended
for Restricted Payments under the initial paragraph under this covenant
"Limitation on Restricted Payments," any amounts expended or set aside
under (i) - (iv) shall be excluded.
(iii) Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its Subsidiaries or Affiliates to,
directly or indirectly, enter into or suffer to exist any transaction
or series of related transactions (including, without limitation, the
sale, purchase, exchange or lease of assets, property or services) with
any Related Person (other than a Subsidiary or an Affiliate) unless (a)
such transaction or series of transactions is on terms that are no less
favorable to the Company or such Subsidiary or Affiliate, as the case
may be, than would be available in a comparable transaction with an
unrelated third party and (b)(1) where such transaction or series of
transactions involves aggregate consideration in excess of $5 million,
such transaction or series of transactions is approved by a majority of
the Board of Directors of the Company, including the approval of a
majority of the independent, disinterested directors, as evidenced by a
resolution relating thereto of the Board of Directors filed with the
Trustee and (2) where such transaction or series of transactions
involves aggregate consideration in excess of $15 million, the Company
also delivers to the Trustee an opinion from a nationally recognized
investment banking firm as to the
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fairness of such transaction or series of transactions to the Company
or such Subsidiary from a financial point of view. Notwithstanding the
foregoing, this provision will not apply to (A) compensation or
employee benefit arrangements with any officer or director of the
Company; and (B) any transaction entered into in the ordinary course of
business by the Company, Subsidiary or Affiliate with a Subsidiary or
an Affiliate.
(iv) Provision of Financial Information. Whether or not the
Company is subject to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"), the Company must, to the
extent permitted under the Exchange Act, file with the Securities and
Exchange Commission (the "SEC") the annual reports, quarterly reports
and other documents which the Company would have been required to file
with the SEC pursuant to such Section 13 or 15(d) (the "Financial
Statements") if the Company were so subject, on or prior to the
respective dates (the "Required Filing Dates") by which the Company
would have been required to file such documents. The Company must also
in any event: (i) within 15 days after each Required Filing Date (a)
transmit by mail to all Holders of Notes, as their names and addresses
appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Company would
have been required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act if the Company were subject to such Sections; and
(ii) if filing such documents by the Company with the SEC is not
permitted under the Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder of the Notes.
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Definitions. As used herein,
"Acquired Indebtedness" means (i) with respect to any Person that
becomes a Subsidiary (or is merged into the Company or any of its Subsidiaries)
or an Affiliate after the date of the Indenture, Indebtedness of such Person or
any of its subsidiaries existing at the time such Person becomes a Subsidiary
(or is merged into the Company or any of its Subsidiaries or Affiliates) that
was not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary (or merged into the Company or any of its Subsidiaries) or
an Affiliate; and (ii) with respect to the Company, any Subsidiary or any
Affiliate, any Indebtedness assumed by the Company, any Subsidiary or any
Affiliate in connection with the acquisition of any asset from another Person,
which Indebtedness was not incurred by such other Person in connection with, or
in contemplation of, such acquisition.
"Adjusted Consolidated Indebtedness" of the Company means the sum of
the aggregate principal amount of all Indebtedness of the Company, on a
consolidated basis, minus the aggregate principal amount of Indebtedness
described in clauses (ii), (iii) and (iv) of the definition of Permitted
Indebtedness and with respect to clause (v) of the definition of Permitted
Indebtedness, those amounts other than amounts described with respect to clause
(i) of the definition of Permitted Indebtedness.
"Adjusted Consolidated Tangible Net Worth" of the Company means, as of
any date all amounts that would be included under shareholders' equity
determined on a consolidated balance sheet of the Company and in accordance with
generally accepted accounting principles, minus the sum of (i) all intangible
assets, determined in accordance with generally accepted accounting principles
and (ii) minority interests in any joint
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venture, partnership or other similar arrangement, whether in corporate,
partnership or other legal form, that is not a Subsidiary or Affiliate. For the
purposes of this definition, loan servicing rights of the Company or its
Subsidiaries and Affiliates are not considered intangible assets.
"Affiliate" of the Company means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company; or (ii) any other Person in which the Company has a
non-controlling ownership interest exceeding 50%. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of Voting Stock, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Beneficial Owner" shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act, as in effect on the date of the
execution of the Indenture.
"Business Day" shall mean, in addition to the meaning given in the
Indenture, any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which banking institutions in New York, New York are
authorized or required by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights or other equivalents of or interests in
(however designated) equity of such person, including any Preferred Stock and if
such Person is a partnership, partnership interests (whether general or limited)
and any other interest or participation
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that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership.
"Cash Equivalents" means, at any time, (a) any evidence of Indebtedness
with a maturity of 180 days or less from the date of acquisition issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof); (b) certificates of
deposit, money market deposit accounts and acceptances with a maturity of 180
days or less from the date of acquisition 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; (c) commercial paper with a
maturity of 180 days or less from the date of acquisition issued by a
corporation that is not an Affiliate of the Company and is organized under the
laws of any state of the United States or the District of Columbia whose debt
rating, at the time as of which such investment is made, is at least "A-1" by
Standard & Poor's Ratings Services or at least "P-1" by Moody's Investors
Service, Inc. or rated at least an equivalent rating category of another
nationally recognized securities rating agency; (d) repurchase agreements and
reverse repurchase agreements having a term of not more than 30 days for
underlying securities of the types described in clause (a) above entered into
with a financial institution meeting the qualifications described in clause (b)
above; (e) any security, maturing not more than 180 days after the date of
acquisition, backed by standby or direct pay letters of credit issued by a bank
meeting the qualifications described in clause (b) above; and (f) any security,
maturing not more than 180 days after the date of acquisition, issued or fully
guaranteed by any state, commonwealth, or territory of the
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United States of America, or by any political subdivision thereof, and rated at
least "A" by Standard & Poor's Ratings Service or at least "A" by Moody's
Investors Service, Inc. or rated at least an equivalent rating category of
another nationally recognized securities rating agency.
"Change of Control" means any event or series of events by which (i)
any "Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the Beneficial Owner, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
shares of Capital Stock of the Company entitling such Person to exercise 50% or
more of the total voting power of all shares of Voting Stock of the Company;
(ii) any consolidation of the Company with, or merger of the Company into, any
other Person, any consolidation of any other Person with, or merger of another
Person into, the Company, in any such event pursuant to a transaction in which
the Voting Stock of the Company outstanding immediately prior to the
effectiveness thereof is cancelled or changed into or exchanged for cash,
securities or other property (other than a transaction where (a) the outstanding
Voting Stock of the Company is changed into or exchanged for Voting Stock of the
surviving corporation that is not Disqualified Stock, and (b) the holders of the
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, more than 50% of the total voting power of all shares of Voting
Stock of the surviving corporation immediately after such transaction); (iii)
any sale, conveyance, transfer or lease (in one transaction or a series of
transactions) of all or substantially all of the assets of the Company to
another Person; (iv) the shareholders of the Company approve any plan of
liquidation or
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dissolution of the Company; or (v) Continuing Directors cease to constitute at
least a majority of the Board of Directors of the Company.
"Change of Control Triggering Event" means the occurrence of both a
Change of Control and a Rating Decline.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Dynex Capital, Inc.
"Continuing Director" means a director who either was a member of the
Board of Directors of the Company on the date that the Indenture became
effective or who became a director of the Company subsequent to such date and
whose election, or nomination for election by the Company's shareholders, was
duly approved by a majority of the Continuing Directors then on the Board of
Directors of the Company, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as a nominee for director.
"Coverage Ratio" means the ratio of (i) the sum of (a) Income Available
for Interest Payments plus (b) any dividends payable to holders of any series or
classes of Preferred Stock to (ii) the sum of (a) Interest Expense plus (b) any
dividends payable to holders of any series or classes of Preferred stock.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any person, any capital
stock or partnership interest of such person which by the terms of such capital
stock or partnership interest (or by the terms of any security into which it is
convertible or for which it is
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exchangeable or exercisable), upon the occurrence of any event or otherwise: (i)
matures or is mandatory redeemable, pursuant to a sinking fund obligation or
otherwise; (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock described by clause (i) or (iii) of this
definition; or (iii) is redeemable at the option of the holder thereof, in whole
or in part, in each case on or prior to the maturity of the relevant series of
Notes.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding Indebtedness that is
convertible into, or exchangeable for, the Company's Capital Stock and warrants,
options or other rights to acquire the Company's Capital Stock, including Stock
Appreciation Rights, issuable or granted under the Company's existing Stock
Incentive Plan).
"Hedging Obligations" means the obligations of the Company or its
Subsidiaries or Affiliates incurred in the normal course of its business under
(i) currency exchange or interest rate swap agreements, currency exchange or
interest rate cap agreements and currency exchange or interest rate collar
agreements and (ii) other agreements or arrangements designed to protect the
Company against fluctuations in currency exchange or interest rates.
"Income Available for Interest Payments" for any periods means Net
Income plus Interest Expense; minus (i) extraordinary gains and losses; (ii) any
other gains and losses that do not otherwise relate to the sale or
securitization of Assets in the ordinary course of business; and (iii) the
effect of any non-cash charge resulting from a change in accounting principles
in determining Net Income for such period.
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"Indebtedness" of the Company means any indebtedness of the Company,
whether or not contingent, in respect of: (i) borrowed money or other
indebtedness evidenced by bonds, notes, debentures or similar instruments; (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by the Company, including but not
limited to collateralized bonds and collateralized repurchase agreements; (iii)
letters of credit or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable; (iv) the principal amount of all obligations
of the Company with respect to redemption, repayment or other repurchase of any
Disqualified Stock; or (v) any lease of property by the Company as lessee which
is reflected on the Company's consolidated balance sheet as a capitalized lease
in accordance with generally accepted accounting principles; provided, that, in
the case of items in indebtedness under (i) through (iii) above such
indebtedness shall be included only to the extent that any such items (other
than letters of credit) would appear as a liability on the Company's
consolidated balance sheet in accordance with generally accepted accounting
principles, and also shall include, to the extent not otherwise included, any
obligation of the Company to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), indebtedness of another person (other than the Company), it being
understood that Indebtedness shall be deemed to be incurred by the Company,
whenever the Company or such Subsidiary shall create, assume, guarantee or
otherwise become liable in respect thereof.
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"Interest Expense" means for any period, the sum of (a) interest and
related expense relating solely to Unsecured Indebtedness (including, but not
limited to, amortization of original issue discount or premium, as the case may
be, non-cash interest payments, the interest component of any deferred payment
obligations, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings and net payments
(if any) pursuant to obligations under hedging instruments but excluding
amortization of deferred financing fees) of the Company on a consolidated basis
and (b) capitalized interest relating to Unsecured Indebtedness of the Company,
whether paid or accrued, all as determined on a consolidated basis and in
accordance with generally accepted accounting principles.
"Investments" means with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding advances to customers,
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions of Indebtedness,
Equity Interests or other securities issued by any other Person and investments
in another Person that are required by generally accepted accounting principles
to be classified on the balance sheet of the Company in the same manner as the
other investments included in this definition to the extent such transactions
involve the transfer of cash or other property.
"Net Income" means net income as presented in the consolidated
financial statements of the Company as determined in accordance with generally
accepted accounting principles, and is calculated before any deduction for
dividends on Preferred Stock.
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"Permitted Indebtedness" means (i) all indebtedness of the Company or
its Subsidiaries or Affiliates at the time of closing of the issuance and sale
of the Notes, (ii) indebtedness under any loan repurchase agreements or
repurchase facilities entered into in the ordinary course of business with an
original maturity not to exceed 180 days, (iii) indebtedness under any warehouse
line of credit, letter of credit or similar facility secured primarily by loans
held for sale or securitization or tax-exempt bonds, (iv) collateralized bond
obligations that are non-recourse to the Company or its Subsidiaries or
Affiliates and (v) the incurrence by the Company or its Subsidiaries or
Affiliates of Indebtedness which serves to refund, refinance or restructure any
Indebtedness incurred as permitted under clauses (i)-(iv) above, or any
Indebtedness issued to so refund, refinance or restructure such Indebtedness
including additional Indebtedness incurred to pay premiums and fees in
connection therewith (the "Refinancing Indebtedness") prior to its respective
maturity, provided that, with respect to the refinancing of Indebtedness
referred to in clause (i) above, such Refinancing Indebtedness (a) does not
increase the principal amount of total Permitted Indebtedness at the time of the
issuance and sale of the Notes, (b) has a Weighted Average Life to Maturity at
the time such Refinancing Indebtedness is incurred which is not less than the
remaining Weighted Average Life to Maturity of Indebtedness being refunded or
refinanced, (c) to the extent that such Refinancing Indebtedness refinances
Indebtedness that is unsecured, such Refinancing Indebtedness is likewise
unsecured, or (d) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinated or pari passu to the Notes, such Refinancing
Indebtedness is subordinated or pari passu to the Notes at least to the same
extent as the Indebtedness being refinanced or refunded.
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"Permitted Investments" means (a) any Investment in the Company or any
Wholly Owned Subsidiary; (b) any Investment in cash and Cash Equivalents; (c)
any Investment in financial assets not constituting Cash or Cash Equivalents
made in the ordinary course of business, including but not limited to portfolio
assets (such as collateral for collateralized bonds, mortgage securities, other
portfolio assets and available-for-sale investments), loans held for
securitization, all as determined in accordance with generally accepted
accounting principles; (d) any Investment by the Company, any Subsidiary or any
Affiliate in a Person if as a result of such Investment (i) such Person becomes
a Wholly Owned Subsidiary or (ii) such person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary; (e) any Investment existing on the
date of the closing date for the sale and original issuance of the Notes under
the Indenture; (f) advances to employees not in excess of $1 million outstanding
at any one time in the aggregate; (g) any Investment acquired by the Company,
any Subsidiary or any Affiliate (i) in exchange for any other Permitted
Investment or (ii) as a result of a foreclosure by the Company, any Subsidiary
or any Affiliate with respect to any secured Investment; (h) Hedging
Obligations; (i) loans and advances to officers, directors and employees for
business related travel expenses, moving expenses and other similar expenses, in
each case, incurred in the ordinary course of business; and (j) Investments the
payment for which consists of Equity Interests of the Company or its
Subsidiaries or Affiliates (exclusive of Disqualified Stock).
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"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Rating Agencies" means both (i) Standard & Poor's Rating Services or
any successor ("S&P") and (ii) Moody's Investors Service, Inc. or any successor
("Moody's") or (iii) if S&P or Moody's or both shall not make a rating of the
Notes publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which shall be
substituted for S&P or Moody's or both, as the case may be.
"Rating Decline" means the occurrence of one of the following on, or
within 90 days after, the date of public notice of the occurrence of a Change of
Control or of the intention by the Company to effect a Change of Control: (a) a
downgrading in the rating by one of the Rating Agencies by one or more
gradations (each gradation for S&P being measured by a "+" or "-" and each
gradation for Moody's being measured by "1", "2" or "3" or their equivalent if
the gradation system used by the Rating Agency in question is changed) or (b)
the public announcement by one of the Rating Agencies that it has under
surveillance or review, with possible negative implications, its rating of the
Notes. In determining whether the rating of the Notes has decreased by one or
more gradations,
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gradations within the rating categories of the Rating Agencies ("+" and "-" for
S&P; "1", "2" and "3" for Moody's, or the equivalent gradations for another
Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline
in a rating from BB+ to BB, as well as from BB- to B+, will constitute a
decrease of one gradation).
"Related Person" means (a) any Affiliate of the Company, (b) any Person
who directly or indirectly holds 5% or more of any class of Voting Stock of the
Company, (c) any Person who is an executive officer or director of the Company
and (d) any Affiliate of or any relative by blood, marriage or adoption not more
remote than first cousin of any such Person referred to in clause (b) or (c)
above.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payments" means any of the following actions by the
Company: (i) the declaration or payment of any dividends or the making of any
distribution on account of the Company's Equity Interests, including any
dividend or distribution payable in connection with any merger or consolidation
(other than (A) dividends or distributions by the Company payable in Equity
Interests (other than Disqualified Stock) of the Company or (B) dividends or
distributions by a Subsidiary or an Affiliate, so long as in the case of any
dividend or distribution payable on or in respect of any class or series of
securities issued by a Subsidiary or an Affiliate, as the case may be, the
Company, a Subsidiary or an Affiliate, as the case may be, receives at least
its pro rata share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities); (ii) the
purchase, redemption, defeasance or, otherwise, acquisition or retirement
for value of any Equity Interests of the Company, excluding the conversion
of any security into an Equity Interest (other than Disqualified Stock) or
redemption thereof with an Equity Interest (other than
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Disqualified Stock); (iii) the making of any principal payments on, or
redemption, repurchase, defeasance or, otherwise, acquisition or retirement for
value (unless with an Equity Interest other than Disqualified Stock) in each
case, prior to any scheduled repayment, or maturity, of any Subordinated
Indebtedness existing on the date of the Indenture; or (iv) the making of any
Restricted Investment.
"Subordinated Indebtedness" means with respect to the Notes, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes.
"Subsidiary" means a corporation, a majority of the outstanding Voting
Stock, of which is owned directly or indirectly, by the Company or by one or
more other Subsidiaries of the Company.
"Unsecured Indebtedness" as of any date means the sum of any
Indebtedness of the Company that is not secured or collateralized by any
mortgage, lien, charge, pledge or other security interest, determined on a
consolidated basis in accordance with generally accepted accounting principles,
excluding (i) any amounts owed under accrued interest payable and (ii) any
letters of credit that are secured or will be secured by other than assets of
the Company in the event such letters of credit are drawn upon.
"Voting Stock" means all outstanding classes of Capital Stock of any
entity entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (i) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or
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similar payment with respect to such Disqualified Stock, as the case may be,
multiplied by the amount of such payment, by (ii) the sum of all such payments.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person 95% of the outstanding Capital Stock or other ownership interest of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
11. The Senior Notes shall be issued as Registered Securities only in
the form of a permanent global note which will be deposited with the Depository
Trust Corporation and shall be exchangeable only as provided in Section 305 of
the Indenture. The form of the Senior Notes is attached hereto.
12. The provisions of Sections 1402 and 1403 of the Indenture with
respect to defeasance and discharge and covenant defeasance, respectively, shall
be applicable to the Senior Notes without modification.
13. The Company will not pay any Additional Amounts in respect of the
Senior Notes.
14. Repurchase at Option of Holders Upon a Change of Control Triggering
Event. Upon the occurrence of a Change of Control Triggering Event, each Holder
of Senior Notes shall have the right, at the Holder's option, to require the
Company to repurchase all of such Holder's Senior Notes, or any portion thereof
that is an integral multiple of $1,000, for cash on the date (the "Repurchase
Date") that is not more than 45 days after the date of the Company Notice (as
defined below), which date shall be set so as to comply with all applicable
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") including regulations thereunder regarding prompt
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payment to Holders of the Senior Notes, at a price equal to 101% of the
principal amount of the Senior Notes to be repurchased (the "Repurchase Price"),
together with the accrued interest to the Repurchase Date.
Within 30 days after the occurrence of a Change of Control Triggering
Event, the Company shall mail to all Holders of record of the Senior Notes a
notice (the "Company Notice") of the occurrence of such Change of Control
Triggering Event and of the repurchase right arising as a result thereof. The
Company shall deliver a copy of the Company Notice to the Trustee and cause a
copy or a summary of such notice to be published in a newspaper of general
circulation in the City of New York. To exercise the repurchase right a Holder
of Senior Notes shall deliver on or before the 30th day after the date of the
Company Notice a written notice (which notice shall be irrevocable except as
otherwise required by applicable law) to the Trustee of the Holder's exercise of
such right, specifying the amount of Senior Notes owned by the Holder for which
the right is being exercised, duly signed by the Holder. The Company will comply
with all applicable tender offer rules under the Exchange Act in the event that
a Change of Control Triggering Event occurs under these Change of Control
provisions and the Company is required to repurchase Senior Notes as described
above.
July 14 1997 /s/ THOMAS H. POTTS
--------------------------
Thomas H. Potts, President
/s/ LYNN K. GEURIN
--------------------------
Lynn K. Geurin, Secretary
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