-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MQKYfXBQkSmtzj/c/fWWIhqXbKha1rmOK6rDRjq3X5M98I2VxJMh8fMDy0bXgcDG C20Q9g99QUmVibadmfMSEw== 0000950116-97-002088.txt : 19971117 0000950116-97-002088.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950116-97-002088 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESOURCE AMERICA INC CENTRAL INDEX KEY: 0000083402 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 720654145 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-40231 FILM NUMBER: 97719487 BUSINESS ADDRESS: STREET 1: 1521 LOCUST ST STREET 2: 4TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155465005 MAIL ADDRESS: STREET 1: 2876 SOUTH ARLINGTON ROAD CITY: AKRON STATE: OH ZIP: 44312 FORMER COMPANY: FORMER CONFORMED NAME: RESOURCE EXPLORATION INC DATE OF NAME CHANGE: 19890214 FORMER COMPANY: FORMER CONFORMED NAME: SMTR CORP DATE OF NAME CHANGE: 19700522 S-4 1 Registration No. 333-_________ SECURITIES AND EXCHANGE COMMISSION FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 RESOURCE AMERICA, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 72-0654145 (I.R.S. Employer Identification No.) 1521 Locust Street, Philadelphia, Pennsylvania 19102 (215-546-5005) (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Michael L. Staines, 1521 Locust Street, Philadelphia, Pennsylvania 19102 (215-546-5005) (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: J. Baur Whittlesey, Esq. Dave Muchnikoff, P.C. Ledgewood Law Firm, P.C. Silver, Freedman & Taff, L.L.P. 1521 Locust Street 1100 New York Avenue, N.W. Philadelphia, PA 19102 Washington, D.C. 20005-3934 (215) 735-0663 (202) 682-0354 Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box [ ]. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering [ ]________. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering [ ]__________. CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------ Title of each class of Proposed Proposed maximum securities to be Amount to be maximum offering aggregate offering Amount of registered registered price per note(1) price(1) registration fee - ------------------------------------------------------------------------------------------------------------------------------------ 12% Senior Notes due 115,000 $1,000 $115,000,000 $34,848.48 2004 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f)(2) under the Securities Act of 1933 based upon the book value of the 12% Senior Notes as of November 14, 1997. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS Subject to Completion November 14, 1997 [LOGO] RESOURCE AMERICA, INC. OFFER BY RESOURCE AMERICA, INC. TO EXCHANGE 12% SENIOR NOTES DUE 2004 (THE "NEW NOTES"), WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OF ITS CURRENTLY OUTSTANDING 12% SENIOR NOTES DUE 2004 (THE "OLD NOTES"). THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FEBRUARY 15, 1998, UNLESS EXTENDED. Resource America, Inc., a Delaware corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, the "Prospectus") and in the accompanying Letter of Transmittal and related documents (which together constitute the "Exchange Offer"), to exchange up to $115 million aggregate principal amount of its 12% Senior Notes due 2004 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein), of which this Prospectus is a part, for a like aggregate principal amount of its currently outstanding 12% Senior Notes due 2004 (the "Old Notes"), of which $115 million aggregate principal amount is outstanding. The Old Notes and the New Notes are collectively sometimes referred to as the "Notes." The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that (i) the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes, and (ii) the New Notes will not provide for any increase in the interest rate thereon since the Old Notes provided for such increases only in the event that the Old Notes were not registered under the Securities Act within the period specified in the Old Notes. See "Description of New Notes" and "Description of Old Notes." The New Notes are being offered in exchange for the Old Notes in order to satisfy certain obligations of the Company under the Registration Rights Agreement (the "Registration Rights Agreement") dated July 22, 1997 between the Company and Friedman, Billings, Ramsey & Co., Inc., the initial purchaser of the Old Notes (the "Initial Purchaser"). In the event the Exchange Offer is consummated, any Old Notes remaining outstanding after consummation of the Exchange Offer and the New Notes issued in the Exchange Offer will vote together as a single class for purposes of determining whether Holders of the requisite percentage in aggregate principal amount of Notes have taken certain actions or exercised certain rights under the Indenture dated July 22, 1997 (the "Indenture") pursuant to which the Old Notes were issued. The New Notes will be unsecured general obligations of the Company which will rank senior in right of payment to all subordinated debt of the Company and pari passu with or senior to all existing and future general unsecured indebtedness of the Company. The New Notes will be subordinate to all liabilities under the Company's existing or future secured indebtedness or indebtedness incurred under existing or future credit facilities. In addition, the business operations of the Company are conducted through its Subsidiaries, and accordingly, the New Notes will be effectively subordinated to all existing and future obligations of the Company's Subsidiaries. As of September 30, 1997, the Company and its Subsidiaries had outstanding $4.5 million of debt, with an aggregate yearly debt service of $1.1 million, and $45 million available under various credit facilities (which have an aggregate of $585,000 in outstanding draws) which are senior to the New Notes, and an additional $4.2 million of unsecured debt ranking pari passu with the New Notes. The Company has also guaranteed performance by a Subsidiary of the Subsidiary's guarantee of a $5.5 million obligation of a special purpose financing entity. The New Notes are not redeemable prior to August 1, 2002; thereafter they are redeemable at the option of the Company at the redemption prices set forth herein plus accrued interest to the redemption date. No sinking fund is provided for the New Notes. Upon a Change in Control Event (as defined in the Indenture), each Holder has the right to require the Company to repurchase such Holder's Notes, in whole or in part, at 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the repurchase date. See "Description of Old Notes" and "Description of New Notes." The New Notes will be represented by one or more "global notes" registered in the name of a nominee of The Depository Trust Company, as depositary (the "Depositary"). Beneficial interests in the global notes will be shown on, and transfer thereof will be effected only through, records maintained by the Depositary and its participants. Owners of beneficial interests in the global notes will not be considered Holders of the New Notes. See "Description of Notes - Book-Entry Delivery and Form." SEE "RISK FACTORS" COMMENCING ON PAGE 25 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER OLD NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is November __, 1997. -2- Based upon certain interpretive letters issued by the staff of the United States Securities and Exchange Commission (the "Commission") to third parties in unrelated transactions, the Company is of the view that Holders of the Old Notes (other than any Holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchange their Old Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes and otherwise transfer such New Notes without compliance with the registration and prospectus-delivery provisions of the Securities Act, provided such New Notes are acquired in the ordinary course of the Holder's business and such Holder has no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. (See "Plan of Distribution"). In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or in compliance with an available exemption from registration or qualification. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any Holder of the New Notes reasonably requests in writing. If a Holder of Old Notes does not exchange such Old Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer referred to in the legend thereon. In general, the Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Holders of Old Notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the Exchange Offer. (See "Risk Factors--Consequences of a Failure to Exchange Old Notes;" "The Exchange Offer--Resales of New Notes.") Each Holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. In addition, the Company may require such Holder, as a condition of such Holder's eligibility to participate in the Exchange Offer, to furnish to the Company (or an agent thereof) in writing information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended [the "Exchange Act"]) on behalf of whom such Holder holds the Old Notes to be exchanged in the Exchange Offer. Each broker-dealer -3- that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities, and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that, by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based upon the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that broker-dealers who acquired Old Notes for their own accounts, as a result of market-making activities or other trading activities ("Participating Broker-Dealers"), may fulfill their prospectus-delivery requirements with respect to the New Notes received upon exchange of such Old Notes with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for the Exchange Offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions of the Registration Rights Agreement, the Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period of 180 days after the Expiration Date (as defined herein), or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. (See "Plan of Distribution.") Any Participating Broker-Dealer (or other person) who is an "affiliate" of the Company, and any person acquiring New Notes in the Exchange Offer with the intent of participating in a distribution of the New Notes, cannot rely upon the interpretive letters of the commission referred to above and must comply with the registration and prospectus-delivery requirements of the Securities Act in connection with any resale transaction. (See "The Exchange Offer--Resales of New Notes.") Each Participating Broker-Dealer who surrenders Old Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal or delivery of an Agent's Message (as defined herein), that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect, or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the -4- sale of New Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. Prior to the Exchange Offer, there has been only a limited secondary market and no public market for the Old Notes. The New Notes will be a new issue of securities for which there currently is no market. Although the Initial Purchaser, has informed the Company that it currently intends to make a market in the New Notes, it is not obligated to do so, and any such market-making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Company does not currently intend to apply for listing of the New Notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. Any Old Notes not tendered and accepted in the Exchange Offer will remain outstanding and will be entitled to all the same rights and will be subject to the same limitations applicable thereto under the Indenture (except for those rights which terminate upon consummation of the Exchange Offer). Following consummation of the Exchange Offer, the Holders of Old Notes will continue to be subject to all of the existing restrictions upon transfer thereof, and the Company will have no further obligation to such Holders (other than under certain limited circumstances) to provide for registration under the Securities Act of the Old Notes held by them. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a Holder's ability to sell untendered Old Notes could be adversely affected. (See "Risk Factors--Consequences of a Failure to Exchange Old Notes.") THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York City time, on February 15, 1998 (such time on such date being hereinafter called the "Expiration Date"), unless the Exchange Offer is extended by the Company (in which case, the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain events and conditions, which may be waived by the Company, and to the terms and provisions of the Registration Rights Agreement. Old Notes may be tendered in whole or in part in a principal amount of not less than $1,000 or any integral multiple of $1,000 in excess thereof. The -5- Company has agreed to pay all expenses of the Exchange Offer. (See "The Exchange Offer----Fees and Expenses.") Each New Note will pay interest from the most recent Interest Payment Date (as defined herein) for the Old Notes surrendered in exchange for such New Notes or, if no interest payments have been paid on such Old Notes, from July 22, 1997. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive interest payments on such Old Notes for any period from and after the last Interest Payment Date for such Old Notes, or, if no such interest payments have been made, will not receive any interest payments on such Old Notes, and will be deemed to have waived the right to receive any interest payments on such Old Notes from and after such Interest Payment Date or, if no such interest payments have been made or duly provided for, from and after July 22, 1997. This Prospectus, together with the Letter of Transmittal, is being sent to all registered Holders of Old Notes as of November 1, 1997. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. No dealer-manager is being used in connection with this Exchange Offer. (See "Use of Proceeds" and "Plan of Distribution.") --------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------------- -6- TABLE OF CONTENTS PAGE ---- Available Information..........................................................7 Incorporation of Certain Documents by Reference................................8 Forward Looking Statements.....................................................9 The Company...................................................................10 Summary of Exchange Offer.....................................................15 The New Notes.................................................................20 Risk Factors..................................................................24 Ratio of Earnings to Fixed Charges............................................36 Use of Proceeds...............................................................36 Capitalization................................................................36 The Exchange Offer............................................................37 Description of The New Notes..................................................51 Description of Old Notes......................................................80 Certain Federal Income Tax Consequences.......................................81 Plan of Distribution..........................................................84 Validity of The New Notes.....................................................85 Experts.......................................................................85 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed with the Commission are available for inspection and copying at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, New York, New York 10048. Copies of such documents may also be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies of such documents may be obtained through the Commission's Internet address at http://www.sec.gov. The Company's Common Stock is authorized for quotation on Nasdaq and, accordingly, such materials and other information can also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company has filed with the Commission a Registration Statement on Form S-4 (No. 333-____) (together with any amendments thereto, the "Registration Statement"), under the Securities Act, with respect to the securities offered hereby. This Prospectus, which constitutes a part of the Registration Statement, omits certain information contained in the Registration Statement as permitted by the rules and regulations of the Commission. For further information -7- with respect to the Company and the securities offered hereby, reference is made to the Registration Statement and the exhibits and financial statements, notes and schedules filed as part thereof or incorporated by reference therein, which may be inspected at the public reference facilities of the Commission, at the addresses set forth above. Statements made in this Prospectus concerning the contents of any documents referred to herein are not necessarily complete, and in each instance are qualified in all respects by reference to the copy of such document filed as an exhibit to the Registration Statement or incorporated by reference therein. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, previously filed with the Commission (File No. 0-4408) pursuant to Section 13 of the Exchange Act, are incorporated by reference herein and made a part hereof: (i) the Company's Annual Report on Form 10-K for the year ended September 30, 1996; (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1996; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iv) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; (v) the Company's Current Report on Form 8-K dated June 24, 1997; (vi) the Company's Current Report on Form 8-K dated July 11, 1997; (vii) the Company's Current Report on Form 8-K dated July 22, 1997; and (viii) the Company's Current Report on Form 8-K dated September 3, 1997. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the termination of this offering shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. All information appearing in this Prospectus should be read in conjunction with, and is qualified in its entirety by, the information and financial statements (including notes thereto) appearing in the documents incorporated herein by reference, except to the extent set forth in the immediately preceding statement. The Company will provide without charge to each person to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the documents referred to above which have been or may be incorporated in this Prospectus by reference (other than exhibits not specifically incorporated by reference therein). Written or oral requests for such copies should be directed -8- to: Secretary, Resource America, Inc., 1521 Locust Street, Philadelphia, Pennsylvania 19102 (215) 546-5005. FORWARD LOOKING STATEMENTS This Prospectus, including any document incorporated herein by reference, contains certain forward-looking statements that involve substantial risks and uncertainties as more fully described below. When used in this Prospectus or in any such documents incorporated herein by reference, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. From time to time, the Company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in various filings made by the Company with the Commission, or in press releases or oral statements made by or with the approval of an authorized executive officer of the Company. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Potential risks and uncertainties that could affect the Company's future operating results include, without limitation, the effect of publicity on demand for the Company's services, general economic conditions, the Company's ability to attract and retain highly skilled managerial personnel, continued market acceptance of the Company's services, the timing and complexity of large transactions and competition in the marketplace. See "Risk Factors." -9- THE COMPANY General The Company is a specialty finance company engaged in three lines of business: real estate finance, "small ticket" commercial equipment leasing and energy operations, including natural gas and oil production. For approximately 25 years prior to 1991, the Company was principally involved in the energy industry. Following the acquisition of a significant ownership position in the Company by new stockholders in 1988 and the appointment of new senior management (whose Chairman has been a senior officer of banking and other financial institutions for the past 30 years), the Company's management evaluated alternative strategies to expand and diversify its operations. Since 1991, the Company's business strategy has focused on locating and developing niche finance businesses in which the Company can realize attractive returns by targeting well-defined financial services markets and by developing specialized skills to service those markets on a cost-effective basis. To date, the Company has developed two business lines: real estate finance and equipment leasing. Within its real estate finance line, the Company has developed a commercial mortgage loan acquisition and resolution business line and a business line consisting of the origination, purchase servicing and sale of non-conforming mortgage loans, secured by single-family residences. Its equipment leasing operations include small ticket lease financing for its own account and management of six publicly-owned equipment leasing partnerships. The Company was organized in 1947. Its executive offices are located at 1521 Locust Street, Philadelphia, Pennsylvania 19102, and its telephone number is (215) 546-5005. Real Estate Finance Commercial Mortgage Loan Acquisition and Resolution. The Company's commercial mortgage loan acquisition and resolution business involves the purchase at a discount of troubled commercial real estate mortgage loans at purchase prices generally ranging from $1 million to $10 million from private market sellers (primarily financial institutions), and the restructuring and refinancing of those loans. These loans typically involve legal and other disputes among the lender, the borrower and/or other parties in interest, and generally are secured by properties which are unable to produce sufficient cash flow to fully service the loans in accordance with the original lender's loan terms. Since entering this business in 1991, the Company's aggregate commercial loan mortgage portfolio has increased to $234 million (before discounts) at September 30, 1997. During the fiscal years ended September 30, 1995, 1996 and 1997, the Company's yield on its net investment in commercial mortgage loans acquired (including gains on refinancings and sales of senior lien interests) -10- equalled 34.6%, 36.2% and 34.6%, respectively, while its gross profits from its commercial mortgage loan activities (that is, revenues from commercial mortgage loan activities minus costs attributable thereto and less depreciation, depletion and amortization, but without allocation of corporate overhead) for fiscal years 1995, 1996 and 1997 were million, $5.3 million, $6.7 million and $17.6 million, respectively. The Company seeks to reduce the amount of its own capital invested in commercial mortgage loans after their acquisition, and to enhance its returns, through prompt refinancing of the properties underlying its loans, or through sale at a profit of senior lien interests in its loans (typically on a recourse basis). The Company may also seek to sell loans at a profit without retaining a junior lien interest; however, except for certain proposed sales to a real estate investment trust which the Company is sponsoring (see "The Company - - Recent Developments") no such sales have been arranged to date, and there can be no assurance that any such sales will be arranged in the future. At September 30, 1997, senior lenders held outstanding obligations of $55.5 million, secured by properties with an aggregate appraised value of $125 million, resulting in a ratio of senior lien obligations-to-appraised value of property of 44%. At September 30, 1997, the operating cash flow coverage on the required debt service on refinancings and senior lien interests (exclusive of proceeds from such refinancings or senior lien interests) was 268%. The balance of operating cash flow is, pursuant to agreements with the borrowers, retained by the Company as debt service on the outstanding balance of the Company's loans. Residential Mortgage Originations. The Company's residential mortgage lending business consists of making first and second mortgage loans on single family residences to borrowers who do not conform to guidelines established by Fannie Mae due to past credit impairment or other reasons. The Company also originates mortgage loans on 2-4 family residences and small mixed use (residential and commercial) properties. Through Fidelity Mortgage Funding, Inc. ("FMF"), the Company is licensed as a mortgage lender in 16 states and is currently originating loans in eight states (Connecticut, Delaware, Indiana, Kentucky, Maryland, Mississippi, North Carolina and Virginia). The Company began mortgage lending activities effective October 1, 1997. As of November 12, 1997, FMF funded 40 loans with an aggregate principal amount of $1.7 million. As of November 6, 1997, FMF had approximately 56 loan applications, with an aggregate principal amount of $3.3 million, pending. Equipment Leasing In September 1995, the Company entered the commercial leasing business through its acquisition of the leasing subsidiary of a regional insurance company. This acquisition provided the Company with a servicing portfolio of approximately 520 individual leases held by six leasing partnerships which provided the Company with a servicing revenue stream of $1.1 million during fiscal 1996 and $864,000 during fiscal 1997. More importantly, through this -11- acquisition the Company acquired an infrastructure of operating systems, computer hardware and proprietary software (generally referred to as a "platform"), as well as personnel, which the Company has utilized to develop a commercial leasing business for its own account. In order to develop this business, in early 1996 the Company hired a team of four experienced leasing executives, including the former chief executive officer of the U.S. leasing subsidiary of Tokai Bank, a major Japanese banking institution. The Company's strategy in developing its leasing business is to focus on leases with equipment costs of between $5,000 to $100,000 (with a targeted average transaction of approximately $10,000 per lease) ("small ticket" leasing) and to market its equipment leasing products nationwide through vendor programs with equipment manufacturers, regional distributors and other vendors. The Company has currently entered into vendor program relationships with nine vendors: Minolta Corporation (copiers), Celsis Incorporated (microbial testing systems), American Marbacom Communications (Teleco) (telephone systems), CSI (test equipment), Telrad Telecommunications (telephone systems), CT Solutions (computer telephony), ATI Communications (telephone systems), the National Association of College Stores (affinity program) and Millipore Corp. (test equipment). In addition, Lucent Technologies (telecommunication equipment) has designated the Company as an authorized lessor for its dealer distribution channel. The Company believes that its targeted market is under-served by equipment lessors, banks and other financial institutions, affording the Company a niche market with significant growth potential. From the inception of leasing activity for its own account in June 1996 through September 30, 1997, the Company had received 8,373 lease proposals involving equipment with an aggregate cost of $96.6 million, approved 4,689 such proposals involving equipment with an aggregate cost of $53.1 million, and entered into 3,214 transactions involving equipment with an aggregate cost of $34.7 million and had 538 such proposals pending with an aggregate cost of $7.2 million. During fiscal 1997, the Company sold equipment leases with an aggregate net book value of approximately $30.2 million to a special purpose financing entity owned by a third party in return for cash of $20.6 million and notes aggregating $13.3 million (of which $8.5 million has since been paid). The aggregate gain on such sale was $3.7 million. The Company has retained servicing on all equipment leases heretofore sold by it and at September 30, 1997, had a servicing portfolio of $36.4 million (at cost) of such leases. Energy Operations The Company produces natural gas and, to a lesser extent, oil from locations principally in Ohio, Pennsylvania and New York. At September 30, 1997, the Company had a net investment of $11.4 million in its energy operations, including interests in 1,057 individual wells owned directly by the Company or through 65 partnerships and joint ventures managed by the Company. While the Company has focused its business development efforts on its specialty finance operations -12- over the past several years, its energy operations historically have provided a steady source of cash flow and tax benefits. Recent Developments Real Estate Finance. Since June 30, 1997, the Company has acquired or originated mortgage loans with an aggregate outstanding balance (at September 30, 1997) of $59.2 million carried at a cost of $34.3 million. The properties underlying these loans have an aggregate appraised value of $52.5 million. At September 30, 1997, senior lenders held outstanding obligations of $1.5 million with respect to these loans. During the period, the Company sold $9.8 million of senior lien interests in two mortgage loans held by it; in one other mortgage loan, the borrower obtained $2.5 million of refinancing. The Company is sponsoring a real estate investment trust ("REIT") which has filed a registration statement with the Commission. The REIT's primary business will be to acquire or originate mortgage loans in situations that, generally, do not conform to the underwriting standards of institutional lenders or sources that provide financing through securitization. Although the REIT may acquire mortgage loans at a discount, it seeks to acquire such loans where the workout process has been initiated and where, unlike the mortgage loans acquired by the Company, there is no need for the REIT's active intervention. It is anticipated that the REIT will begin operations in December, 1997. As sponsor of the REIT, the Company will acquire 9.8% of the REIT's common shares of beneficial interest, at an anticipated cost of approximately $13.7 million, and have the right to purchase up to 15% of the REIT's common shares. So long as the Company owns 5% or more of the REIT's common shares, the Company will have the right to nominate one person to the REIT's board of trustees. The Company will sell twelve of its mortgage loans (with a cost basis to the Company of $23.4 million) to the REIT as part of the REIT's initial investments for $29.7 million. The Company may sell further loans to the REIT, to a maximum of 30% of the REIT's investments (on a cost basis), excluding the initial investments. Betsy Z. Cohen, spouse of the Company's Chairman and Chief Executive Officer, is the Chairman and Chief Executive Officer of the REIT. Their son, Jonathan Z. Cohen, is the Company's nominee to the REIT's board of trustees. To mitigate potential conflicts of interest, the Company has agreed to certain restrictions for a period of two years following completion of the REIT's offering of common shares, including agreements not to sponsor another mortgage REIT and to provide certain rights of first refusal on mortgage investments originated or sought to be sold by the Company. Residential Mortgage Lending. FMF, the Company's residential mortgage lending subsidiary, acquired Tristar Financial Services, Inc. ("Tristar"), an originator -13- of non-conforming residential mortgage loans, in November 1997 for 47,147 shares of the Company's common stock and cash of $998,000. Tristar originated $46 million and $51 million of residential mortgage loans for the year ended December 31, 1996 and for the ten months ended October 31, 1997, respectively. Sources of Funds. On July 24, 1997, Physicians Insurance Company of Ohio ("PICO") exercised warrants held by it to purchase 983,150 shares of the Company's Common Stock for an aggregate purchase price of $3.7 million. PICO subsequently sold such shares. In connection with these transactions, John R. Hart (a PICO officer and director) resigned as a director of the Company. On September 23, 1997, FMF entered into a $5 million facility with CoreStates Bank, bearing interest at either (i) CoreStates prime rate, (ii) the federal funds rate plus 250 basis points, or (iii) an adjusted London Interbank Offered Rate ("LIBOR") plus 150 basis points, with the rate to be elected by FMF, and with the right in FMF to elect different rate formulas for separate draws under of the credit facility. The facility will be secured by a first lien interest in the loans being financed by facility draws. Under the facility, FMF is required to maintain a minimum tangible net worth of $1 million, and a debt to tangible net worth ratio of 5 to 1 (where debt includes the unused portion of any financing commitment but excludes subordinated debt). The facility expires on September 22, 1998 unless renewed by the parties. There is currently no outstanding debt under this facility. On October 16, 1997, FMF established a $15 million warehouse credit facility with Morgan Stanley Mortgage Capital, Inc., bearing interest at the London Interbank Offered Rate ("LIBOR") or, if unavailable, the interbank eurodollars market rate, plus 90 basis points (currently 6.54%). The facility is secured by a first lien interest in the loans being financed by facility draws. Under the facility FMF is required to maintain tangible net worth (capital and subordinated debt minus advances to affiliates and intangible assets representing start up costs in excess of $1 million), and a ratio of total indebtedness to tangible net worth of 10 to 1. The facility expires on October 16, 1998. FMF currently has $585,000 of outstanding debt under the Morgan Stanley facility. On October 9, 1997, the Company obtained a $5 million credit facility from Keybank. For purposes of acquiring oil and gas assets, the facility permits draws based on a percentage of reserves of oil and gas properties pledged as security for the facility. Draws under the facility bear interest at Keybank's prime rate plus 25 basis points. The facility requires the Company to maintain a tangible net worth in excess of $31 million, a 2 to 1 ratio of assets to liabilities, a 1.5 to 1 ratio of cash flow to maturities of long-term debt coming due within the calculation period and a ratio of adjusted debt to tangible -14- net worth of not more than 2 to 1. The facility terminates on June 30, 1999. Other Developments. Scott F. Schaeffer and Daniel G. Cohen have become Executive Vice Presidents and Directors of the Company. The Company has appointed Steven J. Kessler as Senior Vice President and Chief Financial Officer. Mr. Kessler was Vice President (Finance and Acquisitions) at Kravco Company (a national shopping center developer and operator) from March 1994 until joining the Company. Prior thereto, from 1983 through March of 1994, he was Chief Financial Officer and Chief Operating Officer at Strouse Greenberg & Co., Inc., a regional full service real estate company, and Vice President (Finance) and Chief Accounting Officer at its successor, The Rubin Organization. Prior thereto, he was a partner at the international accounting and consulting firm of Touche Ross & Co. (now Deloitte & Touche LLP), Philadelphia, Pennsylvania. SUMMARY OF EXCHANGE OFFER The Exchange Offer........................... Up to $115,000,000 aggregate principal amount of New Notes are being offered in exchange for a like aggregate principal amount of Old Notes. Old Notes may be tendered for exchange in whole or in part in a principal amount of not less than $1,000 or any integral multiple of $1,000 in excess thereof. The Company is making the Exchange Offer in order to satisfy its obligations under the Registration Rights Agreement related to the Old Notes. (For a description of the procedures for tendering Old Notes, see "The Exchange Offer-- Procedures for Tendering Old Notes.") Expiration Date.............................. 5:00 p.m., New York City time, on February 15, 1998 (such time on such date being hereinafter called the "Expiration Date") unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). (See "The Exchange Offer-Expiration Date; Extensions; Amendments.") -15- Conditions to the Exchange Offer...................................... The Exchange Offer is subject to certain conditions, which may be waived by the Company in its sole discretion. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. (See "The Exchange Offer--Conditions to the Exchange Offer.") The Company reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer if certain specified conditions have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of Holders of Old Notes to withdraw their tendered Old Notes, or (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. (See "The Exchange Offer-Expiration Date; Extensions; Amendments.") Withdrawal Rights............................ Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date by delivering a written notice of such withdrawal to the Exchange Agent (as defined herein) in conformity with certain procedures set forth below under "The Exchange Offer--Withdrawal Rights." Procedures for Tendering Old Notes...................................... Tendering Holders of Old Notes must complete and sign a Letter of Transmittal in accordance with the instructions contained therein and forward the same by mail, facsimile or hand delivery, together with any other required -16- documents, to the Exchange Agent, either with the Old Notes to be tendered or in compliance with the specified procedures for guaranteed delivery of Old Notes. Certain brokers, dealers, commercial banks and other nominees may also effect tenders by book-entry transfer, including an Agent's Message in lieu of the Letter of Transmittal. Holders of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Notes pursuant to the Exchange Offer. (See "The Exchange Offer-Procedures for Tendering Old Notes.") Letters of Transmittal and certificates representing Old Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offer--Exchange Agent." Sales of New Notes........................... The Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding, with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any Holder of Old Notes who is an "affiliate" of the -17- Company or who intends to participate in the Exchange Offer for the purpose of distributing the New Notes, or any broker-dealer who purchased the Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (b) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities ("Participating Broker-Dealers") and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. Each Holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. Each broker-dealer that -18- receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market- making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Participating Broker-Dealers may fulfill their prospectus-delivery requirements with respect to the New Notes received upon exchange of such Old Notes with a Prospectus meeting the requirements of the Securities Act, which may be this Prospectus, as it may be amended or supplemented from time to time, for a period ending 180 days after the Expiration Date or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. (See "Plan of Distribution.") Any Participating Broker-Dealer who is an "affiliate" of the Company and any Participating Broker who purchased the Old Notes from the Company for resale must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. (See "The Exchange Offer-Resales of New Notes.") Exchange Agent............................... The exchange agent with respect to the Exchange Offer is The Bank of New York (the "Exchange Agent"). The addresses, and telephone and facsimile numbers of the Exchange Agent are set forth in "The -19- Exchange Offer--Exchange Agent" and in the Letter of Transmittal. Use of Proceeds.............................. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. (See "Use of Proceeds.") Certain United States Federal Income Tax Considerations; ERISA Considerations....................... Holders of Old Notes should review the information set forth under "Certain Federal Income Tax Consequences" and "ERISA Considerations" prior to tendering Old Notes in the Exchange Offer. THE NEW NOTES Securities Offered........................... $115 million aggregate principal amount of 12% Senior Notes due August 1, 2004. Interest Payment Dates....................... Semi-annually on February 1 and August 1 of each year commencing August 1, 1998. Optional Redemption.......................... The New Notes will be redeemable, in whole or in part, at the option of the Company at any time on or after August 1, 2002 at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the redemption date. See "Description of Notes - Optional Redemption." Mandatory Redemption......................... None. Sinking Fund................................. None. Ranking...................................... The New Notes will be senior general unsecured obligations of the Company ranking pari passu with or senior to the Company's existing and future general unsecured indebtedness. Subject to certain limitations, the Company and its Subsidiaries may incur additional indebtedness in the future; however, the Company -20- may not issue any pari passu or junior indebtedness with a maturity date prior to the maturity date of the New Notes. Because the Company is a holding company that currently conducts substantially all of its operations through its Subsidiaries, the right of the Company (and therefore the right of the Company's creditors and stockholders) to participate in any distribution of the assets or earnings of any Subsidiary is subject to the prior claims of creditors of such Subsidiaries, including any claims of the Company as a creditor to the extent such claims may be recognized. As a result, the New Notes will be effectively subordinate to the claims of creditors of the Company's Subsidiaries. -21- Repurchase at Option of Holders Upon Change of Control................................. Under the Indenture pursuant to which the Old Notes were issued, upon a Change of Control Event (as defined herein; see "Description of Notes - Certain Definitions"), Holders of the New Notes will have the option to require the Company to repurchase all outstanding Notes at 101% of their principal amount, plus accrued interest to the date of repurchase. A "Change of Control Event" includes the following events, among others: the acquisition by any person or group (other than the Existing Management Group (as defined herein) of the Company) of more than 40% of the Company's voting stock; a merger, consolidation or other business combination between the Company and another person in which more than 40% of the voting stock of the surviving or transferee company is owned by persons other than the Existing Management Group of the Company or a change in a majority of the directors on the Board of Directors of the Company within a two-year period which is not approved by the incumbent directors. There can be no assurance that the Company will have the funds available to repurchase the New Notes in the event of a Change of Control Event. Certain Covenants............................ The Indenture contains certain covenants that, among other things, require the Company to maintain certain levels of Consolidated Net Worth (as defined herein) and liquid assets, limit the ability of the Company and its Subsidiaries to incur certain indebtedness (not including secured indebtedness used to acquire or refinance the acquisition of loans, equipment leases or other assets), pay -22- dividends or make other distributions, engage in transactions with affiliates, dispose of Subsidiaries, create certain liens and guarantees with respect to pari passu or junior indebtedness and enter into any arrangement that would impose certain restrictions on the ability of Subsidiaries to make dividend and other payments to the Company. The Indenture also restricts the Company's ability to merge, consolidate or sell all of its assets. See "Description of New Notes--Certain Covenants." Absence of Market for the New Notes.......................... The New Notes will be new securities for which there is currently no trading market. Although the Company has been advised by the Initial Purchaser that, it presently intends to make a market in the New Notes, the Initial Purchaser is under no obligation to do so and may discontinue any market making activities at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Company does not intend to apply for listing of the New Notes, on any securities exchange or through the National Association of Securities Dealers Automated Quotation System. Holders tendering the Old Notes in the Exchange Offer should carefully consider the matters set forth under "Risk Factors." For further information regarding the New Notes, see "Description of the New Notes." -23- RISK FACTORS In addition to the other information in this Prospectus, the following factors should be considered carefully in evaluating the New Notes before deciding whether to accept the Exchange Offer. The risk factors set forth below are generally applicable to the Old Notes as well as the New Notes. General Consequences of a Failure to Exchange the Old Notes. The Old Notes have not been registered under the Securities Act or any state securities laws and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions. The Old Notes which remain outstanding after consummation of the Exchange Offer will continue to bear a legend reflecting such restrictions on transfer. In addition, upon consummation of the Exchange Offer, Holders of the Old Notes which remain outstanding will not be entitled to any rights to have such Old Notes registered under the Securities Act or to any similar rights pursuant to the Registration Rights set forth in the Indenture. The Company does not intend to register under the Securities Act any of the Old Notes which remain outstanding after consummation of the Exchange Offer. A Holder's ability to sell untendered Old Notes could be adversely affected. In addition, although the Old Notes have been designated for trading in the Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market, to the extent that the Old Notes are tendered and accepted in connection with the Exchange Offer, any trading market for the Old Notes which remain outstanding after the Exchange Offer could be adversely affected. The New Notes and any Old Notes which remain outstanding after the consummation of the Exchange Offer will vote together as a single class. See "Description of the New Notes." The Old Notes provide that if (i) the Registration Statement is not filed with the Commission on or prior to November 15, 1997, (ii) the Registration Statement is not declared effective on or prior to December 30, 1997 or (ii) the Exchange Offer is not consummated on or prior to February 15, 1998, the interest rate borne by the Old Notes shall be increased by one-half percent per annum following November 15, 1997 in the case of clause (i) above, or following December 30, 1997 in the case of clause (ii) above, or following February 15, 1998 in the case of clause (iii) above, which rate will be increased by an additional one-half of one percent for each 90-day period that such additional interest continues to accrue. The aggregate amount of such increase from the original interest rate -24- pursuant to these provisions will in no event exceed one percent per annum. Following consummation of the Exchange Offer, the Old Notes will not be entitled to any increase in the interest rate thereon. The New Notes will not be entitled to any such increase in the interest rate thereon. See "Description of Old Notes - -- Registration Rights." Absence of Public Market; Trading Characteristics of the Old Notes. The Old Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. The Old Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for the New Notes. Although the New Notes will generally be permitted to be resold or otherwise transferred by the Holders (who are not affiliates of the Company) without compliance with the registration requirements under the Securities Act, they will constitute a new issue of securities with no established trading market. The Company has been advised by the Initial Purchaser that the Initial Purchaser presently intends to make a market in the New Notes. However, the Initial Purchaser is not obligated to do so and any market-making activity with respect to the New Notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limitations imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer. Accordingly, no assurance can be given that an active public or other market will develop for the New Notes or as to the liquidity of or the trading market for the New Notes. If an active public market does not develop, the market price and liquidity of the New Notes may be adversely affected. The Company does not intend to have the New Notes quoted on the NASDAQ National Market System or listed on any securities exchange. If a public trading market develops for the New Notes, future trading prices of such securities will depend upon many factors, including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending upon prevailing interest rates, the market for similar securities and other factors including the financial condition of the Company, the New Notes may trade at a discount. Notwithstanding the registration of the New Notes in the Exchange Offer, Holders who are "affiliates" (as defined under Rule 405 of the Securities Act) of the Company may publicly offer for sale or resell the New Notes only in compliance with the provisions of Rule 144 under the Securities Act. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in -25- connection with any resale of such New Notes. See "Plan of Distribution." Exchange Offer Procedures. Issuance of the New Notes in exchange for the Old Notes pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such Old Notes, a properly completed and duly executed Letter of Transmittal or Agent's Message in lieu thereof, and all other required documents. Therefore, Holders of Old Notes desiring to tender such Old Notes in exchange for New Notes should allow sufficient time to ensure timely delivery. Neither the Company nor the Exchange Agent is under any duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange. Priority of Notes. As with the Old Notes, the New Notes will be unsecured general obligations of the Company which will rank senior in right of payment to all subordinated debt (that is, debt which by its terms is expressly subordinated to the New Notes) and pari passu with or senior to all other existing or future unsecured debt. Any current and future secured debt, and debt under existing or future credit facilities, will have priority over the New Notes with respect to the assets securing such debt. The Indenture permits the Company to incur both secured and unsecured debt in the future, subject to specific limitations (see "Description of the Old Notes--Certain Covenants"), although the Indenture prohibits the Company from incurring pari passu or junior debt with a maturity prior to that of the New Notes. As of September 30, 1997, the Company and its Subsidiaries had outstanding $4.5 million of debt (excluding the Old Notes), with an aggregate yearly debt service of $1.1 million, and $45 million available under various credit facilities (which have an aggregate of $585,000 in outstanding draws) which will be senior to the New Notes, and an additional $4.2 million of unsecured debt ranking pari passu with the New Notes. The Company has also guaranteed performance by a Subsidiary of the Subsidiary's guarantee of a $5.5 million obligation of a special purpose financing entity. Ability to Service New Notes. The Company's ability to repay the New Notes, and any other debt it incurs, will depend directly upon the Company's future operating performance which is subject to numerous factors beyond the Company's control including prevailing economic conditions, changes in interest rate levels, the performance of the Company's mortgage loan and equipment lease portfolios and other factors. Although the Company believes that cash available from operations and financing activities will be sufficient to make required debt service payments on the New Notes as and when due, a significant portion of the Company's earnings derives from accretion of discount on its portfolio of mortgage loans. It is anticipated that, in the future, the Company's earnings will include amounts attributable to the amortization of the residual value of leased equipment. The ability of the Company to realize accreted discounts and residual values, and the timing of such realizations, may affect the Company's ability to pay debt service on the New Notes or to -26- repurchase any New Notes tendered upon a Change in Control Event (as defined in the Indenture), or repay principal and accrued interest on the New Notes on their maturity or upon an Event of Default (as defined in the Indenture). See "Description of Old Notes," "Risk Factors--Real Estate Finance Considerations: Possible Fluctuations in Earnings from Asset Acquisition and Resolution Business" and "-- Equipment Leasing Considerations: Financing for Equipment Leasing Operations" and "--Residuals." In addition, the Company has pledged the stock of its leasing Subsidiaries (Fidelity Leasing, Inc. and its holding company, Resource Leasing, Inc.) as security for the credit facility relating to its equipment leasing operations. A default on such facility, if it were to result in foreclosure on the stock of either or both Subsidiaries, would materially adversely affect the Company's ability to service the New Notes. Holding Company Structure; Limitations on Access to Cash Flow of Operating Companies; Effective Subordination. The New Notes will be obligations solely of the Company, which is a holding company with no material business operations of its own. The Company's assets consist primarily of its ownership interests in its operating Subsidiaries through which all of the operations of the Company are conducted. The Subsidiaries are separate and distinct legal entities which have no obligation, contingent or otherwise, to pay any amounts due under the New Notes or to make any funds available to the Company to enable it to make payments on the New Notes. In addition, to the extent that any of the operating Subsidiaries generates positive cash flow, the Company may be unable to access such cash flow because of credit or other borrowing agreements to which such Subsidiaries are or may become parties that restrict the payment of dividends or other distributions to the Company. The New Notes also will be effectively subordinated to all existing and future indebtedness and other liabilities of the Company's Subsidiaries because the Company's right, as sole or primary shareholder, to receive the assets of any such entities upon their liquidation, dissolution or reorganization will be effectively subordinated to the claims of such entities' creditors. To the extent that the Company is itself recognized as a creditor of any such Subsidiary, the claims of the Company could still be subordinated to the claims of such entities' trade creditors as well as any indebtedness of such entity that is senior in right of payment to the Company's claim or that is secured by the assets of any such entity. At September 30, 1997, the Company's Subsidiaries had liabilities aggregating $3.8 million, all of which constituted indebtedness permitted under the Indenture. Ability to Generate Funding for Growth. The success of the Company's future operations will be largely dependent upon the continued availability of funds for its real estate finance and equipment leasing operations. Funding for the Company's real estate finance operations has heretofore been derived from internally generated funds, a portion of the proceeds from the sale of the Old Notes, prior financings which have heretofore been repaid, sales by the Company of senior lien interests in its portfolio loans, -27- borrowers' refinancing of their mortgage obligations and a portion of the proceeds of the Company's sale of common stock in December 1996. Funding for the Company's residential mortgage origination operations will be initially provided by internally available funds. It is anticipated that funding for the Company's real estate finance operations in the future will be derived from internally generated funds and existing or future third-party sources. Funding for the Company's equipment leasing operations has, through the date of this Prospectus, been provided by internally generated funds, a portion of the proceeds of the December 1996 common stock offering, a portion of the proceeds from the sale of the Old Notes, by the sale of equipment leases during the first six months of fiscal 1997 and the Company's existing leasing credit facility. Future funding will be obtained through third-party warehouse financing (full recourse, short-term borrowings secured by the underlying equipment and repaid with the proceeds of permanent funding) and third-party permanent funding (bank term loans, lease portfolio sales and securitization of lease portfolios). The availability of third-party financing for each of the Company's specialty finance businesses will be dependent upon a number of factors over which the Company has limited or no control, including general conditions in the credit markets, the size, pricing and liquidity of the market for the types of real estate loans or equipment leases in the Company's portfolio and the financial performance of the loans and equipment leases in the Company's portfolio. There can be no assurance that the Company will be able to generate funding on satisfactory terms and in acceptable amounts. Any failure to renew or obtain adequate funding under a warehouse credit facility or other borrowing could have a material adverse effect on the Company's results of operations and financial condition. To the extent the Company is not successful in maintaining or replacing existing financing, the Company would have to curtail its activities, thereby having a material adverse effect on the Company's results of operations and financial condition. Ability to Generate Growth Opportunities. The success of the Company's operations will also depend on its continued ability to generate attractive opportunities for acquiring commercial mortgage loans at a discount and to originate equipment leases and its ability in the future to originate and resell residential mortgage loans. In each area, the Company will rely primarily upon the knowledge, experience and industry contacts of its senior management to generate investment opportunities. There can be no assurance that the Company will generate opportunities satisfactory to it or sufficient to sustain growth or that, in its commercial mortgage loan acquisition and resolution activities, the Company will be able to acquire loans in the same manner, on similar terms or at similar levels of discount as its current portfolio loans. The availability of commercial mortgage loans for acquisition on terms acceptable to the Company, and -28- the ability of the Company to originate satisfactory equipment leases and residential mortgage loans, will be dependent upon a number of factors over which the Company has no control, including economic conditions, interest rates, the market for and value of properties securing loans which the Company may seek to acquire, and the willingness of financial institutions to dispose of troubled or under-performing mortgage loans in their portfolios. Risks Related to Management of Growth. The Company has undergone a period of significant growth, and further expansion may significantly strain the Company's management, financial and other resources. There is no assurance that the Company can manage its growth effectively or that the Company will be able to attract and retain the personnel necessary to meet its business objectives. If the Company is unable to manage its growth effectively, the Company's business, operating results and financial condition could be materially adversely affected. Credit Risks. Mortgage loans and equipment leases are subject to the risk of default in payment by borrowers and lessees. Defaults by borrowers and lessees could adversely affect the Company's financial position. Upon a default, the Company will have the responsibility of seeking to recover outstanding loan or lease balances through foreclosure, repossession of equipment or similar procedures. With respect to any particular mortgage loan or equipment lease, instituting any of these procedures could adversely impact the Company's yield on such loan or lease. There can be no assurance that, in the event of default, the amount realizable from the property securing a defaulted loan or the equipment subject to a defaulted lease will be sufficient to recover amounts invested by or owed to the Company. See "Risk Factors--Real Estate Finance Considerations: Lien Priority" and "--Equipment Leasing Considerations: Residuals." The commercial mortgage loans acquired in the Company's asset acquisition and resolution operations are typically not the general obligations of the borrower and, accordingly, in seeking to collect amounts owed on a loan, the Company must rely solely on the value of the property underlying the loan to satisfy the obligation. This value will be affected by numerous factors beyond the Company's control, including general or local economic conditions, neighborhood real property values, interest rates, operating expenses (such as real estate taxes and insurance costs), occupancy rates and the presence of competitive properties. In addition, most of the Company's loans require a substantial lump sum payment at maturity. The ability of a borrower to pay a lump sum, and thus the ability of the Company to collect promptly all amounts due upon maturity, may be dependent on the borrower's ability to obtain suitable refinancing or otherwise raise a substantial amount of cash which, in turn, will depend upon factors (such as those referred to previously) over which the Company has no control. To the extent that the Company has sold a senior lien position in a loan, or the loan has been refinanced, the Company will typically retain a subordinated interest in the loan, which in certain -29- instances may be unsecured. See "Risk Factors--Real Estate Finance Considerations: Lien Priority." Such retained interests are subject to materially increased risks of collection upon default. The Company anticipates that many of the end-users of the equipment it leases for its own account will be small businesses which may not be able to supply the kinds of financial information available from larger businesses, and which may be more susceptible to changes in economic conditions or have lesser financial resources with which to meet lease obligations than larger businesses. Although the Company will seek to mitigate this risk through the use of its credit scoring, asset tracking and loan servicing and collection systems and procedures, there can be no assurance that the Company will not be subject to higher risks of default than firms leasing to larger entities. Credit Facility Restrictions. The Company anticipates that it may be required to provide credit enhancement for debt incurred as a part of any warehouse or permanent financing utilized in its equipment leasing operations. See "Risk Factors--General: Ability to Generate Funding for Growth." These credit enhancements may include cash deposits, funding of subordinated tranches of securitizations, the pledge of additional mortgage loans, equipment leases or other collateral which are funded by the Company's capital, and/or (as is the case with the Company's existing credit equipment leasing and residential mortgage facilities) a guaranty by the Company of any facility obtained by a Subsidiary. Each of the Company's existing credit facilities also contains restrictive covenants concerning maintenance by the Company of minimum capital levels or debt to equity ratios. Any such requirements may reduce the Company's liquidity and require it to obtain additional capital. The Company anticipates that warehouse financing (as is the case with the Company's existing credit facilities) will bear interest at variable rates while its permanent funding will typically be at fixed rates set at the time the financing is provided. Accordingly, the Company will be subject to interest rate risk to the extent interest rates increase between the time a mortgage loan or equipment lease is funded by warehouse facilities and the time of permanent funding. Increases in interest rates during this period could narrow or eliminate the spread between the effective interest rates on the Company's equipment leases and the rates on the Company's funding, or result in a negative spread. Competition. In each of its business operations, the Company is subject to intense competition from numerous competitors, many of whom possess far greater financial and other resources than the Company. The Company will also have to compete for the capital necessary to fund both its real estate finance and equipment leasing operations based largely upon the performance of the mortgage loans and equipment leases it generates or acquires. See "Risk Factors-- General: Credit Risks." -30- Real Estate Finance Considerations Troubled Status of Acquired Commercial Mortgage Loans and Underlying Properties. The Company seeks to acquire commercial mortgage loans at a discount from both the unpaid principal and interest amounts of the loans and the appraised value of the underlying properties. As a consequence, the Company will frequently be involved with loans which are the subject of contentious and often complex disputes among various parties regarding application of cash flow from the underlying properties, loan terms, lease terms or similar matters, or which are secured by properties that, while income producing, are unable to generate sufficient revenues to pay the full amount of debt service under the original loan terms. Although, prior to acquisition of a loan, the Company will generally negotiate with the borrower or other parties in interest and, where appropriate, make financial accommodations to take into account the operating conditions of an underlying property, resolve outstanding disputes and ensure the Company's control of the cash flow from the underlying property, there can be no assurance that the underlying property will not be subject to recurrence of the problems which existed prior to the Company's acquisition of the loan, or other problems. Lien Priority. Although in its asset acquisition and resolution operations the Company normally acquires first mortgage loans, it is not limited as to the lien priority of a loan which it may acquire. Moreover, a lender refinancing a loan in the Company's portfolio will typically require, as a condition to its refinancing, that the Company's remaining interest in the loan be subordinated to such lender's interest. The Company currently holds 32 junior lien loans or subordinated lien interests. For seven prior loans, (constituting 8.3% by book value, of the Company's real estate loans), the refinancing lender did not permit the loan to be formally secured by a recorded mortgage (although the loans are secured by judgment liens, unrecorded deeds in lieu of foreclosure, borrowers' covenants not to further encumber the property without the Company's consent, or similar devices). In addition, in certain circumstances, mortgage loans, including first mortgage loans, may be subject to mechanics', materialmens' or government liens which may be prior in right of payment to liens held by the Company. To the extent that either the lien securing a loan is junior to other liens encumbering an underlying property or the loan is not secured by a perfected mortgage lien, the Company will be subject to greater risks of loss upon a default. See "Risk Factors--General: Credit Risks." In the event of a default on a senior mortgage, the Company may make payments, if it has the right to do so, in order to prevent foreclosure on the senior mortgage, increasing its investment cost without necessarily improving its lien position. In the event of a foreclosure, the Company will only be entitled to share in the net proceeds after the payment of all senior lienors, including senior mortgagees, and holders of mechanics', materialmens' and government liens. It is therefore possible that the -31- total amount which may be recovered by the Company upon a foreclosure may be less than the outstanding balance of the loan or the Company's investment in the loan, with resultant loss to the Company. It is also possible that, in some cases, a "due on sale" clause included in a senior mortgage, which accelerates the amount due under the senior mortgage in case of the sale of the property, may apply to the sale of the property upon foreclosure of a junior loan, and may accordingly increase the risks to the Company in the event of a default by the borrower on the junior loan. Environmental Liabilities. In the event of a default on a portfolio loan, the Company may acquire the underlying property through foreclosure. There is a risk that hazardous substances, wastes, contaminants or pollutants would be discovered on the foreclosed property after acquisition by the Company. In such event, the Company might be required to remove such substances from the property at its sole cost and expense. There can be no assurance that the cost of such removal would not substantially exceed the value of the affected property or the loan secured by the property, that the Company would have adequate remedies against the prior owner or other responsible parties or that the Company would not find it difficult or impossible to sell the affected properties either prior to or following any such removal. Disposition of Acquired Commercial Loan Interests. In its commercial mortgage loan acquisition and resolution operations, after the Company has acquired a loan, the Company will typically sell a senior lien position in the loan, or assist the borrower in obtaining third-party refinancing, while retaining a junior lien position in the loan. Although the sale of a senior lien position or a refinancing often results in the return of the entire amount of (or, in some cases, more than) the Company's investment in the loan (including amounts advanced to the borrower after loan acquisition), in most such sales or refinancings a reduced portion of the Company's investment in the loan remains unrecovered. Based upon the appraised value of the properties underlying the loans, the Company believes that it will recover amounts substantially in excess of the Company's remaining invested capital; however, there can be no assurance that, upon termination of the loan, the borrower will be able to repay the loan in an amount equal to or in excess of the Company's remaining investment in such loan or that, if the borrower is not able to do so, the Company will be able to dispose of its remaining loan interest for an amount equal to or in excess of its remaining investment or that the property underlying the loan can be disposed of for an amount equal to or in excess of the interests of senior lienors and the Company's remaining investment. Sales of Senior Lien Positions to Institutional Investor. Senior lien positions in nine of the Company's portfolio loans have been sold to an institutional investor. Pursuant to the terms of these sales, if the borrower under any such loan defaults in the payment of debt service, the Company is required to replace the defaulted -32- obligation with a performing one. Since the Company has sold senior positions in, or refinanced, most of its current portfolio loans, if the Company were required to replace a defaulted loan with a performing loan, it may not be able to do so without acquiring additional commercial real estate loans. If the Company could not fulfill its obligation, the institutional investor would have various legal remedies including foreclosure on and sale of the underlying property (see "Risk Factors--General: Credit Risks"), or requiring the Company to repay its senior lien position. There can be no assurance that borrowers on one or more of such loans will not default or that, in such event, the Company would be able to acquire additional commercial real estate loans to substitute, if a replacement loan is not so acquired and substituted, that the investor would not seek to require the Company to repay it. Loss Reserves. The Company records the investments in its loan portfolio at cost, which is significantly discounted from the face value of, and accrued interest and penalties on, the loans. The cost basis in the loans is reviewed periodically to determine that it is not greater than the sum of the projected cash flows and appraised values of the underlying properties. If the cost basis is found to be greater, the Company provides an appropriate allowance through a charge to operations. The Company did not establish any reserves with respect to its portfolio loans for fiscal 1994, 1995 and 1996. For the year ended September 30, 1997, the Company recorded an allowance of $400,000. There can be no assurance that future charges to operations will not occur or that the actual amount of such charges will not be materially greater than the amount of the charge for the particular period. Obligation of Company to Acquire Interest of, or Repay, Existing Senior Lienors. The Company is required to repurchase three senior loans held by a single lender in the event that the loans are not repaid, in accordance with their terms, by June 27, 2002, September 29, 2002 and September 27, 2011, respectively. These senior loans have an aggregate outstanding balance of $12.6 million at September 30, 1997. In addition, the Company is required to repurchase a senior lien interest in one of the Company's portfolio loans held by a single lender in the event that the senior lien interest is not repaid by May 21, 2002. Possible Fluctuations in Earnings from Asset Acquisition and Resolution Business. A material portion of the Company's revenues from its commercial mortgage loan acquisition and resolution business is derived from the sale of senior lien positions in, or refinancings of, its portfolio loans. These sales and refinancings are, with respect to any one loan, non-recurring. Accordingly, the Company's ability to recognize these gains in the future will depend upon its continuing ability to acquire loans and the sale of senior lien positions in, or refinancings of, such loans. See "Risk Factors--General: Ability to Generate Growth Opportunities." Moreover, depending upon the timing of portfolio acquisitions and sales of -33- senior lien positions or refinancings, the Company's revenues from its commercial mortgage loan acquisition and resolution business could be subject to significant fluctuations from period to period. Residential Mortgage Loan Originations. In addition to the risks usually associated with mortgage lending (see "Risk Factors -- General: Credit Risks" and "Risk Factors - Real Estate Finance Considerations: Lien Priority" and "--Real Estate Finance Considerations: Environmental Liability"), the Company's residential mortgage loan origination business, may involve a number of risks, including loan quality risks (principally involving the risk that loans not conforming to FNMA and FHLMC guidelines or loans to credit impaired borrowers may result in higher rates of default than conforming loans), the potential dependence of the Company's revenues from residential mortgage lending on its ability to sell or securitize its residential mortgage loans (and the possible contingent liability of the Company in any such sale or securitization for the repurchase of some or all defaulted loans sold or securitized) and claims made against the Company for breaches of fiduciary duty, misrepresentations, violations of federal or state laws relating to truth in lending, equal credit opportunity, settlement procedures, mortgage disclosure, debt collection practices or similar matters. As a new business line, residential mortgage loan origination is also subject to the risks, expenses and difficulties frequently encountered in the establishment of a new business which may materially adversely affect the Company's ability to develop the business, and the Company's investment in it. Equipment Leasing Considerations Limited Equipment Leasing Operating History. The Company acquired the equipment leasing operations of The Fidelity Mutual Life Insurance Company ("Fidelity") in September 1995 and, in 1996, the Company expanded these leasing operations to include small ticket equipment leasing for its own account. Although the leasing business acquired by the Company has been in operation since 1986, and the executives primarily responsible for developing the Company's proprietary leasing program have had lengthy experience in the equipment leasing industry, the Company has only a limited amount of direct experience upon which an evaluation of its prospects in the equipment leasing business can be based. Demand for Company's Equipment Leasing Services. The demand for the equipment leasing services provided by the Company is subject to numerous factors beyond the control of the Company, including general economic conditions, fluctuations in interest rate levels and fluctuations in demand for the types of equipment as to which the Company provides equipment leases. In addition, the demand for the Company's equipment lease services will be materially affected by the ability of the Company to market its services to manufacturers, regional distributors and other vendors. -34- Residuals. The Company anticipates that a significant portion of the Company's revenues from leasing operations may result from the sale or re-leasing of equipment upon lease termination or from the extension of lease terms beyond their initial expiration dates ("residuals"). The Company's realization of residuals will be subject to numerous factors beyond the Company's control, including the ability or willingness of a lessee to continue a lease or acquire the equipment, equipment obsolescence, excessive supply of similar equipment, reductions in manufacturer's prices for similar equipment and similar matters, which could materially adversely affect the amount of residuals obtainable by the Company and, accordingly, the operating results and financial condition of the Company. Energy Industry Considerations Market for Production. Historically, the availability of a ready market for oil and natural gas, and the price obtained therefor, has depended upon numerous factors including the extent of domestic production, import of foreign natural gas and/or oil, political instability in oil and gas producing countries and regions, market demand, the effect of federal regulation on the sale of natural gas and/or oil in interstate commerce, and other governmental regulation of the production and transportation of natural gas and/or oil. Certain other factors outside the Company's control, such as operational and transportation difficulties of pipeline or oil purchasing companies, may also limit sales. In addition, the marketability of natural gas depends upon the needs of the purchasers to which the producer has access. Depending upon the purchasers' needs, the price obtainable for natural gas produced by the Company, or the amount of natural gas which the Company is able to sell, the revenues of the Company may be materially adversely affected. Possible Decline in Production. Production of oil and gas from a particular well generally declines over time until it is no longer economical to produce from the well, at which time the well is plugged and abandoned. The Company's wells have been drilled at various times from 1966 to the present. The Company's wells generally have productive lives of 15 to 20 years and have been subject to normal production declines. To date, these declines have been offset largely by the acquisition of additional wells and, to a materially lesser extent, drilling of new wells. The Company cannot predict whether the Company will acquire further energy assets or as to the timing or cost thereof. Environmental Liabilities. Oil and gas operations are subject to numerous hazards (such as seepage, spillage of well substances such as brine or oil, and escape of oil or gas from wells, tanks or pipelines) which can cause substantial pollution damage to the environment or severely damage the property of others. While the Company maintains liability insurance coverage and has not had a material environmental incident, there can be no assurance that -35- incidents will not occur in the future or that the liability resulting therefrom will not be substantial. Importance of Key Employees The Company's future success will depend upon the continued services of the Company's senior management and, with respect to its leasing operations, the Chairman and Chief Executive Officer of its leasing subsidiary. The unexpected loss of the services of any of these management personnel could have a material adverse effect upon the Company. The Company does not maintain key man life insurance on, nor (except for employment agreements with Edward E. Cohen, the Chairman, Chief Executive Officer and President of the Company, Abraham Bernstein, the Chairman and Chief Executive Officer of its leasing operations, and Daniel G. Cohen, the Chairman and Chief Executive Officer of the Company's residential mortgage origination business and an Executive Vice President of the Company) does it have employment agreements with, any of its senior management. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges of the Company for the respective periods indicated (unaudited). For The For The Years Ended September 30, Nine Months --------------------------------- Ended 1992 1993 1994 1995 1996 June 30,1997 ---- ---- ---- ---- ---- ------------ Ratio of Earnings to Fixed Charges:.........(1) 16.45 4.89 4.07 9.44 6.95 - ---------------------- (1) Earnings in 1992 were inadequate to cover fixed charges by $506,000. The ratio of earnings to fixed charges is calculated by dividing income from continuing operations before income taxes, extraordinary gains and cumulative effect of a change in accounting principal plus fixed charges by fixed charges. Fixed charges represent total interest expense, including amortization of debt expense and discount relating to indebtedness. USE OF PROCEEDS The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of September 30, 1997, and as adjusted for the exchange of the New Notes for the Old Notes. The following data should be read in -36- conjunction with the consolidated financial statements and notes thereto of the Company incorporated by reference herein. The issuance of the New Notes will have no effect on the capitalization of the Company.
As of September 30, 1997 ------------------------ Actual As Adjusted ------ ----------- Current portion of long-term debt $ 708 $ 708 Long-term debt: Equipment lease credit facility 0 0 Other debt 3,786 3,786 Notes 0 115,000 Old Notes 115,000 0 -------- -------- Total long-term debt $119,494 $119,494 ======== ======== Stockholders' equity Preferred Stock, $1.00 par value, 1,000,000 shares authorized, none issued $ 0 $ 0 Common Stock, $.01 par value, 8,000,000 shares authorized, 5,410,645 shares issued and outstanding 54 54 Additional paid-in capital 56,787 56,787 Retained earnings 22,005 22,005 Less cost of treasury shares (13,664) (13,664) Less loan receivable from ESOP (353) (353) -------- -------- Total stockholders' equity 64,829 64,829 -------- -------- Total capitalization $184,323 $184,323 ======== ========
THE EXCHANGE OFFER Purpose and effect of the Exchange Offer In connection with the sale of the Old Notes, and pursuant to the Indenture, the Company granted certain Registration Rights to the Initial Purchaser, pursuant to which the Company agreed, among other things, to file on or before November 15, 1997 and to use its best efforts to cause to become effective on or before December 30, 1997 with the Commission the Registration Statement with respect to the exchange of the New Notes with terms identical in all material respects to the terms of the Old Notes. The Registration Rights Agreement has been filed as an Exhibit to the Registration Statement of which this Prospectus is a part. The Exchange Offer is being made to satisfy the contractual obligations of the Company under the Registration Rights Agreement. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not provide for any increase in the interest rate thereon. In that regard, the Old Notes provide, among other things, that, in the event that either (i) the Registration Statement is not filed with the Commission on or prior to November 15, 1997, (ii) the Registration Statement is not declared effective on or prior to -37- December 30, 1997, or (iii) the Exchange Offer is not consummated on or prior to February 15, 1998 or a Shelf Registration Statement is not declared effective on or prior to February 15, 1998, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum following November 15, 1997 in the case of clause (i) above, December 30, 1997 in the case of clause (ii) above or February 15, 1998 in the case of clause (iii) above, which rate will be increased by an additional one-half of one percent per annum for each 90-day period that any such additional interest continues to accrue; provided that the aggregate increase in such interest rate will in no event exceed one percent per annum. In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer or if for any other reason the Registration Statement is not declared effective on or prior to December 30, 1997, the Exchange Offer is not consummated on or prior to February 15, 1998, any Holder of the Old Notes (other than the Initial Purchaser) is not eligible to participate in the Exchange Offer or upon the request of the Initial Purchaser under certain circumstances, the Company will at its cost, (a) as promptly as practicable, file with the Commission a Shelf Registration Statement covering resales of the Old Notes, (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to February 15, 1998 (or promptly in the event of a request by the Initial Purchaser) and (c) use its best efforts to keep effective the Shelf Registration Statement for a period of two years after its effective date (or for a period of one year after such effective date if such Shelf Registration Statement is filed at the request of the Initial Purchaser or, for such shorter period, when all of the Old Notes covered by the Shelf Registration Statement have been sold pursuant thereto). The Company will, in the event of the filing of a Shelf Registration Statement, provide to each Holder of the Old Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement for the Old Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Old Notes. A Holder of Old Notes who sells such Old Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling security Holder in the related prospectus and to deliver the prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a Holder (including certain indemnification obligations). In addition, each Holder of the Old Notes will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Old Notes included in the Shelf Registration Statement and to benefit from the provisions regarding liquidated damages set forth in the following paragraph. -38- Upon (x) the filing of the Registration Statement after November 15, 1997, (y) the effectiveness of the Registration Statement after December 30, 1997, or (z) the day before the date of the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after February 15, 1998, the interest rate borne by the Old Notes from the date of such filing, effectiveness or the day before the date of the consummation, as the case may be, will be reduced by the full amount of such increase from the original interest rate of the Old Notes; provided, however, that, if after any such reduction in interest rate, a different event specified in clause (i), (ii) or (iii) above occurs, the interest rate may again be increased and thereafter reduced pursuant to the foregoing provisions. If the Exchange Offer is consummated, Old Notes that remain outstanding thereafter and the New Notes issued in connection with the Exchange Offer will be treated as a single class of securities under the Indenture. The Exchange Offer is not being made to, nor will the Company accept tenders for exchange from, Holders of Old Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Unless the context requires otherwise, the term "Holder" with respect to the Exchange Offer means any person in whose name the Old Notes are registered on the books of the Company, or any person whose Old Notes are held of record by The Depository Trust Company who desires to deliver such Old Notes by book-entry transfer at The Depository Trust Company. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which is an exhibit to the Registration Statement of which this Prospectus is a part. Terms of the Exchange The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, to exchange up to $115,000,000 aggregate principal amount of New Notes for a like aggregate principal amount of Old Notes properly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with the procedures described below. The Company will issue, promptly after the Expiration Date, an aggregate Liquidation Amount of up to $115,000,000 of New Notes in exchange for a like principal amount of outstanding Old Notes tendered and accepted in connection with the Exchange Offer. Holders may tender their Old Notes in whole or in part in denominations of not less than $1,000 or any integral multiple thereof. -39- The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. As of the date of this Prospectus $115,000,000 aggregate principal amount of the Old Notes is outstanding. Holders of the Old Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Old Notes which are not tendered for or are tendered but not accepted in connection with the Exchange Offer will remain outstanding and be entitled to the benefits of the Indenture, but will not be entitled to any further registration rights under the Registration Rights Agreement, except under limited circumstances. See "Risk Factors-- Consequences of a Failure to Exchange Old Notes" and "Description of the Old Notes." If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering Holder thereof promptly after the Expiration Date. Holders who tender Old Notes in connection with the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of the Old Notes in connection with the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. Expiration Date; Extensions; Amendments The term "Expiration Date" means 5:00 p.m., New York City time, on February 15, 1998 unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date") shall mean the latest date and time to which the Exchange Offer is extended). The Company expressly reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer (whether or not any of -40- the Old Notes have theretofore been accepted for exchange) if the Company determines in its sole and absolute discretion, that any of the events or conditions referred to under "--Conditions to the Exchange Offer" have occurred or exist or have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all of the Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of Holders of the Old Notes to withdraw their tendered Old Notes as described under "--Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, or if the Company waives a material condition of the Exchange Offer, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Any such delay in acceptance, extension, termination or amendment will be followed promptly by oral or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. Acceptance for the Exchange and Issuance of New Notes Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange, and will issue to the Exchange Agent, the New Notes for the Old Notes validly tendered and not withdrawn (pursuant to the withdrawal rights described under "--Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of the New Notes in exchange for the Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) the Old Notes or a book-entry confirmation of a book-entry transfer of the Old Notes into the Exchange Agent's account at The Depository Trust Company ("DTC"), including an Agent's Message if the tendering Holder has not delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal, and (iii) any other documents required by the Letter of Transmittal. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of the Old Notes into the Exchange Agent's -41- account at DTC. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgement from the tendering participant, which acknowledgement states that such participant has received and agreed to be bound by the Letter of Transmittal and that the Company may enforce such Letter of Transmittal against such a participant. Subject to the terms and conditions of the Exchange Offer, the Company will be deemed to have accepted for exchange, and thereby exchanged, the Old Notes validly tendered and not withdrawn as, if and when the Company gives oral or written notice to the Exchange Agent of the Company's acceptance of such Old Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent for the Company for the purpose of receiving tenders of the Old Notes, Letters of Transmittal and related documents, and as agent for tendering Holders for the purpose of receiving the Old Notes, Letters of Transmittal and related documents and transmitting the New Notes to validly tendering Holders. Such exchange will be made promptly after the Expiration Date. If for any reason whatsoever, acceptance for exchange or the exchange of any Old Notes tendered pursuant to the Exchange Offer is delayed (whether before or after the Company's acceptance for exchange of the Old Notes) or the Company extends the Exchange Offer or is unable to accept for exchange or exchange the Old Notes tendered pursuant to the Exchange Offer, then, without prejudice to the Company's rights set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes and such Old Notes may not be withdrawn except to the extent tendering Holders are entitled to withdrawal rights as described under "--Withdrawal Rights." Pursuant to the Letter of Transmittal, or Agent's Message in lieu thereof, a Holder of the Old Notes will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer the Old Notes, that the Company will acquire good, marketable and unencumbered title to the tendered Old Notes free and clear of all liens, restrictions, charges and encumbrances, and the Old Notes tendered for exchange are not subject to any adverse claims or proxies. The Holder also will warrant and agree that it will, upon request, execute and delivery any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Notes tendered pursuant to the Exchange Offer. Procedures for Tendering Old Notes Valid Tender. Except as set forth below, in order for the Old Notes to be validly tendered pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry tender, an Agent's Message in lieu of the Letter -42- of Transmittal, and any other required documents, must be received by the Exchange Agent at one of its addresses set forth under "--Exchange Agent," and either (i) tendered Old Notes must be received by the Exchange Agent, or (ii) such Old Notes must be tendered pursuant to the procedures for book-entry transfer set forth below and a book-entry confirmation, including an Agent's Message if the tendering Holder has not delivered a Letter of Transmittal, must be received by the Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set forth below must be complied with. If less than all of the Old Notes are tendered, but in no case less than $1,000 principal amount of Old Notes, a tendering Holder should fill in the amount of the Old Notes being tendered in the appropriate box on the Letter of Transmittal. The entire amount of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF CERTIFICATIONS, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book Entry Transfer. The Exchange Agent will establish an account with respect to the Old Notes at DTC for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or any Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "-- Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. Signature Guarantees. Certificates for the Old Notes need not be endorsed and signature guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate for the Old Notes is registered in a name other than that of the person surrendering the certificate or (b) such registered Holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the -43- Letter of Transmittal. In the case of (a) or (b) above, such certificates for Old Notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. See Instruction 1 to the Letter of Transmittal. Guaranteed Delivery. If a Holder desires to tender Old Notes pursuant to the Exchange Offer and the certificates for such Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent on or before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, such Old Notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Letter of Transmittal, is received by the Exchange Agent, as provided below, on or prior to Expiration Date; and (iii) the certificates (or a book-entry confirmation) representing all tendered Old Notes, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail, to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in such notice. Notwithstanding any other provision hereof, the delivery of the New Notes in exchange for the Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will in all cases be made only after timely receipt by the Exchange Agent of the Old Notes, or of a -44- book-entry confirmation with respect to such Old Notes, and a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), together with any required signature guarantees and any other documents required by the Letter of Transmittal. Accordingly, the delivery of the New Notes might not be made to all tendering Holders at the same time, and will depend upon when the Old Notes, book-entry confirmations with respect to the Old Notes and other required documents are received by the Exchange Agent. The Company's acceptance for exchange of the Old Notes tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering Holder and the Company upon the terms and subject to the conditions of the Exchange Offer. All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Notes will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company reserves the absolute right, in its sole and absolute discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer as set forth under "--Conditions to the Exchange Offer" or any condition or irregularity in any tender of the Old Notes of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of the Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If any Letter of Transmittal, endorsement, bond power, power of attorney, or any other document required by the Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. A beneficial owner of the Old Notes that are held by or registered in the name of a broker, dealer, commercial bank, trust -45- company or other nominee or custodian is urged to contact such entity promptly if such beneficial Holder wishes to participate in the Exchange Offer. Resales of New Notes The Company is making the Exchange Offer for the Old Notes in reliance upon the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based upon these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any Holder of Old Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distributing New Notes, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (b) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. Each Holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. In addition, the Company may require such Holder, as a -46- condition to its participation in the Exchange Offer, to furnish to the Company (or an agent thereof) in writing information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such Holder holds the Old Notes to be exchanged in the Exchange Offer. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Broker-dealers who acquired Old Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of the Old Notes with a prospectus meeting the requirements of the Securities Act, which may be this Prospectus, as it may be amended or supplemented from time to time for a period ending 180 days after the Expiration Date or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Company and any Participating Broker-Dealer who purchased the Old Notes specifically for resale may not use this Prospectus and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer who surrenders Old Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, or delivery of an Agent's Message in lieu thereof, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of the New Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. Withdrawal Rights Except as otherwise provided herein, tenders of the Old Notes may be withdrawn at any time on or prior to the Expiration Date. -47- In order for a withdrawal to be effective, a written or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth under "--Exchange Agent" on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of the Old Notes to be withdrawn, and, if certificates for such Old Notes have been tendered, the name of the registered Holder of the Old Notes as set forth on the Old Notes, if different from that of the person who tendered the Old Notes. If the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Old Notes, the tendering Holder must submit the serial numbers shown on the particular Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If the Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "-- Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of the Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written or facsimile transmission. Withdrawals of tenders of the Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described above under "--Procedures for Tendering Old Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the Holder thereof promptly after withdrawal. Interest Payments on the New Notes Holders of Old Notes whose Old Notes are accepted for exchange will not receive accumulated interest on such Old Notes for any period from and after the last Interest Payment Date with respect to such Old Notes prior to the original issue date of the New Notes or, if no such interest payment has been made, will not receive any accumulated interest on such Old Notes, and will be deemed to have waived the right to receive any interest on such Old Notes accumulated from and after such Interest Payment Date or, if no such interest has been paid or duly provided for, from and after February 1, 1997. However, because interest on the New Notes will accumulate from February 1, -48- 1997, the amount of the interest received by Holders whose Old Notes are accepted for exchange will not be affected by the exchange. Conditions to the Exchange Offer Notwithstanding any other provisions of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to accept for exchange, or to exchange, any Old Notes for any New Notes, and, as described below, may terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any conditions or amend the Exchange Offer, if any of the following conditions have occurred or exists or have not been satisfied: (a) there shall occur a change in the current interpretation by the staff of the Commission which permits the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes to be offered for resale, resold and otherwise transferred by Holders thereof (other than broker-dealers and any such Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement or understanding with any person to participate in the distribution of such New Notes; or (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (c) any law, statute, rule or regulation shall have been adopted or enacted which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; If the Company determines in its sole and absolute discretion that any of the foregoing events or conditions has occurred or exists or has not been satisfied, the Company may, subject to applicable law, terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any such conditions or otherwise amend the terms of the Exchange Offer in any respect. If such waiver or amendment constitutes a material change to -49- the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Exchange Agent The Bank of New York has been appointed as Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent as follows: By Hand or Overnight Delivery: By Registered or Certified Mail: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street, 7E Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section By Facsimile Delivery: (Eligible Institutions Only) (212) 571-3080 Delivery to other than one of above addresses or the facsimile number will not constitute a valid delivery. Fees and Expenses The Company has agreed to pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of Old Notes, and in handling and tendering for their customers. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such taxes will be billed directly to such tendering Holder. -50- The Company will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. DESCRIPTION OF THE NEW NOTES The terms of the New Notes are identical in all material respects to the respective terms of the Old Notes except as otherwise set forth herein. The New Notes are to be issued under the Indenture between the Company and The Bank of New York, as Trustee (the "Trustee"). Upon issuance of the New Notes, the Indenture will be subject to and governed by the provisions of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon request, the Company will provide copies of the Indenture to Holders of the Old Notes. Copies of the Indenture are also available for inspection at the corporate trust office of the Trustee in New York, New York. Capitalized terms not otherwise defined herein have the meanings specified in the Indenture. A glossary of such terms is set forth at "Description of New Notes - Certain Definitions." Wherever a defined term of the Indenture is referred to, the definition of such term set forth in the Indenture is incorporated herein by such reference. The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture, including the definitions therein of certain terms and those terms made part of the Indenture by reference to the Trust Indenture Act. For purposes of this Section, the term "Company" refers only to Resource America, Inc. and not any of its Subsidiaries. General The New Notes will be limited in aggregate original principal amount to $115 million. The New Notes will mature on August 1, 2004 (the "Stated Maturity"). The New Notes will rank pari passu with all other general unsecured obligations of the Company. The New Notes will bear interest from the date of their initial issuance, at the rate of twelve percent (12%) per annum, payable semi-annually in arrears on February 1 and August 1 of each year (each an "Interest Payment Date"), commencing February 1, 1998, to the Holders of record at the close of business on January 15 or July 15 (whether or not a business day), as the case may be, next preceding such Interest Payment Date (each, a "Regular Record Date"). Interest will be computed on the basis of a 360-day year of twelve 30-day months. The New Notes will not be secured by the assets of the Company or any of its Subsidiaries, or otherwise, and will not have the benefit of a sinking fund for the retirement of principal or interest. Because the Company is a holding company that currently conducts substantially all of its operations through its Subsidiaries, the right of the Company to participate in any distribution of assets of -51- the Subsidiaries upon their liquidation or reorganization or otherwise (and thus the ability of Holders of the New Notes to benefit indirectly from such distribution) are subject to the prior claims of creditors of the Subsidiaries. See "Risk Factors - General: Holding Company Structure; Limitations on Access to Cash Flow of Operating Companies; Effective Subordination." Book-Entry Delivery and Form General. The certificates representing the New Notes will be issued in fully registered form, without coupons. Except as described in the next paragraph, the New Notes will be deposited with, or on behalf of, The Depository Trust Company, New York, New York (the "Depositary"), and registered in the name of Cede & Co., as the Depositary's nominee, in the form of a global Note certificate (the "Global Certificate") or will remain in the custody of the Trustee pursuant to a FAST Balance Certificate Agreement between the Depositary and the Trustee. Unless and until it is exchangeable in whole or in part for New Notes in definitive form, a Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Book-Entry Securities. Ownership of beneficial interests in a Global Note will be limited to persons that have accounts with the Depositary or its nominee ("Participants") or persons that may hold interests through Participants. The Company expects that upon the issuance of a Global Note, the Depositary will credit, on its book-entry registration and transfer system, the Participants' accounts with their respective principal amounts of the New Notes represented by such Global Note. Ownership of beneficial interests in such Global Note will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by the Depositary (with respect to interests of Participants) and on the records of Participants (with respect to interests of beneficial owners held through Participants). Beneficial owners will not receive written confirmation from the Depositary of their purchase, but are expected to receive written confirmations from the Participants through which the beneficial owner entered into the transaction. Transfers of ownership interests will be accomplished by entries on the books of Participants acting on behalf of the beneficial owners. So long as the Depositary, or its nominee, is the registered owner of a Global Note, the Depositary or such nominee, as the case may be, will be considered the sole owner or Holder of the New Notes represented by such Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to receive physical delivery of the New Notes in definitive form and will not be considered the owners or Holders thereof under the Indenture. Accordingly, each owner of a -52- beneficial interest in such a Global Note must rely on the procedures of the Depositary and, if such beneficial owner is not a Participant, on the procedures of the Participant through which such beneficial owner owns its interest, to exercise any rights of a Holder under the Indenture. The Company understands that, under the Depositary's existing practices, in the event that the Company requests any action of Holders, or an owner of a beneficial interest in such a Global Note desires to take any action which a Holder is entitled to take under the Indenture, the Depositary would authorize the Participants holding the relevant beneficial interests to take such action, and such Participants would authorize beneficial owners owning through such Participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Redemption notices will also be sent to the Depositary. If less than all of the New Notes are being redeemed, the Company understands that it is the Depositary's existing practice to determine by lot the amount of the interest of each Participant to be redeemed. Payment of principal of, and premium, if any, and interest on New Notes registered in the name of the Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner of the Global Note representing such New Notes. None of the Company, the Trustee or any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Note for such New Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Disbursements of payments of principal, premium, if any, and interest to Participants shall be the responsibility of the Depositary. The Depositary's practice is to credit Participants' accounts on a payable date in accordance with their respective holdings shown on the Depositary's records unless the Depositary has reason to believe that it will not receive payment on such payable date. Payments by Participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of the Depositary, the Company, the Trustee or any agent of the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. The Depositary may discontinue providing its services as securities depository with respect to the New Notes at any time by giving reasonable notice to the Company or the Trustee. If the Depositary notifies the Company that it is unwilling to continue as such, or if it is unable to continue or ceases to be a clearing agency registered under the Exchange Act and a successor depository is not appointed by the Company within ninety days after receiving such notice or becoming aware that the Depositary is no longer so registered, the Company will issue the New Notes in definitive form upon registration of transfer of, or in exchange for, such Global Note. In addition, the Company may at any time and in its sole -53- discretion determine not to have the New Notes represented by one or more Global Notes and, in such event, will issue New Notes in definitive form in exchange for all of the Global Notes representing such New Notes. The Depositary has advised the Company as follows: it is a limited-purpose trust company organized under the New York Banking Law, a "bank organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary was created to hold securities for its Participants and to facilitate the clearance and settlement of securities transactions among its Participants in such securities through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's Participants include securities broker-dealers (such as the Initial Purchaser), banks, trust companies, clearing corporations and certain other organizations. Persons who are not Participants in the Depositary may beneficially own securities held by the Depositary only through Persons who are participants or who clear through or maintain a custodial relationship with a Participant. The Depositary is owned by a number of its Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the NASD. The regulations applicable to the Depositary and its Participants are on file with the Commission. Optional Redemption The New Notes may not be redeemed prior to August 1, 2002. On or after such date, the New Notes may be redeemed, in whole or in part, at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest to (but excluding) the redemption date, if redeemed during the 12-month period, beginning January 1, of the years indicated below: Year Redemption Price ---- ---------------- 2002....................... 106% 2003....................... 103% If at any time fewer than all of the New Notes then outstanding are to be redeemed, the Trustee shall select the New Notes or portions thereof to be redeemed by any method the Trustee shall deem fair and reasonable. New Notes in denominations larger than $1,000 may be redeemed in part in integral multiples of $1,000. Notice of redemption will be mailed to each Holder of New Notes to be redeemed at such Holder's registered address at least 30, but not more than 60, days before the redemption date. On or after the redemption date, interest will cease to accrue on the New Notes or portions thereof called for redemption. -54- In addition to permitted redemptions, the Company may from time to time purchase the New Notes in the open market, in private transactions or otherwise, as permitted by applicable law. No Sinking Fund or Mandatory Redemption The New Notes will not be entitled to the benefit of any sinking fund or mandatory redemption. Certain Covenants The Indenture contains, among others, the following covenants: Net Worth Maintenance. Commencing on the date of issuance of the Old Notes and at all times thereafter including upon the exchange of Old Notes for New Notes, determined at the end of each fiscal quarter, the Company shall maintain Consolidated Net Worth, equal to (i) $50.0 million plus (ii) a cumulative amount equal to twenty-five percent (25%) of the Consolidated Net Income (but not loss), if any, of the Company and its Subsidiaries for each fiscal quarter commencing with the first full quarter ending after issuance of the Old Notes. Limitations on Indebtedness. (a) Except for the issuance of the New Notes, the Company shall not incur, directly or indirectly, any Indebtedness or issue any Disqualified Capital Stock; provided, however, that the Company may incur Indebtedness or issue Disqualified Capital Stock if, on the date of such incurrence or issuance and after giving effect thereto, (i) no Default or Event of Default has occurred and is continuing or would result therefrom and (ii) the Leverage Ratio does not exceed 2.0 to 1.0. (b) The Company will not create, incur, issue, assume, guarantee or otherwise in any manner become directly or indirectly liable for or with respect to, or otherwise permit to exist, any Junior Indebtedness or Pari Passu Indebtedness (other than Acquired Indebtedness) unless the Stated Maturity of principal (or any required repurchase, redemption, defeasance or sinking fund payments) of such Junior Indebtedness or Pari Passu Indebtedness is after the final Stated Maturity of principal of the Notes. (c) The Company will not permit any Subsidiary to, directly or indirectly, incur any Indebtedness or issue any Disqualified Capital Stock. (d) The Company will not incur any Indebtedness which is senior in right of payment to the Notes. -55- (e) The foregoing provisions shall not apply to: (1) Permitted Acquisition Indebtedness of the Company and its Subsidiaries; (2) Permitted Repurchase Facilities of the Company and its Subsidiaries; (3) Guarantees by the Company of (1) and (2); (4) Intercompany Indebtedness owed by the Company to any of its Subsidiaries or owed by any Subsidiary to the Company; (5) Incurrence by the Company of its obligations under the Notes; (6) Non-Recourse Indebtedness of the Company and its Subsidiaries; (7) Securities issued in a securitization by a Securitization Entity formed by or on behalf of the Company or its Subsidiaries, regardless of whether such securities are treated as indebtedness for tax purposes, provided that neither the Company nor any Subsidiary (other than the Securitization Entity formed solely for the purpose of such securitization) is directly or indirectly liable as a guarantor or otherwise (excluding the provision of Credit Support) for such securities or obligations of the Securitization Entity; (8) Unsecured working capital loans to Subsidiaries, not to exceed $5.0 million in the aggregate, provided, however, that such Indebtedness shall be considered to be Indebtedness of the Company for the purpose of the Leverage Ratio; (9) Acquired Indebtedness of Subsidiaries, provided, however, that such Acquired Indebtedness shall be considered to be Indebtedness of the Company for the purpose of the Leverage Ratio; (10) Indebtedness secured by Permitted Liens; or (11) Hedging Obligations directly related to: (i) Indebtedness permitted to be incurred by the Company or its Subsidiaries pursuant to the Indenture; -56- (ii) loans held by the Company or its Subsidiaries pending sale; or (iii) loans with respect to which the Company or any Subsidiary has an outstanding purchase offer or commitment, financing commitment or security interest. (f) For purposes of determining compliance with the foregoing covenants: (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in good faith, will classify such item of Indebtedness and be required to include the amount and type of such Indebtedness in one of the above clauses; and (2) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The Company (a) will not permit any Subsidiary to issue or sell any shares of its Capital Stock (other than to the Company or a Wholly Owned Subsidiary) and (b) except pursuant to existing agreements, options or option plans, will not permit any Person to own any shares of Capital Stock of any Subsidiary. Liquidity Maintenance. The Company shall, at all times when the New Notes are not rated in an investment grade category by one or more nationally recognized statistical rating organizations, maintain Liquid Assets with a value equal to at least 100% of the required interest payments due on the New Notes on the next succeeding semi-annual Interest Payment Date. Liquid Assets of a Subsidiary may be included in such calculation only to the extent that such Liquid Assets may at such time be distributed to the Company without restriction or notice to any Person. Such Liquid Assets shall not be the subject of any pledge, Lien, encumbrance or charge of any kind and shall not be used as collateral or security for Indebtedness for borrowed money or otherwise of the Company or its Subsidiaries nor may such Liquid Assets be used as reserves for any self-insurance maintained by the Company. Limitations on Restricted Payments. The Company will not, and will not permit any Subsidiary to, directly or indirectly, make any Restricted Payment if, at the time of such Restricted Payment or after giving effect thereto, (a) a Default or Event of Default shall have occurred and be continuing; or -57- (b) the Company would fail to maintain sufficient Liquid Assets to comply with the terms of the covenant described above under "Liquidity Maintenance"; or (c) the aggregate amount of all Restricted Payments (the amount of such payments, if other than in cash, having been determined in good faith by the relevant Board of Directors, whose determination shall be conclusive and evidenced by a Board resolution filed with the Trustee) declared and made after the issue date of the Old Notes would exceed the sum of: (i) 25% of the aggregate Consolidated Net Income (or, if such Consolidated Net Income is a deficit, 100% of such deficit) of the Company accrued on a cumulative basis during the period beginning on the first day of the fiscal quarter during which the issue date of the Old Notes occurred and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment; plus (ii) the aggregate Net Cash Proceeds received by the Company as capital contributions (other than from a Subsidiary) after the issue date of the Old Notes; plus (iii) the aggregate Net Cash Proceeds and the Fair Market Value of property not constituting Net Cash Proceeds received by the Company from the issuance or sale (other than to a Subsidiary) of Qualified Capital Stock after the issue date of the Old Notes; plus (iv) 100% of the amount of any Indebtedness of the Company or a Subsidiary that is issued after the issue date of the Old Notes that is thereafter converted into or exchanged for Qualified Capital Stock of the Company; or (d) the Unsecured Debt Coverage Ratio for the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such Restricted Payment is less than 2.00 to 1.00, determined after giving effect to such Restricted Payment; provided, however, that the foregoing provisions will not prevent (y) the payment of a dividend within 60 days after the date of its declaration if at the date of declaration such payment was permitted by the foregoing provisions, or (z) any Permitted Payment. Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its -58- Subsidiaries (other than a Securitization Entity) to, create, assume or otherwise cause or suffer to exist or to become effective any consensual encumbrance or restriction on the ability of any such Subsidiary to (a) pay any dividends or make any other distribution on its Capital Stock; (b) make payments in respect of any Indebtedness owed to the Company or any other Subsidiary; or (c) make loans or advances to the Company or any Subsidiary or to guarantee Indebtedness of the Company or any other Subsidiary; other than, in the case of (a), (b) and (c), (1) restrictions imposed by applicable law; (2) restrictions existing under agreements in effect on the date of the Indenture or under renewals or extensions thereof on substantially the same terms and conditions; (3) consensual encumbrances or restrictions binding upon any Person at the time such Person becomes a Subsidiary of the Company so long as such encumbrances or restrictions are not created, incurred or assumed in contemplation of such Person becoming a Subsidiary; (4) restrictions with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the assets (which term may include the Capital Stock) of such Subsidiary; (5) restrictions on the transfer of assets which are subject to Liens; (6) restrictions existing under agreements evidencing Permitted Acquisition Indebtedness or Permitted Repurchase Facilities if such Indebtedness (i) is made without recourse to, and with no cross collateralization (which shall not include Guarantees) against the assets of the Company or any other subsidiary, and (ii) upon complete or partial liquidation of which the Indebtedness must be correspondingly repaid in whole or in part, as the case may be; and (7) restrictions existing under any agreement that renews, extends, increases, refinances or replaces any of the agreements containing the restrictions in -59- clauses (2), (3) and (6); provided that the terms and conditions of any such restrictions (except for changes in interest rates related to changes in market rates) are not less favorable to the Holders than those under the agreement evidencing or relating to the Indebtedness renewed, extended, increased, refinanced or replaced. Limitations on Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (except that the Company and any of its Subsidiaries may enter into any transaction or series of related transactions with any Subsidiary of the Company without limitation under this covenant) unless: (i) such transactions or series of related transactions is on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than would be available in a comparable transaction in an arm's length dealing with a Person that is not such an Affiliate or, in the absence of such a comparable transaction, on terms that the relevant Board of Directors determines in good faith would be offered to a Person that is not an Affiliate; (ii) with respect to any transaction or series of related transactions involving aggregate payments in excess of $250,000, the Company delivers an officers' certificate to the Trustee certifying that such transaction or series of transactions complies with clause (i) above and has been approved by a majority of the Disinterested Directors of the relevant Board of Directors of the Company or such Subsidiary, as the case may be; and (iii) with respect to any transaction or series of related transactions involving aggregate payments in excess of $1.0 million, or in the event that no members of the Board of Directors are Disinterested Directors with respect to any transaction or series of transactions included in clause (ii), (x) in the case of a transaction involving real property, the aggregate rental or sale price of such real property shall be the fair market rental or sale value of such real property as determined in a written opinion by a nationally recognized expert with experience in appraising the terms and conditions of the type of transaction or series of transactions for which approval is required and (y) in all other cases, the Company delivers to the Trustee a written opinion of a nationally recognized expert with experience in appraising the terms and conditions of the type of transaction or series of transactions for which approval is required to the effect that the transaction or series of transactions are fair to the Company or such Subsidiary from a financial point of view. The limitations set forth in this paragraph will not apply to (i) transactions entered into pursuant to any agreement already in effect on the date of the Indenture and any renewals or extensions thereof not involving modifications materially adverse to the Company or any Subsidiary, (ii) normal banking relationships with an Affiliate on an arms' length basis, (iii) any employment agreement, stock option, employee benefit, indemnification, compensation, business -60- expense reimbursement or other employment-related agreement, arrangement or plan entered into by the Company or any of its Subsidiaries which agreement, arrangement or plan was adopted by the Board of Directors of the Company or such Subsidiary (including a majority of the Disinterested Directors), as the case may be, (iv) any Restricted Payment or Permitted Payment, (v) any transaction or series of transactions in which the total amount involved does not exceed $125,000, or (vi) services rendered and obligations incurred by the Company or any of its Subsidiaries pursuant to existing agreements or agreements between the Company and/or any of its Subsidiaries. Limitations on Liens and Guarantees. The Company will not create, assume, incur or suffer to exist any Lien (other than a Permitted Lien) upon any of the Company's assets (including the Capital Stock of any Subsidiary) as security for Indebtedness, without effectively providing that the Notes will be equally and ratably secured with (or prior to) such Indebtedness. In addition, the Company will not permit any Subsidiary of the Company, directly or indirectly, to guarantee or assume, or subject any of its assets to a Lien (other than a Permitted Lien) to secure any Pari Passu Indebtedness or Junior Indebtedness unless (i) such Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a guarantee of, or pledge of assets to secure, the Notes by such Subsidiary on terms at least as favorable to the Holders of the Notes as such guarantee or security interest in such assets is to the Holders of such Pari Passu Indebtedness or Junior Indebtedness, except that in the event of a guarantee or security interest in such assets with respect to (x) Pari Passu Indebtedness, the guarantee or security interest in such assets under the supplemental indenture shall be made pari passu to the guarantee or security interest in such assets with respect to such Pari Passu Indebtedness or (y) Junior Indebtedness, any such guarantee or security interest in such assets with respect to such Junior Indebtedness shall be subordinated to such Subsidiary's guarantee or security interest in such assets with respect to the Notes to the same extent as such Junior Indebtedness is subordinated to the Notes and (ii) such Subsidiary waives and will not in any manner whatsoever claim, or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Subsidiary of the Company as a result of any payment by such Subsidiary under its guarantees. Offer to Purchase upon a Change of Control. If a Change of Control Event shall occur at any time, then each Holder will have the right to require the Company to repurchase such Holder's Notes (pursuant to an offer made to all Holders), in whole or in part, in integral multiples of $1,000 at a purchase price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that the Company will have the funds available to repurchase the Notes in the event of a Change of Control Event. -61- The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes upon the occurrence of a Change of Control Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof. Additional Covenants. The Indenture also contains covenants with respect to, among other things, the following matters: (i) payment of principal, premium and interest; (ii) maintenance of corporate existence; (iii) payment of taxes and other claims; (iv) maintenance of properties; and (v) maintenance of insurance. Merger and Consolidation The Indenture provides that the Company may not, in a single transaction or a series of transactions, consolidate with or merge into any other Person or sell, assign, convey, transfer, lease all or substantially all of its assets to any Person or group of affiliated Persons unless (a) either (i) the Company shall be the continuing entity, or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person that acquires by sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the assets of the Company (the "Surviving Entity") is organized under the laws of the United States or a state thereof or the District of Columbia and such Surviving Entity assumes by supplemental indenture, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, all obligations of the Company on the Notes and under the Indenture, (b) immediately after giving effect to such transaction or series of transactions, no Default or Event of Default shall have occurred and be continuing; (c) the Company or the Surviving Entity, as applicable, could incur at least $1.00 of additional Indebtedness without violating the Leverage Ratio described above under "Limitation on Indebtedness;" and (d) the Company or the Surviving Entity, as applicable, shall have delivered, or caused to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officer's certificate and an opinion of counsel, each to the effect that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition and the supplemental indenture in respect thereto comply with the Indenture and that all conditions precedent provided for relating to such transaction have been complied with. Modification of the Indenture; Waiver of Covenants Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the Holders of greater than 50% in aggregate principal amount of the Notes then outstanding; -62- provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding Note affected thereby, (i) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Note or reduce the principal amount thereof, premium, if any, or the rate of interest thereon, or change the coin or currency in which any Note or any premium or the interest thereon is payable or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof; (ii) reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such amendment or modification, or the consent of whose Holders is required for any waiver; (iii) modify any of the provisions relating to supplemental indentures requiring the consent of Holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase the percentage in principal amount of outstanding Notes required for such action or to provide that certain other provisions of the Indenture may not be modified or waived without the consent of the Holder of each Note affected thereby; or (iv) waive a default in payment with respect to any Note (other than a default in payment that is due solely because of acceleration of the maturity of the Notes). Notwithstanding the foregoing, without the consent of any Holders of the Notes, the Company and the Trustee may modify or amend the Indenture (i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in the Indenture and in the Notes in accordance with the "Merger and Consolidation" provisions of the Indenture; (ii) to add any additional Events of Default, to add to the covenants of the Company for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Company in the Indenture or in the Notes; (iii) to cure any ambiguity, to correct or supplement any provision in the Indenture which may be defective or inconsistent with any other provision in the Indenture or in the Notes, provided that any such action shall not adversely affect in any material respect the interests of any Holder of any Note; (iv) to secure the Notes or add a guarantor under the Indenture pursuant to the provisions of the covenant on "Limitations on Liens and Guarantees" described above; (v) to evidence and provide the acceptance of the appointment of a successor Trustee under the Indenture; or (vi) to make any other provisions with respect to matters or questions arising under the Indenture or the Notes, provided that such provisions shall not adversely affect in any material respect the interests of any Holder of any Note. The Holders of greater than 50% in aggregate principal amount of the Notes outstanding may waive compliance with certain restrictive covenants and provisions of the Indenture. Events of Default An Event of Default is defined in the Indenture to include: -63- (i) failure by the Company to pay interest on any Note when due and payable, if such failure continues for a period of 30 days; (ii) failure by the Company to pay the principal on any Note when due and payable at maturity or upon redemption, acceleration or otherwise; (iii) failure by the Company to comply with any other agreement or covenant contained in the Indenture if such failure continues for a period of 30 days after notice to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Notes then outstanding; (iv) indebtedness of the Company or any Subsidiary of the Company is not paid within any applicable grace period after final maturity or in the event that final maturity is accelerated because of a default and, in either case, the total amount of such indebtedness unpaid or accelerated is equal to or greater than 5% of the Company's Consolidated Net Worth at the quarter end preceding the end of such grace period or such acceleration; (v) occurrence of certain events of bankruptcy or insolvency of the Company or any Significant Subsidiary; and (vi) existence of one or more judgments against the Company or any Subsidiary which remain undischarged 60 days after all rights to directly review such judgment, whether by appeal or writ, have been exhausted or have expired which are in excess, either individually or in the aggregate, of 5% of the Company's Consolidated Net Worth as of the quarter end preceding the end of such 60-day period. The Company has agreed in the Indenture to file annually with the Trustee a statement regarding compliance by the Company with the terms of the Indenture and specifying any defaults of which the signers may have knowledge. If an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of the Notes then outstanding may declare all the Notes to be immediately due and payable by notice to the Company (and to the Trustee if given by the Holders). Under certain circumstances, the Holders of a majority in principal amount of the Notes then outstanding may rescind such a declaration. -64- Provision of Reports The Company will furnish to the Holders of Notes, upon request, whether or not required by the rules and regulations of the Commission, (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Form 10-Q and Form 10-K if the Company was required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries, and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. Defeasance or Covenant Defeasance of the Indenture The Company may, at its option and at any time, elect to have its obligations and the obligations of any of its Subsidiaries with respect to the outstanding Notes discharged ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due and certain provisions of the Indenture with respect to the registration and transfer of the Notes. In addition, the Company may, at its option and at any time, elect to have its obligations and the obligations of any of its Subsidiaries with respect to certain covenants described in the Indenture released ("covenant defeasance") and thereafter any failure to comply with such covenants shall not constitute a Default or an Event of Default. In the event of a covenant defeasance, certain other events (not including prepayment, bankruptcy, receivership or insolvency events) described under "Events of Default" will no longer constitute a Default or an Event of Default with respect to the Notes. In order to exercise either defeasance or covenant defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of Notes, cash in United States Dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof (collectively, the "trust fund"), in such amounts as will be sufficient (without considering any reinvestment of amounts earned on such U.S. Government Obligations), in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge interest on the outstanding Notes as it becomes due and to pay and discharge the principal of and premium, if any, on the outstanding Notes at redemption or maturity; (ii) in the case of defeasance, the Company must deliver to the Trustee an opinion of independent counsel in the United States stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there -65- has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel in the United States shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (iii) in the case of covenant defeasance, the Company must deliver to the Trustee an opinion of independent counsel in the United States to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (iv) no Default or Event of Default may have occurred and be continuing on the date of such deposit and after giving effect thereto; (v) such defeasance or covenant defeasance may not cause the Trustee for the Notes to have a conflicting interest with respect to any securities of the Company; (vi) such defeasance or covenant defeasance may not result in a breach or violation of, or constitute a Default under, the Indenture or any material agreement or instrument to which the Company is a party or by which it is bound; (vii) the Company must deliver to the Trustee an opinion of independent counsel in the United States to the effect that the trust fund will not be subject to the effect of any applicable bankruptcy, insolvency, receivership, conservatorship, reorganization or similar laws affecting creditors' rights generally (including, without limitation, fraudulent and avoidable transfers); (viii) the Company must deliver to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of the Notes over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company; (ix) no event or condition may exist that would prevent the Company from making payments of the principal of, premium, if any, and interest on the Notes, on the date of such deposit; and (x) the Company must deliver to the Trustee an officers' certificate and an opinion of independent counsel in the United States, each stating that all conditions precedent relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with. Satisfaction and Discharge The Indenture will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of any Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable, or will become due and payable or are to be called for redemption within one year, and the Company has irrevocably deposited or caused to be deposited with the -66- Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, and premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions to the Trustee from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel each stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. Trustee The Bank of New York, the Trustee under the Indenture, may from time to time enter into ordinary correspondent and other banking relationships with the Company. The address of the principal corporate trust office of the Trustee is 101 Barclay Street - 21W, New York, New York 10286. Certain Definitions "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Subsidiary of or is merged with or into any other Person or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of such other Person or such acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from such Person or the date such Person becomes a Subsidiary of or is merged with or into such other Person. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person and any legal or beneficial owner, directly or indirectly, of 20% or more of the Voting Stock of such specified Person. Notwithstanding the foregoing, no Securitization Entity shall be deemed an Affiliate of the Company. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Capital Lease Obligation" of any Person means any obligations of such Person under any capital lease for real or personal property -67- which, in accordance with GAAP, is required to be recorded as a capitalized lease obligation; and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Capital Stock" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents or interests in (however designated) capital stock in such Person, including, with respect to a corporation, common stock, Preferred Stock and other corporate stock and, with respect to a partnership, partnership interests, whether general or limited, and any rights (other than debt securities convertible into corporate stock, partnership interests or other capital stock), warrants or options exchangeable for or convertible into such corporate stock, partnership interests or other capital stock. "Change of Control Event" means an event or series of events by which (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Existing Management Group, is or becomes after the date of issuance of the Notes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date of the Indenture), of more than 40% of the total voting power of all Voting Stock of the Company then outstanding; (b) (1) another corporation merges into the Company or the Company consolidates with or merges into any other corporation, or (2) the Company conveys, transfers or leases all or substantially all its assets to any person or group, in one transaction or a series of transactions other than any conveyance, transfer or lease between the Company and a Wholly-Owned Subsidiary of the Company, and, in the case of each of clause (1) and clause (2), with the effect that a person or group, other than the Existing Management Group, is or becomes the beneficial owner of more than 40% of the total voting power of all Voting Stock of the surviving or transferee corporation of such transaction or series of transactions; (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors, or whose nomination for election by the Company's shareholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was -68- previously so approved, cease for any reason to constitute a majority of the directors then in office; or (d) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. "Consolidated Depreciation and Amortization Expense" means with respect to any Person for any period, the total amount of depreciation and amortization expense of such Person for such period on a consolidated basis and otherwise determined in accordance with GAAP. "Consolidated Net Assets" of any Person as of any date means the total amount of assets of such Person and its Subsidiaries (less applicable reserves) on a consolidated basis at the end of the fiscal quarter immediately preceding such date for which financial information is available, as determined in accordance with GAAP. "Consolidated EBITDA" means, with respect to any Person for any period, the Consolidated Net Income (Loss) of such Person for such period plus (a) provision for taxes based on income or profits of such Person for such period deducted in computing Consolidated Net Income (Loss) plus (b) Consolidated Interest Expense of such Person for such period, plus (c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income (Loss), plus (d) without duplication, any other non-cash charges reducing Consolidated Net Income (Loss) of such Person for such period less (e) without duplication, non-cash items increasing Consolidated Net Income (Loss) of such Person for such period in each case, on a consolidated basis for such Person in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any period, the sum of: (a) consolidated interest expense of such Person for such period, other than interest expense on Permitted Acquisition Indebtedness and Permitted Repurchase Facilities, whether paid or accrued (except to the extent accrued in a prior period), to the extent such expense was deducted in computing Consolidated Net Income (Loss) (including amortization of original issue discount, non-cash interest payments and the interest component of Capitalized Lease Obligations, excluding amortization of deferred financing fees) and (b) consolidated capitalized interest of such Person for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (Loss). "Consolidated Net Income (Loss)" of any Person means, for any period, the consolidated net income (or loss) of such Person and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), by excluding, without duplication, (i) the portion of net income (or loss) of any other Person (other than any of such Person's consolidated Subsidiaries) in which such Person or any of its -69- Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to such Person or its consolidated Subsidiaries in cash by such other Person during such period, (ii) net income (or loss) of any Person combined with such Person or any of its Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iii) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan and (iv) solely for the purpose of determining Consolidated Net Income (Loss) in connection with the calculation of Restricted Payments permitted to be made hereunder, the net income of any consolidated Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Subsidiary or its shareholders; provided that, upon the termination or expiration of such dividend or distribution restrictions, the portion of net income (or loss) of such consolidated Subsidiary allocable to such Person and previously excluded shall be added to the Consolidated Net Income (Loss) of such Person to the extent of the amount of dividends or other distributions available to be paid to such Person in cash by such Subsidiary. "Consolidated Net Worth" of any Person and its Subsidiaries mean as of the date of determination all amounts that would be included under stockholders' equity on a consolidated balance sheet of such Person and its Subsidiaries determined in accordance with GAAP. "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 ownership of voting securities (or pledge of voting securities if the pledgee thereof may on the date of determination exercise or control the exercise of the voting rights of the owner of such voting securities), by contract or otherwise; and the terms "to Control," "Controlling" and "Controlled" have meanings correlative to the foregoing. "Credit Support" means credit support designed to enhance the likelihood of payment on securities issued in connection with a securitization of loans or other assets which are generally funded with the proceeds of such securitization, including without limitation subordination of certain classes of securities, insurance policies, representations and warranties, reserve funds, liquidity reserves, lost- and missing- note reserves, letters of credit. "Default" means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Disqualified Capital Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or -70- exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part on, or prior to, or is exchangeable for debt securities of the Company or its Subsidiaries prior to, the final Stated Maturity of principal of the Notes; provided that only the amount of such Capital Stock that is redeemable prior to the Stated Maturity of principal of the Notes shall be deemed to be Disqualified Capital Stock. "Disinterested Director" of any Person means, with respect to any transaction or series of related transactions, a member of the board of directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "Existing Management Group" means, a majority of the executive officers of the Company as of the date of the Indenture (see "Management"), members of their immediate families, certain trusts for their benefit, and legal representatives of, or heirs, beneficiaries or legatees receiving Common Stock (or securities convertible or exchangeable for Common Stock) under any such person's estate. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets shall be determined by the Board of Directors of the Company, acting in good faith, and shall be evidenced by a resolution of such Board of Directors delivered to the Trustee. "Fixed Charges" means, with respect to any Person for any period, the sum of (i) Consolidated Interest Expense of such Person for such period, and (ii) the product of (a) all cash dividend payments on any series of Preferred Stock or Disqualified Capital Stock of such Person or its Subsidiaries for such period, and (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 such Person, expressed as a decimal, in each case on a consolidated basis and in accordance with GAAP. "GAAP" means generally accepted accounting principles. "Guaranteed Indebtedness" of any Person means, without duplication, all Indebtedness of any other Person guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the Holder of such Indebtedness against -71- loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor, or (v) otherwise to assure a creditor with respect to Indebtedness against loss; provided that the term shall not include endorsements for collection of deposit, in either case in the ordinary course of business. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement. "Holders" means the registered holders of the Notes. "Indebtedness" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit issued under letter of credit facilities, and in connection with any agreement by such Person to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person now or hereafter outstanding, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, but excluding trade payables arising in the ordinary course of business, (iv) all obligations under Interest Rate Agreements of such Person, (v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in clauses (i) through (v) above of other Persons and all dividends payable by other Persons, the payment of which is secured by (or for which the Holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligations being deemed to be the lesser of the value of such property or asset or the amount of the obligations so secured), (vii) all guarantees by such Person of Guaranteed Indebtedness, (viii) all Disqualified Capital Stock (valued at the greater of book value and voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends) of such Person, and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing or any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date -72- on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value is to be determined in good faith by the board of directors (or any duly authorized committee thereof) of the issuer of such Disqualified Capital Stock, and (y) Indebtedness is deemed to be incurred pursuant to a revolving credit facility each time an advance is made thereunder. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, repurchase agreement, futures contract or other financial agreement or arrangement designed to protect the Company or any Subsidiary against fluctuations in interest rates. "Junior Indebtedness" means any Indebtedness of the Company subordinated in right of payment of either principal, premium (if any) or interest thereon to the New Notes. "Leverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of all Indebtedness and Disqualified Capital Stock of the Company, excluding (a) Indebtedness and Guarantees thereof permitted to be incurred pursuant to clauses (d)(1), (2), (3), (4), (6) and (7) of "Certain Covenants--Limitation on Indebtedness," (b) Hedging Obligations permitted to be incurred pursuant to clause (e)(11) of the covenant described under "Certain Covenants--Limitation on Indebtedness" and (c) Junior Indebtedness of the Company to (ii) the Consolidated Net Worth of the Company. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "Liquid Assets" shall include: (i) cash; (ii) any of the following instruments that have a remaining term to maturity not in excess of 90 days from the determination date: (a) repurchase agreements on obligations of, or are guaranteed as to timely receipt of principal and interest by, the United States or any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States provided that the party agreeing to repurchase such obligations is a primary dealer in United States government securities, (b) federal funds and deposit accounts, including but not limited to certificates of deposit, time deposits and bankers' acceptances of any United States depository institution or trust company incorporated under the laws of the United States or any state, provided that the debt of such depository institution or trust company at the date of acquisition thereof has been rated by Standard & Poor's Corporation in the highest short-term rating category or has an equivalent rating from another nationally recognized rating agency, or (c) commercial paper of any corporation incorporated under the laws of the United States or any state thereof that on the date of acquisition is rated investment grade by Standard & Poor's Corporation or has an -73- equivalent rating from another nationally recognized rating agency; (iii) any debt instrument which is an obligation of, or is guaranteed as to the receipt of principal and interest by the United States, its agencies or any U.S. government sponsored enterprise, or (iv) any mortgage-backed or mortgage- related security issued by the United States, its agencies, or any United States government sponsored enterprise which the payment of principal and interest from the mortgages underlying such securities will be passed through to the Holder thereof and which such security has a remaining weighted average maturity of 15 years or less. Notwithstanding the foregoing, Liquid Assets shall not include any debt instruments, securities or collateralized mortgage obligations (real estate mortgage investment conduits) that would be classified as a "High-Risk Mortgage Security" pursuant to the policy statement adopted by the Federal Financial Institutions Examination Counsel on February 10, 1992, as reflected in Volume I of the Federal Reserve Report Service, Part 3-1562. "Net Cash Proceeds" means, with respect to any issuance or sale of Capital Stock, or options, warrants or rights to purchase Capital Stock, or debt securities or Capital Stock that have been converted into or exchanged for Capital Stock, or any capital contribution in respect of Capital Stock, as referred to under "Certain Covenants, Limitation on Restricted Payments," the proceeds of such issuance or sale or capital contribution in the form of cash or cash equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Subsidiary of the Company), net of attorney's fees, accountant's fees and brokerage, consulting, underwriting and other fees and expenses actually incurred in connection with such issuance or sale or capital contribution and net of taxes paid or payable by the Company as a result thereof. "Non-Recourse Indebtedness" is defined to mean, with respect to any Person, Indebtedness of such Person for which (i) the sole recourse (excluding certain exceptions relating to fraud, intentional misrepresentation, proceeds of the assets, environmental liabilities and similar matters customary in non-recourse indebtedness) for collection of principal and interest on such Indebtedness is against the specific assets identified in the instruments evidencing or securing such Indebtedness, (ii) such assets were acquired with the proceeds of such Indebtedness or such Indebtedness was incurred concurrently with the acquisition of such assets; and (iii) no other assets (other than Credit Support) of such Person or of any other Person may be realized upon or in collection of principal or interest on such Indebtedness. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment of principal, premium (if any) and interest thereon to the Notes. -74- "Permitted Acquisition Indebtedness" means any secured funding arrangement with a financial institution or other lender to the extent (and only to the extent) funding thereunder is used exclusively to finance or refinance the purchase or origination of loans, real estate owned, equipment leases or other assets by the Company or a Subsidiary, or to provide financing subsequent to such purchase or origination. "Permitted Liens" is defined to mean (i) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens imposed by law and arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made, (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, surety and appeal bonds, progress payments, development obligations, government contracts, performance and return-of-money bonds and other obligations of a similar nature, in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money or otherwise constituting a liability in accordance with GAAP); (v) with respect to property of the Company or any Subsidiary, Liens granted on such property or assets in favor of the Person from whom the Company or such Subsidiary acquired such property or assets which Liens secure the payment of a contingent portion of the purchase price of such property so long as such Liens are granted and such arrangement is entered into in the ordinary course of business of the Company; (vi) attachment or judgment Liens not giving rise to a Default or Event of Default and which are being contested in good faith by appropriate proceedings; (vii) easements, rights-of-way, restrictions, homeowners association assessments and similar charges or encumbrances that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries; (viii) 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 property in the ordinary course of business of the Company or any Subsidiary or the value of such real property for the purpose of such business; (ix) Liens in favor of the Company or any Subsidiary that is a Wholly Owned Subsidiary of the Company; (x) Liens existing on the Closing Date; (xi) Liens securing Non-Recourse Indebtedness of the Company or a Subsidiary thereof; (xii) Liens with respect to the property or assets of the Company or a Subsidiary securing Indebtedness permitted to be -75- incurred pursuant to clauses (d)(1), (2), (3), (4), (6) and (7) of "Certain Covenants-- Limitations on Indebtedness," above; (xiii) Liens granted after the Closing Date on any assets or Capital Stock of the Company or its Subsidiaries created in favor of the Holders; (xiv) Liens with respect to the property or assets of a Subsidiary granted by such Subsidiary to the Company to secure Indebtedness owing to the Company; (xv) Liens securing Indebtedness which is incurred to refinance Permitted Indebtedness, provided that such Liens constitute Permitted Liens under this clause (xvi) Liens only to the extent that they do not extend to or cover any property or assets of the Company or any Subsidiary other than the property or assets securing the Indebtedness being refinanced; (xvii) leases or subleases granted to others not materially interfering with the ordinary course of business of the Company or any of its Subsidiaries; (xviii) other Liens securing obligations not exceeding $1,000,000; and (xix) Liens securing Hedging Obligations of the Company or such Subsidiary so long as such Hedging Obligations relate to Indebtedness that is, and is permitted under the Indenture to be, secured by a Lien on the same property securing such Hedging Obligations. "Permitted Payment" means, so long as no Default or Event of Default is continuing, (a) the purchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Company or any Affiliate (other than a Wholly-Owned Subsidiary) of the Company, Junior Indebtedness or Pari Passu Indebtedness in exchange for (including any such exchange pursuant to the exercise of a conversion right or privilege where, in connection therewith, cash is paid in lieu of the issuance of fractional shares or scrip), or out of the Net Cash Proceeds or Fair Market Value of property not constituting Net Cash Proceeds of, a substantially concurrent issue and sale (other than to a Subsidiary of the Company or to an employee benefit plan of the Company or any of its Subsidiaries) of Qualified Capital Stock of the Company; provided that the Net Cash Proceeds or Fair Market Value of such property received by the Company from the issuance of such shares of Qualified Capital Stock, to the extent so utilized, shall be excluded from clause (d)(iii) of the covenant described under "Covenants -Limitation on Restricted Payments" above; and (b) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Junior Indebtedness or Pari Passu Indebtedness in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent issue and sale (other than to a Subsidiary of the Company) of new Indebtedness by the Company (such a transaction, a "refinancing"); provided, that any such new Indebtedness of the Company (i) shall be in a -76- principal amount that does not exceed an amount equal to the sum of (A) the principal amount of the Indebtedness so refinanced and accrued but unpaid interest thereon less any discount from the face amount of such Indebtedness to be refinanced expected to be deducted from the amount payable to the holders of such Indebtedness in connection with such refinancing, (B) the amount of any premium expected to be paid in connection with such refinancing pursuant to the terms of the Junior Indebtedness or Pari Passu Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing by means of a tender offer, privately negotiated repurchase or otherwise and (C) the amount of legal, accounting, printing and other similar expenses of the Company incurred in connection with such refinancing; provided, further, that for purposes of this clause (i), the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination; (ii) (A) if such refinanced Indebtedness has an Average Life to Stated Maturity shorter than that of the Notes or a final Stated Maturity earlier than the final Stated Maturity of the New Notes, such new Indebtedness shall have an Average Life to Stated Maturity no shorter than the Average Life to Stated Maturity of such refinanced Indebtedness and a final Stated Maturity no earlier than the final Stated Maturity of such refinanced Indebtedness or (B) in all other cases each Stated Maturity of principal (or any required repurchase, redemption, defeasance or sinking fund payments) of such new Indebtedness shall be after the final Stated Maturity of principal of the New Notes; and (iii) is (A) made expressly subordinated to or pari passu with the New Notes to substantially the same extent as the Indebtedness being refinanced or (B) expressly subordinate to such refinanced Indebtedness. "Permitted Repurchase Facilities" includes purchase and sale facilities pursuant to which the Company or a Subsidiary sells loans, real estate owned or other financial assets to a financial institution or other entity and agrees to repurchase such loans, real estate owned or financial assets. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivisions thereof. -77- "Preferred Stock" means, with respect to any Person, any Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary liquidation or dissolution of such Person, over Capital Stock of any other class in such Person. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Disqualified Capital Stock. "Reference Period" with regard to any Person means the four full fiscal quarters of such Person ended on or immediately preceding any date upon which any determination is to be made pursuant to the terms of the New Notes or the Indenture for which financial information is available. "Restricted Payment" means (a) the declaration, payment or setting apart of any funds for the payment of any dividend on, or making of any distribution to holders of, the Capital Stock of the Company or any Subsidiary of the Company (other than (i) dividends or distributions in Qualified Capital Stock of the Company and (ii) dividends or distributions payable on or in respect of any class or series of Capital Stock of a Subsidiary of the Company as long as the Company receives at least its pro rata share of such dividends or distributions in accordance with its ownership interests in such class or series of Capital Stock); (b) the purchase, redemption or other acquisition or retirement for value, directly or indirectly, of any Capital Stock of the Company or any Affiliate of the Company (other than a Wholly-Owned Subsidiary, and other than the purchase from a non-Affiliate of the Company of Capital Stock of any joint venture or other Person which is an Affiliate of the Company solely because of the Company's direct or indirect ownership of 20% or more of the Voting Stock of such joint venture or other Person) except such as shall constitute a Permitted Payment; or (c) the making of any principal payments on, or repurchase, redemption, defeasance, retirement or other acquisition for value, directly or indirectly, of any Junior Indebtedness or Pari Passu Indebtedness, prior to any Stated Maturity of principal or scheduled redemption or defeasance of, or any scheduled sinking fund payment on, such Junior Indebtedness or Pari Passu Indebtedness, except such as shall constitute a Permitted Payment. "Securitization Entity" means any pooling arrangement or entity formed or originated for the purpose of holding, and/or issuing securities representing interests in, one or more pools of mortgages, -78- leases, credit card receivables, home equity loan receivables, automobile loans, leases or installment sales contracts, other consumer receivables, real estate owned or other financial assets of the Company or any Subsidiary, and shall include, without limitation, any partnership, limited liability company, liquidating trust, grantor trust, owner trust, real estate mortgage investment conduit, real estate investment trust or collateralized bond obligation. "Significant Subsidiary" means any Subsidiary of the Company which accounted for 15% or more of the Consolidated Net Assets of the Company and its Subsidiaries as of the end of the fiscal quarter preceding the date of determination for which financial information is available or Consolidated EBITDA of the Company and its Subsidiaries for the Reference Period. "Stated Maturity" when used with respect to any Indebtedness (including, without limitation, the New Notes) means the dates specified in the instrument governing such Indebtedness as the fixed dates on which any principal amount of such Indebtedness is due and payable (including, without limitation, by reason of any required redemption, purchase, defeasance or sinking fund payment) and, when used with respect to any installment of interest on Indebtedness, means the date on which such installment is due and payable. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of Voting Stock thereof is at the time owned or Controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "Unsecured Debt Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company incurs, assumes, guarantees or redeems any Indebtedness (including any Indebtedness which constitutes Acquired Indebtedness) subsequent to the commencement of the period for which the Unsecured Debt Coverage Ratio is being calculated but prior to the event for which the calculation of the Unsecured Debt Coverage Ratio is made (the "Calculation Date"), then the Unsecured Debt Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, as if the same had occurred at the beginning of the applicable four-quarter period, including an assumption of investment returns at the rate equal to the higher of the six-month Treasury bill rate or six-month LIBOR at the beginning of such four-quarter period. For purposes of making the computation referred to above, investments in the equity of, or other acquisitions or dispositions, which constitute all or substantially all of an operating unit of a business and discontinued operations (as determined in accordance with GAAP) that have been made by the Company or any of its Subsidiaries, including all mergers, consolidations and dispositions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall -79- be calculated on a pro forma basis assuming that all such investments, acquisitions, dispositions, discontinued operations, mergers and consolidations (and the reduction of any associated fixed charge obligations and the change in Consolidated EBITDA resulting therefrom) had occurred on the first day of the four-quarter period. If since the beginning of such period any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any investment in the equity of, or other acquisition or disposition, which constitutes all or substantially all of an operating unit of a business, discontinued operation, merger or consolidation that would have required adjustment pursuant to this definition, then the Unsecured Debt Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such investment, acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter period. For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that 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 rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate. "Voting Stock" means Capital Stock of the class or classes of which the holders have (i) in respect of a corporation, the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) or (ii) in respect of a partnership, the general voting power under ordinary circumstances to elect the board of directors or other governing board of such partnership or of the Person which is a general partner of such partnership. "Wholly-Owned Subsidiary" means a Subsidiary all of the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly-Owned Subsidiary. DESCRIPTION OF OLD NOTES The terms of the Old Notes are identical in all material respects to the New Notes, except that (i) the Old Notes have not been -80- registered under the Securities Act, are subject to certain restrictions on transfer and are entitled to certain rights under the applicable Registration Rights Agreement (which rights will terminate upon the consummation of this Exchange Offer, except under limited circumstances); and (ii) the New Notes will not provide for any increase in the Interest Rate thereon. The Old Notes provide that, in the event that either (i) the Registration Statement is not filed with the Commission on or prior to November 15, 1997, (ii) the Registration Statement is not declared effective on or prior to December 30, 1997 or (iii) the Exchange Offer is not consummated or a Shelf Registration Statement with respect to the Old Notes is not declared effective on or prior to February 15, 1998, the interest rate borne by the Old Notes shall be increased by one-half of one percent per annum following November 15, 1997 in the case of clause (i) above, following December 30, 1997 in the case of clause (ii) above, or following February 15, 1998 in the case of clause (iii) above, which rate will be increased by an additional one-half of one percent per annum for each 90-day period that such additional interest continues to accrue. The aggregate amount of such increase from the original interest rate pursuant to these provisions will in no event exceed one percent per annum. Upon (x) the filing of the Registration Statement for the Exchange Offer after November 15, 1997, (y) the effectiveness of the Registration Statement after December 30, 1998 or (z) the day before the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after February 15, 1998, the interest rate borne by the Old Notes from the date of consummation or effectiveness, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with such requirements; provided that if after any such reduction in interest rate, a different event specified in clause (i), (ii) or (iii) above occurs, the interest rate may again be increased and thereafter reduced pursuant to the foregoing provisions. The New Notes are not, and upon consummation of the Exchange Offer the Old Notes will not be, entitled to any such additional interest. See, "Risk Factors -- Certain Consequences of a Failure to Exchange Old Notes" and "Description of the New Notes." CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the principal federal income tax consequences of the exchange of the Old Notes for the New Notes. This summary does not address the tax consequences to a person that may be subject to special treatment under the United States federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, dealers in securities or currencies, persons that hold the New Notes as part of a position in a "straddle" or as part of a "hedging, "conversion" or other integrated investment transaction for federal income tax purposes, persons whose functional currency is not the United States dollar or persons that do not hold the New Notes as capital assets. -81- The statements of law or legal conclusions set forth in this summary constitute the opinion of Ledgewood Law Firm, P.C. ("Ledgewood"), tax counsel to the Company. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time. Such changes may be applied retroactively in a manner that could cause the tax consequences to vary substantially from the consequences described below, possibly adversely affecting a beneficial owner of the New Notes. The authorities on which this summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the exchange of the Old Notes for the New Notes may differ from the treatment described below. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES OF THE EXCHANGE OF THE OLD NOTES FOR THE NEW NOTES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. Exchange of Notes The exchange of Old Notes for New Notes will not be a taxable event to beneficial owners of the Old Notes for federal income tax purposes. The exchange of Old Notes for New Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the New Notes will not differ materially in kind or extent from the Old Notes and because the exchange will occur by operation of the terms of the Old Notes. Accordingly, a Holder will have the same adjusted tax basis and holding period in the New Notes as the Holder had in the Old Notes immediately before the exchange. Sales or Redemption of the New Notes Gain or loss will be recognized by a Holder on a sale of the New Notes (including a redemption for cash) in an amount equal to the difference between the amount realized and the Holder's adjusted tax basis in the New Notes (which will equal the Holder's adjusted tax basis in the Old Notes) sold or so redeemed. Gain or loss recognized by a Holder on New Notes held for more than eighteen months (which holding period will include the time during which the Holder held the Old Notes) will generally be taxable as long-term capital gain or loss generally subject to a maximum federal income tax rate of 20%. New Notes held for between twelve and eighteen months will generally be subject to a maximum federal income tax rate of 28%. A Holder that disposes of New Notes between record dates for payments of interest (and consequently does not receive interest from the Company for the period prior to such disposition) will nevertheless be required to include in income as ordinary income accrued but unpaid interest on the New Notes through the date of disposition. -82- A Holder will recognize a capital loss on the disposition of New Notes to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the Holder's adjusted tax basis in the New Notes (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for federal income tax purposes. United States Alien Holders For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, non-resident alien individual, a foreign partnership or a non-resident fiduciary of a foreign estate or trust. Under present United States federal income tax law: (i) payments by the Company or any of its paying agents to any Holder who or which is a United States Alien Holder will not be subject to United Stated federal withholding tax; provided, that (a) the Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) the Holder is not a controlled foreign corporation that is related to the Company through stock ownership and (c) either (A) the Holder certifies to the Company under penalties of perjury, that it is not a Untied States Holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") certifies to the Company, under penalties of perjury, that such statement has been received from the Holder by it or by a financial Institution holding such security for the Holder and furnishes the Company with a copy thereof; and (ii) a United States Alien Holder of a New Note will not be subject to United States federal withholding tax on any gain realized upon the sale or other disposition of a New Note. New Treasury regulations adopted on October 6, 1997 (the "New Regulations") provide alternative methods for satisfying the certification requirement described in clause (i)(c) above. The New Regulations also require, in the case of New Notes held by a foreign partnership, that (x) the certification described in clause (i)(c) above be provided by the partners rather than by the foreign partnership and (y) the partnership provide certain information, including a United States taxpayer identification number. A look-through rule would apply in the case of tiered partnerships. The New Regulations are to be effective for payments made after December 31, 1998. Backup Withholding Payments made on, and proceeds from the sale of, New Notes may be subject to a "backup" withholding tax of 31% unless the Holder -83- complies with certain certification requirements. Any withheld amounts will be allowed as a credit against the Holder's United States federal income tax, provided the required information is provided to the Internal Revenue Service on a timely basis. ERISA Considerations The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on those employee benefit plans to which it applies ("Plans") and on those persons who are fiduciaries with respect to such Plans. Assuming the Old Notes were permitted investments for a Plan, the exchange of the Old Notes for the New Notes will have no adverse consequences. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account in connection with the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by Participating Broker-Dealers during the period referred to below in connection with resales of New Notes received in exchange for Old Notes if such Old Notes were acquired by such Participating Broker-Dealers for their own accounts as a result of market-making activities or be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period ending 180 days after the Expiration Date (subject to extension under certain limited circumstances described herein) or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. See "The Exchange Offer--Resales of New Notes." The Company will not receive any cash from proceeds from the issuance of the New Notes offered hereby. New Notes received by broker-dealers for their own accounts in connection with the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account in connection with the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to -84- admit that it is an "underwriter" within the meaning of the Securities Act. VALIDITY OF THE NEW NOTES Certain matters of Delaware law relating to the validity of the New Notes and the enforceability of the Indenture and certain matters relating to federal income taxation will be passed upon by Ledgewood Law Firm, P.C., counsel to the Company. EXPERTS The consolidated financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K of the Company for the year ended September 30, 1996 have been so incorporated in reliance on the report of Grant Thornton LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting. -85- PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. As permitted by Section 102(b)(7) of the Delaware General Corporation Law, the Company's Certificate of Incorporation provides that directors of the Company shall not be personally liable to the Company or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends or distributions or the repurchase or redemption of stock, or (iv) for any transaction from which the director derives an improper personal benefit. In addition, the Company's By-laws provide for indemnification of the Company's officers and directors to the fullest extent permitted under Delaware law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. The Company maintains directors' and officers' liability insurance against any actual or alleged error, misstatement, misleading statement, act, omission, neglect or breach of duty by any director or officer, excluding certain matters including fraudulent, dishonest or criminal acts or self-dealing. Item 21. Exhibits and Financial Statement Schedules. a. Exhibits. 3. (a)* Articles of Incorporation of registrant. (b)* By-Laws of registrant. 5. Opinion of Ledgewood Law Firm, P.C., as to the legality of the securities being registered (including consent). 8. Opinion of Ledgewood Law Firm, P.C., as to certain tax matters (including consent). 10. (a) 12% Senior Note due 2004 (b) Trust Indenture Relating to Senior Notes (c) Registration Rights Agreement (d)* Employment Agreement between registrant and Edward E. Cohen. (e)* Contribution Agreement between Resource Leasing, Inc. and Abraham Bernstein. -86- (f)* Employment Agreement between Fidelity Leasing, Inc. and Abraham Bernstein. (g)* Employment Agreement between registrant and Daniel G. Cohen. (h)* 1984 Key Employee Stock Option Plan (i)* 1989 Employee Stock Ownership Plan. (j)* 1989 Key Employee Stock Option Plan. (k)* 1997 Employee Stock Ownership Plan. (l)* 1997 Stock Option Plan for Directors. (m)* Fidelity Mortgage Funding, Inc. 1997 Key Employee Stock Option Plan. (n)* Grant of Incentive Stock Option Pursuant to the Fidelity Mortgage Funding, Inc. 1997 Key Employee Stock Option Plan. 11. *Statement re: computation of per share earnings. 21. *Subsidiaries of the registrant. 23. (a) Consent of Grant Thornton LLP. (b) Consents of Ledgewood Law Firm, P.C. (included in Exhibits 5 and 8). 24. Power of Attorney (included as part of signature pages to this registration statement). - -------------------- * Exhibit 3(a) appears as an exhibit to registrant's Annual Report on Form 10-K ("10-K Report") for its 1983 fiscal year and in its definitive proxy statement for its September 9, 1996 Special Meeting of Shareholders; Exhibit 3(b) appears as an exhibit to registrant's 10-K Report for its 1984 fiscal year; Exhibits 10(d), 10(g) and 10(m) appear as exhibits to registrant's 10-Q Report for the quarter ended March 31, 1997; Exhibits 10(e) and 10(f) appear as exhibits to registrant's 10-K Report for its 1996 fiscal year; Exhibit 10(h) appears as an exhibit to registrant's 10-K Report for its 1984 fiscal year; Exhibits 10(i), 10(j), 10(k) and 10(l) appear as exhibits to registrant's 10-K Report for its 1995 fiscal year; Exhibit 10(m) appears as an exhibit to registrant's 10-K Report for its 1989 fiscal year; Exhibits 11 and 21 appear as exhibits to registrant's November, 1996 registration statement on Form S-1. Item 22. Undertakings. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. -87- SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on November 13, 1997. RESOURCE AMERICA, INC. By: /s/ Edward E. Cohen ----------------------------- Edward E. Cohen, Chairman of the Board of Directors, Chief Executive Officer and President POWER OF ATTORNEY Each person whose signature appears below in so signing also makes, constitutes and appoints Edward E. Cohen and Michael L. Staines, and each of them acting alone, his true and lawful attorney-in-fact, with full power of substitution, for him in any and all capacities to execute and cause to be filed with the Securities and Exchange Commission any and all amendments and post-effective amendments to this registration statement with exhibits thereto and other documents in connection therewith, and hereby ratifies and confirms all that said attorney-in-fact or said attorney-in-fact's substitute or substitutes may do or cause to be done by virtue hereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Edward E. Cohen Date: November 13, 1997 - --------------------------------- EDWARD E. COHEN, Chairman of the Board of Directors, Chief Executive Officer, President and Director (Chief Executive Officer) -88- [SIGNATURES CONTINUED ON FOLLOWING PAGE] /s/ Carlos C. Campbell Date: November 13, 1997 - --------------------------------- CARLOS C. CAMPBELL, Director /s/ Daniel G. Cohen Date: November 13, 1997 - --------------------------------- DANIEL G. COHEN, Executive Vice President and Director /s/ Andrew M. Lubin Date: November 13, 1997 - --------------------------------- ANDREW M. LUBIN, Director /s/ Scott F. Schaeffer Date: November 13, 1997 - --------------------------------- SCOTT F. SCHAEFFER, Executive Vice President and Director /s/ Alan D. Schrieber Date: November 13, 1997 - --------------------------------- ALAN D. SCHREIBER, M.D., Director /s/ Michael L. Staines Date: November 13, 1997 - --------------------------------- MICHAEL L. STAINES, Senior Vice President, Secretary and Director /s/ John S. White Date: November 13, 1997 - --------------------------------- JOHN S. WHITE, Director /s/ Steven Kessler Date: November 13, 1997 - --------------------------------- STEVEN J. KESSLER, Senior Vice President-Finance and Chief Financial Officer /s/ Nancy J. McGurk Date: November 13, 1997 - --------------------------------- NANCY J. MCGURK, Vice President- Finance (Chief Accounting Officer) EX-5 2 EXHIBIT 5 LEDGEWOOD LAW FIRM A PROFESSIONAL CORPORATION 1521 LOCUST STREET PHILADELPHIA, PENNSYLVANIA 19102 November 12, 1997 Resource America, Inc. 1521 Locust Street Philadelphia, PA 19102 Gentlemen/Ladies: We have acted as counsel to Resource America, Inc. (the "Company") in connection with the preparation and filing by the Company of a registration statement (the "Registration Statement") on Form S-4 under the Securities Act of 1933, as amended (the "Act"), with respect to the exchange offering of 12% Senior Notes Due 2004 (the "Notes"). In connection therewith, you have requested our opinion as to certain matters referred to below. In our capacity as such counsel, we have familiarized ourselves with the actions taken by the Company in connection with the registration of the Notes. We have examined the originals or certified copies of such records, agreements, certificates of public officials and others, and such other documents, including the Registration Statement, as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In such examination, we have assumed the genuineness of all signatures on original documents and the authenticity of all documents submitted to us as originals, the conformity to original documents of all copies submitted to us as conformed or photostatic copies, and the authenticity of the originals of such latter documents. We are attorneys admitted to practice in the Commonwealth of Pennsylvania and, accordingly, we express no opinion with respect to matters governed by the laws of any jurisdiction other than the Commonwealth of Pennsylvania, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. Based upon and subject to the foregoing, we are of the opinion that: 1. The Company is a corporation which has been duly formed and is validly subsisting under the laws of the State of Delaware. 2. When issued, the Notes will be duly authorized, validly issued, fully paid, non-assessable and a binding obligation of the Company. We consent to the references to this opinion and to Ledgewood Law Firm, P.C. in the Prospectus included as part of the Registration Statement, and to the inclusion of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Ledgewood Law Firm, P.C. LEDGEWOOD LAW FIRM, P.C. EX-8 3 EXHIBIT 8 LEDGEWOOD LAW FIRM A PROFESSIONAL CORPORATION 1521 LOCUST STREET PHILADELPHIA, PENNSYLVANIA 19102 November 12, 1997 Resource America, Inc. 1521 Locust Street - Suite 400 Philadelphia, PA 19102 Ladies and Gentlemen: We have acted as counsel to Resource America, Inc., a Delaware corporation (the "Company"), in connection with the preparation of a Form S-4 registration statement (the "Registration Statement") filed with the Securities and Exchange Commission with respect to the offer by the Company (the "Offering") to exchange 12% Senior Notes Due 2004 (the "New Notes") which have been registered under the Securities Act of 1933, for any and all of its currently outstanding 12% Senior Notes due 2004 (the "Old Notes"). You have requested our opinion requiring certain U.S. federal income tax matters in connection with the Offering. In giving this opinion letter, we have examined the following: 1. the Company's Articles of Incorporation; 2. the Company's Bylaws; 3. the Registration Statement, including the prospectus contained as part of the Registration Statement (the "Prospectus"); and 4. such other documents as we have deemed necessary or appropriate for purposes of this opinion. Based on the documents set forth above, we are of the opinion that the description of the law and the legal conclusions contained in the Prospectus under the caption "Certain Federal Income Tax Consequences" are correct in all material aspects, and the discussion thereunder fairly summarizes the federal income tax considerations (and ERISA considerations) that are likely to be material to a person holding Old Notes who is considering exchanging them for New Notes. The forgoing opinions are based on current provisions of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder, published administrative interpretations thereof and published court decisions. No assurance can be given that the applicable law will not be amended or that regulations will not be issued and that any such amendment or regulations or the legal authority will not affect our opinion or the position of the Internal Revenue Service. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the reference to Ledgewood Law Firm, P.C. under the caption "Certain Resource America, Inc. November 12, 1997 Page 2 Federal Income Tax Consequences" in the Prospectus. In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder by the Securities and Exchange Commission. The foregoing opinions are limited to the U.S. federal income tax matters addressed herein, and no other opinions are rendered with respect to other federal tax matters or to any issues arising under the tax laws of any other country, or any state or locality. We undertake no obligation to update the opinions expressed herein after the date of this letter. This opinion letter is solely for the information and use of the addressee, and it may not be distributed, relied upon for any purpose by any other person, quoted in whole or in part or otherwise reproduced in any document, or filed with any governmental agency without our express written consent. Very truly yours, /s/ Ledgewood Law Firm, P.C. ---------------------------- LEDGEWOOD, LAW FIRM, P.C. EX-10.(A) 4 EXHIBIT 10(A) RESOURCE AMERICA, INC. 12% Senior Notes Due 2004 No____________ $___________ CUSIP No. ____________ Resource America, Inc., a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any Successor Company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of ___________ Dollars on ______________, 2004, and to pay interest thereon from July 22, 1997 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on February 1 and August 1 in each year, commencing February 1, 1998, at the rate of 12% per annum, plus Additional Interest, if any, until the principal hereof is paid or made available for payment, and at the rate of 1% over the rate set forth above per annum on any overdue principal and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Senior Note (or one or more Predecessor Senior Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest (including any Additional Interest) not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Senior Note (or one or more Predecessor Senior Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Senior Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Senior Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Interest on the Senior Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The principal of, and premium, if any, and interest including Additional Interest, if any, on the Senior Notes shall be payable at the principal office of the Company in Philadelphia, Pennsylvania or at the office of the Paying Agent as may be established by the Company and the Trustee (herein called the "Place of Payment"; initially the Place of Payment shall be the principal corporate trust office of the Trustee in New York, New York). All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made (subject to collection) by check mailed to the address of the Person entitled thereto at such address as shall appear on the Note Register or by wire transfer in immediately available funds to the accounts designated by the Person entitled thereto in writing in form satisfactory to the Trustee at least fifteen (15) days prior to the date of such payment. Reference is hereby made to the further provisions of this Senior Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Senior Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. RESOURCE AMERICA, INC. By:____________________________ Attest: ____________________________ Form of Reverse of Senior Note. This Senior Note is one of a duly authorized issue of the Company (herein called the "Senior Notes"), issued under an Indenture, dated as of July 22, 1997 (herein called the "Indenture"), between the Company and The Bank of New York as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Senior Notes and of the terms upon which the Senior Notes are, and are to be, authenticated and delivered. This Senior Note is one of the Senior Notes designated on the face hereof, limited in aggregate principal amount up to $75,000,000. The Senior Notes may not be redeemed prior to August 1, 2002 except as set forth herein. On or after such date, the Senior Notes may be redeemed upon not less than 30 days' and not more than 60 days' notice by mail, at any time on or after August 1, 2002, as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed during the 12-month period beginning August 1, of the years indicated, Redemption Year Price ---- ----------- 2002 106% 2003 103% together in the case of any such redemption with accrued and unpaid interest (including any Additional Interest) to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Senior Notes, or one or more Predecessor Senior Notes, of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. In the event of redemption of this Senior Note in part only, a new Senior Note or Senior Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. Upon a Change of Control Event, the Holder of this Senior Note will have the right to cause the Company to repurchase all or any part of this Senior Note at a repurchase price equal to 101% of the principal amount of this Senior Note plus accrued interest (including any Additional Interest) to the date of purchase (subject to the right of the Holders on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date) as provided in, and subject to the terms of, the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness evidenced by this Senior Note and (b) certain restrictive covenants, in each case upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Senior Note. If an Event of Default with respect to Senior Notes shall occur and be continuing, the principal of the Senior Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Senior Notes at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Senior Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Senior Notes at the time Outstanding, on behalf of the Holders of all Senior Notes, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Senior Note and upon all future Holders of this Senior Note and of any Senior Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Senior Note. No reference herein to the Indenture and no provision of this Senior Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest (including any Additional Interest) on this Senior Note at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Senior Note is registrable in the Senior Note Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest (including any Additional Interest) on this Senior Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Senior Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Senior Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Senior Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Senior Notes are exchangeable for a like aggregate principal amount of Senior Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Senior Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Senior Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Indenture and the Senior Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required. EX-10.B 5 EXHIBIT 10(B) RESOURCE AMERICA, INC. TO THE BANK OF NEW YORK, Trustee 12% SENIOR NOTES DUE 2004 --------------------------- INDENTURE Dated as of July 22, 1997 --------------------------- TABLE OF CONTENTS
Page ---- ARTICLE ONE Definitions and Other Provisions of General Application........................................... 1 Section 1.1 Definitions.............................................................................. 1 Section 1.2 Compliance Certificates and Opinions..................................................... 19 Section 1.3 Form of Documents Delivered to Trustee................................................... 20 Section 1.4 Acts of Holders, Record Dates............................................................ 20 Section 1.5 Notices, Etc., to Trustee and Company.................................................... 22 Section 1.6 Notice to Holders; Waiver................................................................ 22 Section 1.7 Conflict with Trust Indenture Act........................................................ 23 Section 1.8 Effect of Headings and Table of Contents................................................. 23 Section 1.9 Successors and Assigns................................................................... 23 Section 1.10 Separability Clause..................................................................... 23 Section 1.11 Benefits of Indenture.................................................................... 23 Section 1.12 Governing Law; Choice of Forum.......................................................... 23 Section 1.13 Legal Holidays.......................................................................... 25 ARTICLE TWO Senior Note Forms................................................................................. 25 Section 2.1 Forms Generally.......................................................................... 25 Section 2.2 Form of Face of Senior Note.............................................................. 25 Section 2.3 Form of Reverse of Senior Note........................................................... 27 Section 2.4 Form of Legend for Global Senior Notes................................................... 29 Section 2.5 Legending of the Securities; Restrictions on Transfers................................... 30 Section 2.6 Form of Trustee's Certificate of Authentication.......................................... 30
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Page ---- Section 2.7 Form of Assignment and Election to Purchase.............................................. 30 ARTICLE THREE The Senior Notes............................................................................... 31 Section 3.1 Global Senior Note; Depositary............................................................ 31 Section 3.2 Amount.................................................................................... 31 Section 3.3 Denominations............................................................................. 31 Section 3.4 Execution, Authentication, Delivery and Dating............................................ 32 Section 3.5 Temporary Notes........................................................................... 32 Section 3.6 Registration; Registration of Transfer and Exchange....................................... 33 Section 3.7 Mutilated, Destroyed, Lost and Stolen Notes............................................... 34 Section 3.8 Payment of Interest; Interest Rights Preserved............................................ 34 Section 3.9 Persons Deemed Owners..................................................................... 36 Section 3.10 Cancellation............................................................................. 36 Section 3.11 Computation of Interest.................................................................. 36 Section 3.12 CUSIP Numbers............................................................................ 36 ARTICLE FOUR Book-Entry Provisions for Global Senior Notes.................................................... 37 Section 4.1 Applicability of Article.................................................................. 37 Section 4.2 Book-Entry Provisions For Global Senior Note.............................................. 37 ARTICLE FIVE Remedies......................................................................................... 39 Section 5.1 Events of Default........................................................................ 39 Section 5.2 Acceleration of Maturity; Rescission and Annulment....................................... 40 Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.......................... 41 Section 5.4 Trustee May File Proofs of Claim......................................................... 42 Section 5.5 Trustee May Enforce Claims Without Possession of Senior Notes............................ 42
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Page ---- Section 5.6 Application of Money Collected........................................................... 43 Section 5.7 Limitation on Suits...................................................................... 43 Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest............................................................... 44 Section 5.9 Restoration of Rights and Remedies....................................................... 44 Section 5.10 Rights and Remedies Cumulative.......................................................... 44 Section 5.11 Delay or Omission Not Waiver............................................................ 44 Section 5.12 Control by Holders...................................................................... 44 Section 5.13 Waiver of Past Defaults................................................................. 45 Section 5.14 Undertaking for Costs................................................................... 45 Section 5.15 Waiver of Usury, Stay or Extension Laws................................................. 46 ARTICLE SIX The Trustee...................................................................................... 46 Section 6.1 Certain Duties and Responsibilities...................................................... 46 Section 6.2 Notice of Defaults....................................................................... 47 Section 6.3 Certain Rights of Trustee................................................................ 47 Section 6.4 Not Responsible for Recitals or Issuance of Senior Notes.................................. 48 Section 6.5 May Hold Senior Notes..................................................................... 48 Section 6.6 Money Held in Trust....................................................................... 48 Section 6.7 Compensation and Reimbursement............................................................ 49 Section 6.8 Disqualification; Conflicting Interests................................................... 49 Section 6.9 Corporate Trustee Required; Eligibility................................................... 49 Section 6.10 Resignation and Removal; Appointment of Successor........................................ 50 Section 6.11 Acceptance of Appointment by Successor................................................... 51 Section 6.12 Merger, Conversion, Consolidation or Succession to Business.............................. 52
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Page ---- Section 6.13 Preferential Collection of Claims Against Company........................................ 52 Section 6.14 Appointment of Authenticating Agent...................................................... 52 ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company............................................. 54 Section 7.1 Company to Furnish Trustee Names and Addresses of Holders; Trustee to Furnish Senior Note Register..................................... 54 Section 7.2 Preservation of Information; Communications to Holders.................................... 55 Section 7.3 Reports by Trustee........................................................................ 55 ARTICLE EIGHT Amendments, Supplements and Waivers............................................................ 56 Section 8.1 Supplemental Indentures Without Consent of Holders........................................ 56 Section 8.2 Supplemental Indentures with Consent of Holders........................................... 57 Section 8.3 Execution of Supplemental Indentures...................................................... 58 Section 8.4 Effect of Supplemental Indentures......................................................... 58 Section 8.5 Conformity with Trust Indenture Act....................................................... 58 Section 8.6 Reference in Senior Notes to Supplemental Indentures...................................... 58 Section 8.7 Notice of Supplemental Indenture.......................................................... 58 ARTICLE NINE Covenants........................................................................................ 59 Section 9.1 Payment of Principal, Premium and Interest............................................... 59 Section 9.2 Maintenance of Office or Agency.......................................................... 59 Section 9.3 Money for Senior Notes Payments to Be Held in Trust...................................... 59 Section 9.4 Statement by Officers as to Default...................................................... 61 Section 9.5 Payment of Taxes and Other Claims........................................................ 61 Section 9.6 Maintenance of Properties................................................................ 61 Section 9.7 Corporate Existence; Keeping of Books.................................................... 62 Section 9.8 Insurance................................................................................ 62
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Page ---- Section 9.9 Net Worth Maintenance.................................................................... 62 Section 9.10 Limitations on Indebtedness.............................................................. 62 Section 9.11 Liquidity Maintenance.................................................................... 64 Section 9.12 Limitations on Restricted Payments....................................................... 65 Section 9.13 Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries............................................................. 66 Section 9.14 Limitations on Transactions with Affiliates.............................................. 67 Section 9.15 Limitations on Liens and Guarantees...................................................... 68 Section 9.16 Offer to Purchase upon a Change of Control Event......................................... 68 Section 9.17 Payments for Consent..................................................................... 70 Section 9.18 Waiver of Certain Covenants.............................................................. 70 ARTICLE TEN Merger, Consolidation and Transfer of Assets..................................................... 71 Section 10.1 Merger, Consolidation or Transfer of Assets of the Company............................... 71 Section 10.2 Successor Substituted.................................................................... 71 Section 10.3 Senior Notes to Be Secured in Certain Events............................................. 72 ARTICLE ELEVEN Redemption of Senior Notes.................................................................... 72 Section 11.1 Applicability of Article................................................................ 72 Section 11.2 Optional Redemption..................................................................... 72 Section 11.3 Election to Redeem; Selection by Trustee of Senior Notes to Be Redeemed.................................................................... 72 Section 11.4 Notice of Redemption.................................................................... 73 Section 11.5 Deposit of Redemption Price............................................................. 74 Section 11.6 Senior Notes Payable on Redemption Date................................................. 74 Section 11.7 Senior Notes Redeemed in Part........................................................... 74 ARTICLE TWELVE Defeasance and Covenant Defeasance............................................................ 75
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Page ---- Section 12.1 Option to Effect Legal Defeasance or Covenant Defeasance................................. 75 Section 12.2 Legal Defeasance and Discharge........................................................... 75 Section 12.3 Covenant Defeasance....................................................................... 75 Section 12.4 Conditions to Legal or Covenant Defeasance............................................... 76 Section 12.5 Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions...................................... 77 Section 12.6 Reinstatement............................................................................ 78 ARTICLE THIRTEEN Miscellaneous................................................................................ 78 Section 13.1. No Recourse Against Others.............................................................. 78 Section 13.2. Execution in Counterparts............................................................... 78
vi RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF JULY 22, 1997 TIA Section Indenture Section 310(a)(1) 6.9 (a)(2) 6.9 (a)(3) Not Applicable (a)(4) Not Applicable (a)(5) 6.9 (b) 1.5, 6.8, 6.9, 6.10, 6.11 (c) Not Applicable 311(a) 6.13 (b) 6.13 (c) Not Applicable 312(a) 7.1, 7.2 (b) 7.2 (c) 7.2 313(a) 7.3 (b)(1) Not Applicable (b)(2) 7.3 (c) 1.6, 7.3 (d) 7.3 314(a) 1.5, 1.6, 7.4 (b) Not Applicable (c)(1) 1.2 (c)(2) 1.2 (c)(3) Not Applicable (d) Not Applicable (e) 1.2 (f) Not Applicable 315(a) 6.1 (b) 1.6, 6.2 (c) 6.1 (d) 6.1 (e) 5.14 316(a)(last sentence) 1.1 (definition of "Outstanding") 316(a)(1)(A) 5.12 (a)(1)(B) 5.13 (a)(2) Not Applicable (b) 5.7, 5.8 (c) 1.4 317(a)(1) 5.3 (a)(2) 5.4 (b) 6.6, 9.3 318(a) 1.7 (b) 6.6, 9.3 (c) 1.7 vii INDENTURE, dated as of July 22, 1997, between RESOURCE AMERICA, INC., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 1521 Locust Street, Philadelphia, Pennsylvania 19102, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY A. The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of up to $75,000,000 in principal amount of its unsecured 12% Senior Notes due 2004, whether Original Senior Notes (as defined below) or Series B Senior Notes (as defined below), to be issued as in this Indenture provided. B. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Senior Notes (as defined below) by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Senior Notes, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (5) the word "including" is not limiting; (6) references in this Indenture to any agreement, other document or law "as amended" or "as amended from time to time," or to "amendments" of any document or law, shall include any amendments, supplements, replacements, renewals or other modifications from time to time, provided in the case of modifications to documents, such modifications are permissible under this Indenture; and (7) references in this Indenture to any law include regulations promulgated thereunder from time to time. "Accredited Investor" means an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act. "Acquired Indebtedness" means Indebtedness of a person (i) existing at the time such Person becomes a Subsidiary of or is merged with or into any other Person or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary of such other Person or such acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from such Person or the date such Person becomes a Subsidiary of or is merged with or into such other Person. "Act", when used with respect to any Holder, has the meaning specified in Section 1.4. "Additional Interest" means any Registration Penalty and the interest, if any, that shall accrue on any interest on the Senior Notes the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Senior Note. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person and any legal or beneficial owner, directly or indirectly, of 20% or more of the Voting Stock of such specified Person. Notwithstanding the foregoing, no Securitization Entity shall be deemed an Affiliate of the Company. "Applicable Law" means all applicable provisions of all (i) constitutions, treaties, statutes, laws, rules, regulations and ordinances of any Governmental Authority, (ii) Governmental Approvals and (iii) orders, decisions, judgments, awards and decrees of any Governmental Authority. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Senior Notes. "Authorized Officer" means any officer of the Company designated by a Board Resolution to take certain actions as specified in this Indenture. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal 2 payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Board of Directors" means the board of directors or any duly authorized committee of that board. Unless otherwise indicated, "Board of Directors" means the Board of Directors of the Company. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company, or by action of an Authorized Officer designated as such pursuant to a resolution of the Board of Directors of the Company, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" of any Person means any obligations of such Person under any capital lease for real or personal property which, in accordance with GAAP, is required to be recorded as a capitalized lease obligation; and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Capital Stock" in any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents or interests in (however designated) capital stock in such Person, including, with respect to a corporation, common stock, Preferred Stock and other corporate stock and, with respect to a partnership, partnership interests, whether general or limited, and any rights (other than debt securities convertible into corporate stock, partnership interests or other capital stock), warrants or options exchangeable for or convertible into such corporate stock, partnership interests or other capital stock. "Change of Control Event" means an event or series of events by which (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Management group, is or becomes after the date of issuance of the Senior Notes the "beneficial owner" (as defined in Rules 13 d-3 and 13d-5 under the Exchange Act as in effect on the date of the In-denture), of more than 40% of the total voting power of all Voting Stock of the Company then outstanding; (b) (1) another corporation merges into the Company or the Company consolidates with or merges into any other corporation, or (2) the Company conveys, transfers or leases all or substantially all its assets to any person or group, in one transaction or a series of transactions other than any conveyance, transfer or lease between the Company and a Wholly-Owned Subsidiary of the Company, and in the case of each of clause (1) and clause (2), with the effect that a person or group, other than the Management group, is or becomes the beneficial owner of more than 40% of the total voting power of all Voting Stock of the surviving or transferee corporation of such transaction or series of transactions; 3 (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors, or whose nomination for election by the Company's shareholders was approved by a vote of a majority of the directors 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 directors then in office; or (d) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. "Change of Control Purchase Date," "Change of Control Purchase Notice," "Change of Control Purchase Price" and "Change of Control Purchase Offer" are defined in Section 9.17. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board or its President, and by its Chief Financial Officer, its Controller or an Assistant Controller, and delivered to the Trustee. "Consolidated Depreciation and Amortization Expense" means with respect to any Person for any period, the total amount of depreciation and amortization expense of such Person for such period on a consolidated basis and otherwise determined in accordance with GAAP. "Consolidated EBITDA" means, with respect to any Person for any period, the Consolidated Net Income (Loss) of such Person for such period plus (a) provision for taxes based on income or profits of such Person for such period deducted in computing Consolidated Net Income (Loss) plus (b) Consolidated Interest Expense of such Person for such period, plus (c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted in computing Consolidated Net Income (Loss), plus (d) without duplication, any other non-cash charges reducing Consolidated Net Income (Loss) of such Person for such period less (e) without duplication, non-cash items increasing Consolidated Net Income (Loss) of such Person for such period in each case, on a consolidated basis for such Person in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any period, the sum of: (a) consolidated interest expense of such Person for such period, other than the interest expense on Permitted Acquisition Indebtedness and Permitted Repurchase Facilities, whether paid or accrued (except to the extent accrued in a prior period), to the extent such expense was deducted in computing Consolidated Net Income (Loss) (including amortization of original issue discount, non-cash interest payments and the interest component of Capital Lease Obligations, excluding amortization of deferred financing fees) and (b) consolidated capitalized interest of such Person for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (Loss). 4 "Consolidated Net Assets" of any Person as of any date means the total amount of assets of such Person and its Subsidiaries (less applicable reserves) on a consolidated basis at the end of the fiscal quarter immediately preceding such date for which financial information is available, as determined in accordance with GAAP. "Consolidated Net Income (Loss)" of any Person means, for any period, the consolidated net income (or loss) of such Person and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), by excluding, without duplication, (i) the portion of net income (or loss) of any other Person (other than any of such Person's consolidated Subsidiaries) in which such Person or any of its Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to such Person or its consolidated Subsidiaries in cash by such other Person during such period, (ii) net income (or loss) of any Person combined with such Person or any of its Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (iii) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan and (iv) solely for the purpose of determining Consolidated Net Income (Loss) in connection with the calculation of Restricted Payments permitted to be made hereunder, the net income of any consolidated Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Subsidiary or its shareholders; provided that, upon the termination or expiration of such dividend or distribution restrictions, the portion of net income (or loss) of such consolidated Subsidiary allocable to such Person and previously excluded shall be added to the Consolidated Net Income (Loss) of such Person to the extent of the amount of dividends or other distributions available to be paid to such Person in cash by such Subsidiary. "Consolidated Net Worth" of any Person and its Subsidiaries mean as of the date of determination all amounts that would be included under stockholders' equity on a consolidated balance sheet of such Person and its Subsidiaries determined in accordance with GAAP. "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 ownership of voting securities (or pledge of voting securities if the pledgee thereof may on the date of determination exercise or control the exercise of the voting rights of the owner of such voting securities), by contract or otherwise; and the terms "to Control," "Controlling" and "Controlled" have meanings correlative to the foregoing. "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 as of the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286. "Covenant Defeasance" has the meaning specified in Section 12.3. "Credit Support" means credit support designed to enhance the likelihood of payment on securities issued in connection with a securitization of loans or other assets which are generally funded with the proceeds of such securitization, including without limitation subordination of certain classes of securities, insurance policies, representations and warranties, reserve funds, liquidity reserves, lost- and missing- note reserves and letters of credit. 5 "Default" means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Defaulted Interest" has the meaning specified in Section 3.8. "Depositary" has the meaning specified in Section 3.1. "Disqualified Capital Stock" means any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part on, or prior to, or is exchangeable for debt securities of the Company or its Subsidiaries prior to, the final Stated Maturity of principal of the Senior Notes; provided that only the amount of such Capital Stock that is redeemable prior to the Stated Maturity of principal of the Senior Notes shall be deemed to be Disqualified Capital Stock. "Disinterested Director" of any Person means, with respect to any transaction or series of related transactions, a member of the board of directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "Event of Default" has the meaning specified in Section 5.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the offer by the Company and the Guarantors to exchange the Series B Senior Notes for the Original Senior Notes made pursuant to the Senior Notes Registration Rights Agreement. "Existing Management Group" means a majority of the executive officers of the Company as of the date of the Indenture as set forth in the Placement Memorandum, members of their immediate families, certain trusts for their benefit and legal representatives of, or heirs, beneficiaries or legatees receiving Common Stock (or securities convertible or exchangeable for Common Stock) under any such person's estate. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets shall be determined by the Board of Directors of the Company, acting in good faith, and shall be evidenced by a Board Resolution. "Fixed Charges" means, with respect to any Person for any period, the sum of (i) Consolidated Interest Expense of such Person for such period, and (ii) the product of (A) all cash dividend payments on any series of Preferred Stock or Disqualified Capital Stock of such Person or its Subsidiaries for such period, and (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 such Person, expressed as a decimal, in each case on a consolidated basis and in accordance with GAAP. 6 "GAAP" means generally accepted accounting principles as in effect on the date of computation. "Global Senior Note" means a Senior Note bearing the legend prescribed in Section 2.4 evidencing all or part of the Senior Notes, authenticated and delivered to the Depositary or its nominee, and registered in the name of such Depositary or nominee. "Global Senior Note holder" has the meaning specified in Section 3.1. "Governmental Approval" means an authorization, consent, approval, permit, license, registration or filing with any Governmental Authority. "Governmental Authority" with respect to any Person, means any nation (including an Indian nation), any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the United States, any state of the United States or any political subdivision thereof, and any tribunal or arbitrator(s) of competent jurisdiction in each case, having jurisdiction or authority over such Person. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantor" means any person Guaranteeing any obligation. "Guaranteed Indebtedness" of any Person means, without duplication, all Indebtedness of any other Person guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor, or (v) otherwise to assure a creditor with respect to Indebtedness against loss; provided that the term shall not include endorsements for collection of deposit, in either case in the ordinary course of business. 7 "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holders" or "Senior Note Holders" means the Person in whose name a Senior Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit issued under letter of credit facilities, and in connection with any agreement by such Person to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person now or hereafter outstanding, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, but excluding trade payables arising in the ordinary course of business, (iv) all obligations under Interest Rate Agreements of such Person, (v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in clauses (i) through (v) above of other Persons and all dividends payable by other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligations being deemed to be the lesser of the value of such property or asset or the amount of the obligations so secured), (vii) all guarantees by such Person of Guaranteed Indebtedness, (viii) all Disqualified Capital Stock (valued at the greater of book value and voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends) of such Person, and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing or any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value is to be determined in good faith by the board of directors (or any duly authorized committee thereof) of the issuer of such Disqualified Capital Stock, and (y) Indebtedness is deemed to be incurred pursuant to a revolving credit facility each time an advance is made thereunder. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into 8 pursuant to the applicable provisions hereof, including, for all purposes of this instrument, and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date" means the date on which any installment of interest (including any Additional Interest) on the Senior Notes becomes due and payable, as provided in Section 2.2. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, repurchase agreement, futures contract or other financial agreement or arrangement designed to protect the Company or any Subsidiary against fluctuations in interest rates. "Issue Date" means the date on which the Original Senior Notes are originally issued. "Junior Indebtedness" means any Indebtedness of the Company subordinated in right of payment of either principal, premium (if any) or interest (including any Additional Interest) thereon to the Senior Notes. "Legal Defeasance" has the meaning specified in Section 12.2. "Legal Holiday" means any Saturday, Sunday or other day on which banks in the States of New York or Pennsylvania are authorized or obligated by law or executive order to be closed for business. "Leverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of all Indebtedness and Disqualified Capital Stock of the Company, excluding (A) Indebtedness and Guarantees thereof permitted to be incurred pursuant to Section 9.10 (f) (1), (2), (3), (4), (6) and (7) hereof; (B) Hedging Obligations permitted to be incurred pursuant to Section 9.10 (f)(11) hereof; and (C) Junior Indebtedness of the Company to (ii) the Consolidated Net Worth of the Company. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "Liquid Assets" shall include: (i) cash; (ii) any of the following instruments that have a remaining term to maturity not in excess of 90 days from the determination date: (a) repurchase agreements on obligations of, or are guaranteed as to timely receipt of principal and interest by, the United States or any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States provided that the party agreeing to repurchase such obligations is a primary dealer in U.S. government securities, (b) federal funds and deposit accounts, including but not limited to certificates of deposit, time deposits and bankers' acceptances of any U.S. depository institution or trust company incorporated under the laws of the United States or any state, provided that the debt of such depository institution or trust company at the date of acquisition thereof has been rated by Standard & Poor's Corporation in the highest short-term rating category or has an equivalent rating from another nationally recognized rating agency, or (c) commercial paper of any corporation incorporated under the laws of the United States or any state thereof that on the date of acquisition is rated investment grade by Standard & Poor's Corporation or has an equivalent rating from another nationally recognized 9 rating agency; (iii) any debt instrument which is an obligation of, or is guaranteed as to the receipt of principal and interest by the United States, its agencies or any U.S. government sponsored enterprise, or (iv) any mortgage-backed or mortgage-related security issued by the United States, its agencies, or any U.S. government sponsored enterprise which the payment of principal and interest from the mortgages underlying such securities will be passed through to the holder thereof and which such security has a remaining weighted average maturity of 15 years or less. Notwithstanding the foregoing, Liquid Assets shall not include any debt instruments, securities or collateralized mortgage obligations (real estate mortgage investment conduits) that would be classified as a "High-Risk Mortgage Security" pursuant to the policy statement adopted by the Federal Financial Institutions Examination Counsel on February 10, 1992, as reflected in Volume I of the Federal Reserve Report Service, Part 3-1562. "Maturity", when used with respect to any Senior Note, means the date on which the principal of such Senior Note or with respect to any installment of principal, when such installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, upon repurchase or otherwise. "Net Cash Proceeds" means, with respect to any issuance or sale of Capital Stock, or options, warrants or rights to purchase Capital Stock, or debt securities or Capital Stock that have been converted into or exchanged for Capital Stock, or any capital contribution in respect of Capital Stock, as referred to under Section 9.13 hereof, the proceeds of such issuance or sale or capital contribution in the form of cash or cash equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Subsidiary of the Company), net of attorney's fees, accountant's fees and brokerage, consulting, underwriting and other fees and expenses actually incurred in connection with such issuance or sale or capital contribution and net of taxes paid or payable by the Company as a result thereof. "Non-Recourse Indebtedness" means, with respect to any Person, Indebtedness of such Person for which (i) the sole recourse (excluding certain exceptions relating to fraud, intentional misrepresentation, proceeds of the assets, environmental liabilities and similar matters customary in non-recourse indebtedness) for collection of principal and interest on such Indebtedness is against the specific assets identified in the instruments evidencing or securing such Indebtedness, (ii) such assets were acquired with the proceeds of such Indebtedness or such Indebtedness was incurred concurrently with the acquisition of such assets; and (iii) no other assets (other than Credit Support) of such Person or of any other Person may be realized upon or in collection of principal or interest on such Indebtedness. "Offering" means the initial private placement of the Senior Notes by the Company. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer or the President, and by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller or an Assistant Controller, of the Company (provided that no one person signs twice on behalf of the Company), and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 9.4 shall be the principal executive, financial or accounting officer of the Company. Unless otherwise indicted, "Officers' Certificate" means an Officers' Certificate of the Company. 10 "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company and who shall be acceptable to the Trustee. "Original Senior Notes" means the 12% Senior Notes due 2004, as amended or supplemented from time to time in accordance with the terms hereof, issued under this Indenture on the Issue Date. "Outstanding", when used with respect to Senior Notes, means, as of the date of determination, all Senior Notes theretofore authenticated and delivered under this Indenture, except: (i) Senior Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Senior Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Senior Notes; provided that, if such Senior Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Senior Notes paid pursuant to Section 3.7 or in exchange for or in lieu of which other Senior Notes have been authenticated and delivered pursuant to this Indenture, other than any such Senior Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Senior Notes are held by a bona fide purchaser in whose hands such Senior Notes are valid obligations of the Company provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Senior Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) Senior Notes owned by the Company or any other obligor on the Senior Notes or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Senior Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Senior Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Senior Notes and that the pledgee is not the Company or any other obligor on the Senior Notes or any Affiliate of the Company. "Pari Passu Indebtedness" means any Indebtedness of the Company that is pari passu in right of payment of principal, premium (if any) and interest (including any Additional Interest) thereon to the Senior Notes. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest (including any Additional Interest) on any Notes on behalf of the Company or, if the Company is acting as its own Paying Agent, the Company. Initially, the Paying Agent shall be the Trustee. 11 "Permitted Acquisition Indebtedness" means any secured funding arrangement with a financial institution or other lender to the extent (and only to the extent) funding thereunder is used exclusively to finance or refinance the purchase or origination of loans, real estate owned, equipment leases or other assets by the Company or a Subsidiary or to provide related financing subsequent to such purchase or origination. "Permitted Liens" means (i) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens imposed by law and arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, surety and appeal bonds, progress payments, development obligations, government contracts, performance and return-of-money bonds and other obligations of a similar nature, in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money or otherwise constituting a liability in accordance with GAAP); (v) with respect to property of the Company or any Subsidiary, Liens granted on such property or assets in favor of the Person from whom the Company or such Subsidiary acquired such property or assets which Liens secure the payment of a contingent portion of the purchase price of such property so long as such Liens are granted and such arrangement is entered into in the ordinary course of business of the Company; (vi) attachment or judgment Liens not giving rise to a Default or Event of Default and which are being contested in good faith by appropriate proceedings; (vii) easements, rights-of-way, restrictions, homeowners association assessments and similar charges or encumbrances that do not materially interfere with the ordinary course of business of the Company or any of its Subsidiaries; (viii) 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 property in the ordinary course of business of the Company or any Subsidiary or the value of such real property for the purpose of such business; (ix) Liens in favor of the Company or any Subsidiary that is a Wholly Owned Subsidiary of the Company; (x) Liens existing on the Closing Date; (xi) Liens securing Non-Recourse Indebtedness of the Company or a Subsidiary thereof, (xii) Liens with respect to the property or assets of the Company or a Subsidiary securing Indebtedness permitted to be incurred pursuant to Section 9.10 (e)(1), (2), (3), (4), (6) and (7) hereof; (xiii) Liens granted after the Issue Date on any assets or Capital Stock of the Company or its Subsidiaries created in favor of the Holders; (xiv) Liens with respect to the property or assets of a Subsidiary granted by such Subsidiary to the Company to secure Indebtedness owing to the Company; (xv) Liens securing Indebtedness which is incurred to refinance Permitted Indebtedness, provided that such Liens constitute Permitted Liens under this clause (xv) only to the extent that they do not extend to or cover any property or assets of the Company or any Subsidiary other than the property or assets securing the Indebtedness being refinanced; (xvi) leases or subleases granted to others not materially interfering with the ordinary course of business of the Company or any of its Subsidiaries; (xvii) other Liens securing obligations not exceeding $1,000,000 in the aggregate; and (xviii) Liens securing Hedging Obligations of the Company or such Subsidiary so long as 12 such Hedging Obligations relate to Indebtedness that is, and is permitted under this Indenture to be, secured by a Lien on the same property securing such Hedging Obligations. "Permitted Payment" means, so long as no Default or Event of Default is continuing, (a) the purchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Company or any Affiliate (other than a Wholly-Owned Subsidiary) of the Company, Junior Indebtedness or Pari Passu Indebtedness in exchange for (including any such exchange pursuant to the exercise of a conversion right or privilege where, in connection therewith, cash is paid in lieu of the issuance of fractional shares or scrip), or out of the Net Cash Proceeds or Fair Market Value of property not constituting Net Cash Proceeds of, a substantially concurrent issue and sale (other than to a Subsidiary of the Company or to an employee benefit plan of the Company or any of its Subsidiaries) of Qualified Capital Stock of the Company; provided that the Net Cash Proceeds or Fair Market Value of such property received by the Company from the issuance of such shares of Qualified Capital Stock, to the extent so utilized, shall be excluded from clause (c)(iii) of Section 9.13 hereof; and (b) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Junior Indebtedness or Pari Passu Indebtedness in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent issue and sale (other than to a Subsidiary of the Company) of new Indebtedness by the Company (such a transaction, a "refinancing"); provided, that any such new Indebtedness of the Company (i) shall be in a principal amount that does not exceed an amount equal to the sum of (A) the principal amount of the Indebtedness so refinanced and accrued but unpaid interest thereon less any discount from the face amount of such Indebtedness to be refinanced expected to be deducted from the amount payable to the holders of such Indebtedness in connection with such refinancing, (B) the amount of any premium expected to be paid in connection with such refinancing pursuant to the terms of the Junior Indebtedness or Pari Passu Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing by means of a tender offer, privately negotiated repurchase or otherwise and (C) the amount of legal, accounting, printing and other similar expenses of the Company incurred in connection with such refinancing; provided, further, that for purposes of this clause (i), the principal amount of any Indebtedness shall be deemed to mean the principal amount thereof or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination; (ii) (A) if such refinanced Indebtedness has an Average Life to Stated Maturity shorter than that of the Senior Notes or a final Stated Maturity earlier than the final Stated Maturity of the Senior Notes, such new Indebtedness shall have an Average Life to Stated Maturity no shorter than the Average Life to Stated Maturity of such refinanced Indebtedness and a final Stated Maturity no earlier than the final Stated Maturity of such refinanced Indebtedness or (B) in all other cases each Stated Maturity of principal (or any required repurchase, redemption, defeasance or sinking fund payments) of such new Indebtedness shall be after the final Stated Maturity of principal of the Senior Notes; and (iii) is (A) made expressly subordinated to or 13 pari passu with the Senior Notes to substantially the same extent as the Indebtedness being refinanced or (B) expressly subordinate to such refinanced Indebtedness. "Permitted Repurchase Facilities" includes purchase and sale facilities pursuant to which the Company or a Subsidiary sells loans, real estate owned or other financial assets to a financial institution or other entity and agrees to repurchase such loans, real estate owned or financial assets. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivisions thereof. "Place of Payment" means the principal office of the Company in Philadelphia, Pennsylvania, or the office of the Paying Agent as may be established by the Company and the Trustee. "Placement Memorandum" means the Company's Offering Memorandum, dated July 16, 1997, as supplemented prior to the Issue Date, pursuant to which the Original Senior Notes were initially offered. "Predecessor Senior Note" of any particular Senior Note means every previous Senior Note evidencing all or a portion of the same debt as that evidenced by such particular Senior Note; and, for the purposes of this definition, any Senior Note authenticated and delivered under Section 3.7 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Senior Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Senior Note. "Preferred Stock" means, with respect to any Person, any Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary liquidation or dissolution of such Person, over Capital Stock of any other class in such Person. "Purchase Agreement" means the Purchase Agreement, dated July 22, 1997, among the Company, and the initial purchasers of the Original Senior Notes, as such may be amended or modified from time to time. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Disqualified Capital Stock. "Redemption Date", when used with respect to any Senior Note to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Senior Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Reference Period" with regard to any Person means the four full fiscal quarters of such Person ended on or immediately preceding any date upon which any determination is to be made pursuant to the terms of the Senior Notes or this Indenture for which financial information is available. 14 "Registrar" means the Trustee or its nominee. "Registration Penalty" has the meaning set forth in the Registration Rights Agreement. "Registration Rights Agreement" means the Senior Notes Registration Rights Agreement, dated as of July 22, 1997, by and among the Company and Friedman, Billings, Ramsey & Co., Inc., as such may be amended or modified from time to time. "Regular Record Date" for the interest (including any Additional Interest) payable on any Interest Payment Date on the Senior Notes means January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer", when used with respect to the Trustee shall mean any officer within the corporate trust department (or any successor group of the Trustee) including any vice president, assistant vice president, assistant secretary, assistant treasurer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Trustee's Corporate Trust Office because of his knowledge of and familiarity with the particular subject. "Restricted Payment" means (a) the declaration, payment or setting apart of any funds for the payment of any dividend on, or making of any distribution to holders of, the Capital Stock of the Company or any Subsidiary of the Company (other than (i) dividends or distributions in Qualified Capital Stock of the Company and (ii) dividends or distributions payable on or in respect of any class or series of Capital Stock of a Subsidiary of the Company as long as the Company receives at least its pro rata share of such dividends or distributions in accordance with its ownership interests in such class or series of Capital Stock); (b) the purchase, redemption or other acquisition or retirement for value, directly or indirectly, of any Capital Stock of the Company or any Affiliate of the Company (other than a Wholly-Owned Subsidiary, and other than the purchase from a non-Affiliate of the Company of Capital Stock of any joint venture or other Person which is an Affiliate of the Company solely because of the Company's direct or indirect ownership of 20% or more of the Voting Stock of such joint venture or other Person), except such as shall constitute a Permitted Payment; or (c) the making of any principal payments on, or repurchase, redemption, defeasance, retirement or other acquisition for value, directly or indirectly, of any Junior Indebtedness or Pari Passu Indebtedness, prior to any Stated Maturity of principal or scheduled redemption or defeasance of, or any scheduled sinking fund payment on, such Junior Indebtedness or Pari Passu Indebtedness, except such as shall constitute a Permitted Payment. "Restricted Security" means a Security, unless or until it has been (i) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering 15 it or (ii) distributed to the public pursuant to Rule 144 (or any similar provision then in force) under the Securities Act; provided that in no case shall a Series B Senior Note issued in accordance with this Indenture and the terms and provisions of the Senior Notes Registration Rights Agreement be a Restricted Security. "SEC" means the Securities and Exchange Commission. "Securities" or "Senior Notes" means, prior to the Exchange Offer, the Original Senior Notes, and after the Exchange Offer, the Original Senior Notes (if any) and the Series B Senior Notes, in each case as amended or modified from time to time in accordance with the terms hereof, issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securitization Entity" means any pooling arrangement or entity formed or originated for the purpose of holding, and/or issuing securities representing interests in, one or more pools of mortgages, leases, credit card receivables, home equity loan receivables, automobile loans, leases or installment sales contracts, other consumer receivables, real estate owned or other financial assets of the Company or any Subsidiary, and shall include, without limitation, any partnership, limited liability company, liquidating trust, grantor trust, owner trust, real estate mortgage investment conduit, real estate investment trust or collateralized bond obligation. "Senior Note Register" has the meaning specified in Section 3.6. "Senior Notes": (See "Securities"). "Senior Notes Registration Rights Agreement": (See " Registration Rights Agreement") "Series B Senior Notes" means the Series B 12% Senior Notes due 2004, to be issued pursuant to this Indenture in connection with the offer to exchange Series B Senior Notes for Original Senior Notes that may be made by the Company pursuant to the Senior Notes Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary of the Company which accounted for 5% or more of the Consolidated Net Assets of the Company and its Subsidiaries as of the end of the fiscal quarter preceding the date of determination for which financial information is available or Consolidated EBITDA of the Company and its Subsidiaries for the Reference Period. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.8. "Stated Maturity" when used with respect to any Indebtedness (including, without limitation, the Senior Notes) means the dates specified in the instrument governing such Indebtedness as the fixed dates on which any principal amount of such Indebtedness is due and payable (including, without limitation, by reason of any required redemption, purchase, defeasance or sinking fund payment) and, when used with respect to any installment of interest on Indebtedness, means the date on which such installment is due and payable. 16 "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of Voting Stock thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. "Successor Company" has the meaning specified in Section 10.1. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Senior Notes shall mean the Trustee with respect to the Senior Notes. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Unsecured Debt Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company incurs, assumes, guarantees or redeems any Indebtedness (including any Indebtedness which constitutes Acquired Indebtedness) subsequent to the commencement of the period for which the Unsecured Debt Coverage Ratio is being calculated but prior to the event for which the calculation of the Unsecured Debt Coverage Ratio is made (the "Calculation Date"), then the Unsecured Debt Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, as if the same had occurred at the beginning of the applicable four-quarter period, including an assumption of investment returns at the rate equal to the higher of the six-month Treasury bill rate or six-month LIBOR at the beginning of such four-quarter period. For purposes of making the computation referred to above, investments in the equity of, or other acquisitions or dispositions, which constitute all or substantially all of an operating unit of a business and discontinued operations (as determined in accordance with GAAP) that have been made by the Company or any of its Subsidiaries, including all mergers, consolidations and dispositions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be calculated on a pro forma basis assuming that all such investments, acquisitions, dispositions, discontinued operations, mergers and consolidations (and the reduction of any associated fixed charge obligations and the change in Consolidated EBITDA resulting therefrom) had occurred on the first day of the four-quarter period. If since the beginning of such period any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any investment in the equity of, or other acquisition or disposition, which constitutes all or substantially all of an operating unit of a business, discontinued operation, merger or consolidation that would have required adjustment pursuant to this definition, then the Unsecured Debt Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such investment, acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter period. For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness 17 shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a reoccurrence interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Vice President", when used with respect to the Company or the Trustee, means any vice president (but shall not include any assistant vice president), whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means Capital Stock of the class or classes of which the holders have (i) in respect of a corporation, the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) or (ii) in respect of a partnership, the general voting power under ordinary circumstances to elect the board of directors or other governing board of such partnership or of the Person which is a general partner of such partnership. "Wholly-Owned Subsidiary" means a Subsidiary all of the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly-Owned Subsidiary. SECTION 1.2 Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by officers of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion (other than the Officers' Certificate delivered under Section 9.4 hereof) with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 18 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.3 Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.4 Acts of Holders, Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective upon action by the requisite percentage of Holders when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any 19 purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Senior Note, may make, give or take, by a proxy, or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Senior Note may provide its proxy or proxies to the beneficial owners of interest in any such Global Senior Note. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders of Senior Notes entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Senior Notes. If not set by the Company prior to the first solicitation of a Holder of Senior Notes made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.1) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders Senior Notes, only the Holders of Senior Notes on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Senior Notes shall be proved by the Senior Note Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Senior Note shall bind every future Holder of the same Senior Note and the Holder of every Senior Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Senior Note. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Senior Note may do so with regard to all or any part of the principal amount of such Senior Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. 20 SECTION 1.5 Notices, Etc., to Trustee and Company. Except as otherwise expressly provided herein, any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Trustee Administration, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of the Company's principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company, Attention: Edward E. Cohen, Chairman. SECTION 1.6 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Senior Note Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 1.7 Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 1.8 Effect of Headings and Table of Contents. 21 The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.9 Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.10 Separability Clause. In case any provision in this Indenture or in the Senior 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. SECTION 1.11 Benefits of Indenture. Nothing in this Indenture or in the Senior Notes, express or implied, shall give to any Person, other than (a) the parties hereto and their successors hereunder and (b) the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.12 Governing Law; Choice of Forum. (a) This Indenture and the Senior Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. (b) The Company hereby irrevocably submits to the jurisdiction of any New York State Court sitting in the Borough of Manhattan in the City of New York or any federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to this indenture and the Senior Notes, and irrevocably accepts for itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts. The company irrevocably waives, to the fullest extent it may effectively do so under applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (c) The Company hereby irrevocably appoints [CT Corporation Systems] (the "Process Agent," which has consented thereto) with offices on the date hereof at [1633 Broadway, New York, New York 10019] as Process Agent to receive for and on behalf of the Company service of process in the County of New York relating to this Indenture and the Senior Notes. SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY MAY BE 22 MADE ON THE PROCESS AGENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK, AND THE PROCESS AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT SUCH SERVICE FOR AND ON BEHALF OF THE COMPANY AND TO ADMIT SERVICE WITH RESPECT THERETO. SUCH SERVICE UPON THE PROCESS AGENT SHALL BE DEEMED EFFECTIVE PERSONAL SERVICE ON THE COMPANY, SUFFICIENT FOR PERSONAL JURISDICTION, 10 DAYS AFTER MAILING, AND SHALL BE LEGAL AND BINDING UPON THE COMPANY FOR ALL PURPOSES, NOTWITHSTANDING ANY FAILURE OF THE PROCESS AGENT TO MAIL COPIES OF SUCH LEGAL PROCESS TO THE COMPANY OR ANY FAILURE ON THE PART OF THE COMPANY TO RECEIVE THE SAME. The Company confirms that it has instructed the Process Agent to mail to the Company, upon service of process being made on the Process Agent pursuant to this Section, a copy of the summons and complaint or other legal process served upon it, by registered mail, return receipt requested, at the Company's address set forth in the first paragraph of this instrument, or to such other address as the Company may notify the Process Agent in writing. The Company agrees that it will at all times maintain a process agent to receive service of process in the County of New York on its behalf with respect to this Indenture and the Senior Notes. If for any reason the Process Agent or any successor thereto shall no longer serve as such process agent or shall have changed its address without notification thereof to the Trustee, the Company, immediately after gaining knowledge thereof, irrevocably shall appoint a substitute process agent acceptable to the Trustee in the County of New York and advise the Trustee thereof or notify the Trustee of the new address, respectively. (d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. SECTION 1.13 Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Senior Note shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Senior Notes (other than a provision of the Senior Notes which specifically states that such provision shall apply in lieu of this Section)) payment of interest (including any Additional Interest) or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. 23 ARTICLE TWO SENIOR NOTE FORMS SECTION 2.1 Forms Generally. The Senior Notes shall be in substantially the form set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Senior Notes, as evidenced by their execution of the Senior Notes. The definitive Senior Notes shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Senior Notes, as evidenced by their execution of such Senior Notes. SECTION 2.2 Form of Face of Senior Note. [If the Security is a Restricted Security, such as an Original Senior Note, then insert -- THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE OR UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN EFFECT WITH RESPECT TO THIS NOTE. BY ITS ACQUISITION HEREBY (BUT SUBJECT TO CERTAIN RIGHTS TO REQUIRE REGISTRATION OF THE NOTES), THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 UNDER THE SECURITIES ACT) ("ACCREDITED INVESTOR") (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT IN A TRANSACTION NOT REQUIRING REGISTRATION UNDER THE SECURITIES ACT (A) TO RESOURCE AMERICA, INC. OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE UNDER THE INDENTURE RELATING TO THIS NOTE (THE "TRUSTEE") A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTION ON TRANSFER OF THE NOTES EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION REQUIREMENTS OF THE SECURITIES ACT INCLUDING THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE. IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH 24 TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. [All Securities, including Series B Senior Notes, shall be in substantially the following form] NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING THIS SECURITY ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. 25 RESOURCE AMERICA, INC. 12% Senior Notes Due 2004 No____________ $___________ CUSIP No. ____________ Resource America, Inc., a corporation duly organized and existing under the laws of Delaware (herein called the "Company", which term includes any Successor Company under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of ___________ Dollars on August 1, 2004, and to pay interest thereon from July 22, 1997 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on February 1 and August 1 in each year, commencing February 1, 1998, at the rate of 12% per annum, plus Additional Interest, if any, until the principal hereof is paid or made available for payment, and at the rate of 1% over the rate set forth above per annum on any overdue principal and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Senior Note (or one or more Predecessor Senior Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest (including any Additional Interest) not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Senior Note (or one or more Predecessor Senior Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Senior Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Senior Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Interest on the Senior Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The principal of, and premium, if any, and interest including Additional Interest, if any, on the Senior Notes shall be payable at the principal office of the Company in Philadelphia, Pennsylvania or at the office of the Paying Agent as may be established by the Company and the Trustee (herein called the "Place of Payment"; initially the Place of Payment shall be the principal corporate trust office of the Trustee in New York, New York). All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made (subject to collection) by check mailed to the address of the Person entitled thereto at such address as shall appear on the Note Register or by wire transfer in immediately available funds to the accounts designated by the Person entitled thereto in writing in form satisfactory to the Trustee at least fifteen (15) days prior to the date of such payment. Reference is hereby made to the further provisions of this Senior Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 26 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Senior Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. RESOURCE AMERICA, INC. By: _____________________________ Attest: _____________________________ 27 SECTION 2.3 Form of Reverse of Senior Note. This Senior Note is one of a duly authorized issue of the Company (herein called the "Senior Notes"), issued under an Indenture, dated as of July 22, 1997 (herein called the "Indenture"), between the Company and The Bank of New York as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Senior Notes and of the terms upon which the Senior Notes are, and are to be, authenticated and delivered. This Senior Note is one of the Senior Notes designated on the face hereof, limited in aggregate principal amount up to $75,000,000. The Senior Notes may not be redeemed prior to August 1, 2002 except as set forth herein. On or after such date, the Senior Notes may be redeemed upon not less than 30 days' and not more than 60 days' notice by mail, at any time on or after August 1, 2002, as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed during the 12-month period beginning August 1, of the years indicated, Redemption Year Price ---- ----------- 2002 106% 2003 103% together in the case of any such redemption with accrued and unpaid interest (including any Additional Interest) to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Senior Notes, or one or more Predecessor Senior Notes, of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. In the event of redemption of this Senior Note in part only, a new Senior Note or Senior Notes of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. Upon a Change of Control Event, the Holder of this Senior Note will have the right to cause the Company to repurchase all or any part of this Senior Note at a repurchase price equal to 101% of the principal amount of this Senior Note plus accrued interest (including any Additional Interest) to the date of purchase (subject to the right of the Holders on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date) as provided in, and subject to the terms of, the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness evidenced by this Senior Note and (b) certain restrictive covenants, in each case upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Senior Note. 28 If an Event of Default with respect to Senior Notes shall occur and be continuing, the principal of the Senior Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Senior Notes at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Senior Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Senior Notes at the time Outstanding, on behalf of the Holders of all Senior Notes, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Senior Note and upon all future Holders of this Senior Note and of any Senior Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Senior Note. No reference herein to the Indenture and no provision of this Senior Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest (including any Additional Interest) on this Senior Note at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Senior Note is registrable in the Senior Note Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest (including any Additional Interest) on this Senior Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Senior Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Senior Notes of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Senior Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Senior Notes are exchangeable for a like aggregate principal amount of Senior Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Senior Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 29 All terms used in this Senior Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Indenture and the Senior Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required. SECTION 2.4 Form of Legend for Global Senior Notes. Any Global Senior Note authenticated and delivered hereunder shall bear a legend in substantially the following form: "This Senior Note is a Global Senior Note within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Senior Note may not be transferred to, or registered or exchanged for Senior Notes registered in the name of, any Person other than the Depositary or a nominee thereof or a successor of such Depositary or a nominee of such successor and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Senior Note authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, this Senior Note shall be a Global Senior Note subject to the foregoing, except in such limited circumstances." SECTION 2.5 Legending of the Securities; Restrictions on Transfers. Until such time as the same is no longer a Restricted Security, each certificate evidencing the Securities (and all Securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the form set forth on the form of Senior Note set forth at Section 2.2. Prior to any transfer or exchange of a legended Security for another Security, the Company shall deliver an Officers' Certificate to the Trustee directing it to transfer or exchange such Security for another legended or unlegended Security, subject to compliance with any transfer restrictions. SECTION 2.6 Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Senior Notes designated and referred to in the within-mentioned Indenture. The Bank of New York, as Trustee Dated: ___________________ By: _______________________________ Authorized Signatory 30 SECTION 2.7 Form of Assignment and Election to Purchase. Each Senior Note shall include the following form of Assignment and Option of Holder to Elect Purchase: ASSIGNMENT (To be executed by the registered Holder if such Holder desires to transfer this Senior Note) FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers unto ________________________. PLEASE INSERT SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER OF TRANSFEREE __________________________________________________ (Please print name and address of transferee) this Senior Note, together with all right, title and interest herein, and does hereby irrevocably constitute and appoint ___________________ Attorney to transfer this Senior Note on the Senior Note Register, with full power of substitution. Dated: __________________________________ Signature of Holder: ____________________________ Signature Guaranteed: ___________________________ NOTICE: The signature to the foregoing Assignment must correspond to the name as written upon the face of this Senior Note in every particular, without alteration or any change whatsoever. 31 OPTION OF HOLDER TO ELECT PURCHASE (check as appropriate) [ ] In connection with the Change of Control Purchase Offer made pursuant to Section 9.17 of the Indenture, the undersigned hereby elects to have the entire principal amount [ ] $ _______________ ($1,000 in principal amount or an integral multiple thereof) principal amount of this Senior Note repurchased by the Company. The undersigned hereby directs the Trustee or Paying Agent to pay it an amount in cash equal to 101% of the principal amount indicated in the preceding sentence plus accrued and unpaid interest on such principal amount to the date of purchase. Dated: __________________________________ Signature of Holder: ____________________________ Signature Guaranteed: ___________________________ NOTICE: The signature to the foregoing must correspond to the name as written upon the face of this Senior Note in every particular, without alteration or any change whatsoever. 32 ARTICLE THREE THE SENIOR NOTES SECTION 3.1 Global Senior Note; Depositary. Any Senior Notes issued in the form of one or more Global Senior Notes will be deposited with The Depository Trust Company or any successor thereto (the "Depositary"), or the Trustee on its behalf, and registered in the name of the Depositary's nominee, as nominee of the Depositary (such nominee being referred to herein as the "Global Senior Note Holder"). SECTION 3.2 Amount. The aggregate principal amount of Senior Notes which may be authenticated and delivered under this Indenture is up to $75,000,000 (Seventy-Five Million Dollars and No Cents), except for Senior Notes authenticated and delivered pursuant to Section 3.5, 3.6, 3.7, 9.16 or 11.7. SECTION 3.3 Denominations. The Senior Notes shall be issuable in registered form without coupons in denominations of $1,000 and any integral multiple thereof. SECTION 3.4 Execution, Authentication, Delivery and Dating. The Senior Notes shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President or one of its Vice Presidents, under its corporate seal, if any, reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Senior Notes and the corporate seal may be manual or facsimile. Senior Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Senior Notes or did not hold such offices at the date of such Senior Notes. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Senior Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Senior Notes, and the Trustee in accordance with the Company Order shall authenticate and make such Senior Notes available for delivery. Each Senior Note shall be dated the date of its authentication. No Senior Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Senior Note a certificate of authentication substantially in the form provided for herein executed by the Trustee or an Authenticating Agent by manual signature of an authorized signatory of the Trustee or an Authenticating Agent, and 33 such certificate upon any Senior Note shall be conclusive evidence, and the only evidence, that such Senior Note has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Senior Note shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Senior Note to the Trustee for cancellation as provided in Section 3.10, for all purposes of this Indenture such Senior Note shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 3.5 Temporary Senior Notes. Pending the preparation of definitive Senior Notes, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Senior Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Senior Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Senior Notes may determine, as evidenced by their execution of such Senior Notes. If temporary Senior Notes are issued, the Company will cause definitive Senior Notes to be prepared without unreasonable delay. After the preparation of definitive Senior Notes, the temporary Senior Notes shall be exchangeable for definitive Senior Notes upon surrender of the temporary Senior Notes at the office or agency of the Company in a Place of Payment, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Senior Notes the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor one or more definitive Senior Notes of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Senior Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Senior Notes of such tenor. SECTION 3.6 Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office being herein sometimes collectively referred to as the "Senior Note Register"), in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Senior Notes and of transfers of Senior Notes. The Trustee is hereby appointed "Senior Note Registrar" for the purpose of registering Senior Notes and transfers of Senior Notes as herein provided. Upon surrender for registration of transfer of any Senior Note at the office or agency in a Place of Payment, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Senior Notes of any authorized denominations and of a like aggregate principal amount and tenor. At the option of the Holder, Senior Notes may be exchanged for other Senior Notes of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Senior Notes to be exchanged at such office or agency. 34 Whenever any Senior Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Senior Notes which the Holder making the exchange is entitled to receive. All Senior Notes issued upon any registration of transfer or exchange of Senior Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Senior Notes surrendered upon such registration of transfer or exchange. Every Senior Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Senior Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Senior Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Senior Notes, other than exchanges pursuant to Section 3.5, 9.16 or 11.7 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Senior Notes during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Senior Notes selected for redemption under Section 11.3 and ending at the close of business on the day of such mailing or (ii) to register the transfer of or exchange any Senior Note so selected for redemption in whole or in part, except the unredeemed portion of any Senior Note being redeemed in part. Any Original Senior Notes which are presented to the Registrar for exchange pursuant to an Exchange Offer shall be exchanged for Series B Senior Notes of equal principal amount upon surrender to the Registrar of the Original Senior Notes to be exchanged; provided, however, that the Original Senior Notes surrendered for exchange in an Exchange Offer shall be duly endorsed and accompanied by a letter of transmittal or written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar, duly executed by the Holder thereof or his attorney who shall be duly authorized in writing to execute such document. Whenever any Original Senior Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall, upon Company Order, authenticate and make available for delivery to the Registrar, the same aggregate principal amount of Series B Senior Notes as the aggregate principal amount of Original Senior Notes that have been surrendered. Notwithstanding any other provisions hereof, no Original Senior Note may be exchanged by the Holder thereof for a Series B Senior Note other than pursuant to the Exchange Offer and no Series B Senior Note may be exchanged by the Holder thereof for an Original Senior Note. Each Holder of a Senior Note agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Senior Note in violation of any provision of this Indenture and/or applicable United States federal or state securities law. 35 The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 3.7 Mutilated, Destroyed, Lost and Stolen Senior Notes. If any mutilated Senior Note is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Senior Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Senior Note and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Senior Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Note, a new Senior Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Senior Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Senior Note, pay such Senior Note. Upon the issuance of any new Senior Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Senior Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Senior Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Senior Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Senior Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Senior Notes. SECTION 3.8 Payment of Interest; Interest Rights Preserved. Interest (including any Additional Interest) on any Senior Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Senior Note (or one or more Predecessor Senior Notes) is registered at the close of business on the Regular Record Date for such interest. All payments of interest 36 (including any Additional Interest) on any Senior Notes shall be made by the Company in immediately available funds; provided, however, that should, in accordance with the terms of the Indenture, interest (including any Additional Interest) on the Senior Notes not be paid in immediately available funds, such payment may be paid by check drawn on a bank in The City of New York and mailed to the address of the Person entitled thereto as such address shall appear in the Senior Note Register. Any interest (including any Additional Interest) on any Senior Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Senior Notes (or their respective Predecessor Senior Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Senior Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 7 days prior to the date of the proposed payment and not less than 7 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Senior Notes at its address as it appears in the Senior Note Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Senior Notes (or their respective Predecessor Senior Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Senior Notes in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Senior Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. 37 Subject to the foregoing provisions of this Section, each Senior Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Senior Note shall carry the rights to interest (including any Additional Interest) accrued and unpaid, and to accrue, which were carried by such other Senior Note. SECTION 3.9 Persons Deemed Owners. Prior to due presentment of a Senior Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Senior Note is registered as the owner of such Senior Note for the purpose of receiving payment of principal of and any premium and (subject to Section 3.8) any interest (including any Additional Interest) on such Senior Note and for all other purposes whatsoever, whether or not such Senior Note be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. So long as the Global Senior Note Holder is the registered owner of any Senior Notes, the Global Senior Note Holder will be considered the sole Holder under this Indenture of any Senior Notes evidenced by the Global Senior Note for the purposes of receiving payment on the Senior Notes, receiving notices, and for all other purposes under this Indenture and the Senior Notes. Beneficial owners of Senior Notes evidenced by the Global Senior Note will not be considered the owners or Holders thereof under this Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of the Depositary or for maintaining, supervising or reviewing any records of the Depositary relating to the Senior Notes. SECTION 3.10 Cancellation. All Senior Notes surrendered for payment, redemption or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Senior Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Senior Notes previously authenticated hereunder which the Company has not issued and sold, and all Senior Notes so delivered shall be promptly canceled by the Trustee. No Senior Notes shall be authenticated in lieu of or in exchange for any Senior Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Senior Notes held by the Trustee shall be promptly returned to the Company. SECTION 3.11 Computation of Interest. Interest on the Senior Notes shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 3.12 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption or other related 38 material as a convenience to Holders; provided that any such notice or other related material may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption or other related material and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trust of any change in the "CUSIP" numbers. ARTICLE FOUR BOOK-ENTRY PROVISIONS FOR GLOBAL SENIOR NOTES SECTION 4.1 Applicability of Article. Each Global Senior Note shall be subject to this Article Four. SECTION 4.2 Book-Entry Provisions For Global Senior Note. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Senior Note held on their behalf by the Depositary or under the Global Senior Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Senior Note for all purposes whatsoever. Any Holder of the Global Senior Note shall, by acceptance of such Global Senior Note, agree that the transfers of beneficial interests in such Global Senior Note may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Global Senior Note shall be required to be reflected in a book-entry system. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or an agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Senior Note. (b) Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for individual Senior Notes represented thereby, a Global Senior Note representing all or a portion of the Senior Notes may not be transferred except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Interests of beneficial owners in the Global Senior Notes (each an "Interest") may be transferred to one beneficial owner or to another Agent Member or exchanged for definitive Senior Notes in accordance with the rules and procedures of the Depositary and the provisions of this Indenture. In addition, definitive Senior Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in 39 Global Senior Notes if (i) the Depositary for the Senior Notes notifies the Company that the Depositary is unwilling or unable to continue as Depositary for the Global Senior Notes or is no longer eligible to serve as Depositary pursuant to the terms of this Indenture and a successor Depositary is not appointed by the Company within 90 days after delivery of such notice; (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of definitive Senior Notes under this Indenture; or (iii) there shall have occurred and be continuing a Default or an Event of Default with respect to any Senior Notes represented by the Global Senior Notes; and the Trustee shall, upon receipt of a Company Order in accordance with Section 3.4, authenticate and make available for delivery, definitive Senior Notes in an aggregate principal amount equal to the principal amount of the Global Senior Notes in exchange for such Global Senior Notes. If specified by the Company pursuant to Section 3.4, the Depositary may surrender a Global Senior Note in exchange in whole or in part for Senior Notes of like tenor and terms and in definitive form on such terms as are acceptable to the Company, the Trustee and the Depositary. (c) In connection with the transfer of Global Senior Notes to beneficial owners pursuant to the third sentence of paragraph (b) of this Section, the Global Senior Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute and the Trustee upon receipt of a Company Order for the authentication and delivery of definitive Senior Notes shall authenticate and make available for delivery, without service charge: (i) to the Depositary or to each Person specified by such Depositary a new Senior Note or Senior Notes of like tenor and terms and of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Senior Note; and (ii) to such Depositary a new Global Senior Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the principal amount of the surrendered Global Senior Note and the aggregate principal amount of Senior Notes delivered to Holders thereof. Notwithstanding any other provision of this Indenture, any Senior Note authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, any Global Senior Note shall also be a Global Senior Note and shall bear the legend specified in Section 2.4 except for any Senior Note authenticated and delivered in exchange for, or upon registration of transfer of, a Global Senior Note pursuant to the preceding sentence. (d) The Holder of any Global Senior 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 Senior Notes. (e) Upon the exchange of a Global Senior Note in its entirety for Senior Notes in definitive form, such Global Senior Note shall be canceled by the Trustee. 40 (f) Notwithstanding anything herein to the contrary, if at any time the Depositary for the Senior Notes notifies the Company that it is unwilling or unable to continue as a Depositary for the Senior Notes or if at any time the Depositary for the Senior Notes shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation, the Company shall appoint a successor Depositary with respect to the Senior Notes. If a successor Depositary for the Senior Notes is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon Company Request, will authenticate and make available for delivery Senior Notes in definitive form in an aggregate principal amount equal to the principal amount of the Global Senior Note or Global Senior Notes representing Senior Notes in exchange for such Global Senior Note or Global Senior Notes. ARTICLE FIVE REMEDIES SECTION 5.1 Events of Default. An "Event of Default" as used herein is any one of the following: (a) failure by the Company to pay interest (including any Additional Interest) on any Senior Note when due and payable, if such failure continues for a period of 30 days; (b) failure by the Company to pay principal on any Senior Note when due and payable at Stated Maturity or upon redemption, acceleration or otherwise; (c) failure by the Company to comply with any other agreement or covenant contained in this Indenture (other than a default specified in clause (a) or (b) above) if such failure continues for a period of 30 days after notice to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Senior Notes then Outstanding; (d) Indebtedness of the Company or any Subsidiary of the Company is not paid within any applicable grace period after final maturity or in the event that final maturity is accelerated because of a default and, in either case, where the aggregate principal amount of such Indebtedness so unpaid or accelerated is equal to or greater than 5% of the Company's Consolidated Net Worth at the quarter end preceding the end of such grace period or such acceleration; (e) existence of one or more judgments against the Company or any of its Subsidiaries, which remain undischarged 60 days after all rights to directly review such judgment, whether by appeal or writ, have been exhausted or have expired, in excess, either individually or in the aggregate, of 5% of the Company's 41 Consolidated Net Worth as of the quarter end preceding the end of such 60-day period; or (f) a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or other similar official) shall take possession of the Company or any Significant Subsidiary or any substantial part of the property of the Company or any Significant Subsidiary without the consent of the Company or such Significant Subsidiary, respectively, or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or such Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, trustee, custodian, conservator, sequestrator (or other similar official) of the Company or the Significant Subsidiary or for any substantial part of the property of the Company or the Significant Subsidiary, or ordering the winding-up or liquidation of the affairs of the Company or the Subsidiary, and such decree or order shall continue unstayed and in effect for a period of 60 consecutive days, or the Company or the Significant Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, conservator, sequestrator (or other similar official) of the Company or the Significant Subsidiary or of any substantial part of the property of the Company or the Significant Subsidiary, or shall make any general assignment for the benefit of creditors, or shall take any corporate action in furtherance of any of the foregoing. SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in clause (f) of Section 5.1) occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Senior Notes may declare the principal amount of all of the Senior Notes to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount shall become immediately due and payable. If any Event of Default specified in clause (f) of Section 5.1 occurs, the principal amount of all of the Senior Notes shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after such a declaration of acceleration with respect to Senior Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Senior Notes, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: 42 (1) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue interest (including any Additional Interest) on all Senior Notes, (B) the principal of (and premium, if any, on) any Senior Notes which have become due otherwise than by such declaration of acceleration and any interest (including any Additional Interest) thereon at the rate or rates prescribed therefor in such Senior Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Senior Notes, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable, expenses, disbursements and advances of the Trustee's agents and counsel; and (2) all Events of Default with respect to Senior Notes, other than the non-payment of the principal of Senior Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any interest (including any Additional Interest) on any Senior Note when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Senior Note at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Senior Notes, the whole amount then due and payable on such Senior Notes for principal and any premium and interest (including any Additional Interest) and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest (including any Additional Interest), at the rate or rates prescribed therefor in such Senior Notes, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable expenses, disbursements and advances of the Trustee's agents and counsel. 43 If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may (or, at the direction of Holders of not less than 25% of the Outstanding Senior Notes shall), in addition to any other remedies available to it, institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Senior Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Senior Notes, wherever situated. If an Event of Default with respect to Senior Notes occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Senior Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 5.4 Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company (or any other obligor upon the Senior Notes), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official 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 the reasonable expenses, disbursements and advances of the Trustee's agents and counsel, and any other amounts due the Trustee under Section 6.7. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Senior 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 proceeding; provided, however, the Trustee may vote on behalf of the Holders for the election of a trustee in bankruptcy or similar official and may be a member of a creditors' or other similar committee. SECTION 5.5 Trustee May Enforce Claims Without Possession of Senior Notes. All rights of action and claims under this Indenture or the Senior Notes may be prosecuted and enforced by the Trustee without the possession of any of the Senior Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable expenses, disbursements and advances of the Trustee's agents and counsel, be for the ratable benefit of the Holders of the Senior Notes in respect of which such judgment has been recovered. SECTION 5.6 Application of Money Collected. 44 Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest (including any Additional Interest), upon presentation of the Senior Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 6.7; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest (including any Additional Interest) on the Senior Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Senior Notes for principal and any premium and interest (including any Additional Interest), respectively. SECTION 5.7 Limitation on Suits. No Holder of any Senior Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Senior Notes; (2) the Holders of not less than 25% in principal amount of the Outstanding Senior Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Senior Notes; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest. 45 Notwithstanding any other provision in this Indenture, the Holder of any Senior Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 3.8) any interest (including any Additional Interest) on such Senior Note on the Stated Maturity or maturities expressed in such Senior Note (or, in the case of redemption, on the Redemption Date), and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 5.9 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 such case, subject to any determination in such proceeding, the Company, 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. SECTION 5.10 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Senior Notes in the last paragraph of Section 3.7, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.11 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Senior Notes to exercise any right or remedy accruing upon any Default shall impair any such right or remedy or constitute a waiver of any such Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 5.12 Control by Holders. The Holders of a majority in principal amount of the Outstanding Senior Notes shall have the right to 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, with respect to the Senior Notes, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and 46 (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. SECTION 5.13 Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Senior Notes may on behalf of the Holders of all the Senior Notes waive any past default hereunder and its consequences, except a default: (1) in the payment of the principal of or any premium or interest (including any Additional Interest) on any Senior Note, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Senior Note affected. 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 thereon. SECTION 5.14 Undertaking for Costs. The parties to this Indenture agree, and each Holder of any Senior Notes by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Senior Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Senior Notes on or after the Stated Maturity or maturities expressed in such Senior Notes (or, in the case of redemption, on or after the Redemption Date). SECTION 5.15 Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 47 ARTICLE SIX THE TRUSTEE SECTION 6.1 Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. If an Event of Default occurs (and is not cured), the Trustee, in the exercise of its power, must use the degree of care of a prudent man in the conduct of his own affairs. Subject to the requirement in the foregoing sentence, the Trustee is under no obligation to exercise any of its rights or powers under this Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of this Indenture. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk of liability is not reasonably assured to it. Except during the continuance of an Event of Default, (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) 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. The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders or a majority in principal amount of the Outstanding Senior Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust power conferred upon the Trustee, under this Indenture. SECTION 6.2 Notice of Defaults. If a Default occurs and is continuing and is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to each Holder notice of the Default as to and to the extent provided in the Trust Indenture Act. Except in the case of a Default in the payment of principal of, premium, if any, or interest (including any Additional Interest) on any Senior Note, the Trustee may withhold notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee determines that withholding notice is in the interest of the Holders. SECTION 6.3 Certain Rights of Trustee. 48 Subject to the provisions of Section 6.1: (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligent action, negligent omission or its willful misconduct; and 49 (i) the Trustee shall not be charged with knowledge of any Event of Default under Section 5 (other than an Event of Default under Section 5.1(a) or (b) if the Trustee is also the Paying Agent with respect to the Senior Notes) hereof unless either (1) a Responsible Officer of the Trustee shall have actual knowledge thereof or (2) the Trustee shall have received notice thereof in accordance with Section 1.5 hereof from the Company or a Holder. SECTION 6.4 Not Responsible for Recitals or Issuance of Senior Notes. The recitals contained herein and in the Senior Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Senior Notes. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Senior Notes or the proceeds thereof. SECTION 6.5 May Hold Senior Notes. The Trustee, any Authenticating Agent, any Paying Agent, any Senior Note Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Senior Notes and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Senior Note Registrar or such other agent. SECTION 6.6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 6.7 Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee such compensation as from time to time agreed in writing with the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith or willful misconduct; (3) to indemnify each of the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any and all loss, liability, 50 damage, claim or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the 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; (4) to secure the Company's obligations under this Section, the Trustee shall have a lien prior to the Senior Notes upon all money or property held or collected by the Trustee in its capacity as Trustee, except for such money and property which is held in trust to pay principal (and premium, if any) or interest (including any Additional Interest) on particular Senior Notes; (5) when the Trustee incurs any expenses or renders any services after the occurrence of an Event of Default specified in Section 5.1(f), such expenses and the compensation for such services are intended to constitute expenses of administration under the Bankruptcy Code or any similar federal or state law for the relief of debtors; and (6) that the provisions of this Section 6.7 shall survive the termination of this Indenture or the appointment of a successor trustee. SECTION 6.8 Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 6.9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 6.10 Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.11. (b) The Trustee may resign at any time with respect to the Senior Notes by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the 51 Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Senior Notes. (c) The Trustee may be removed at any time with respect to the Senior Notes by Act of the Holders of a majority in principal amount of the Outstanding Senior Notes, delivered to the Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the Trustee being removed may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Senior Notes. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Senior Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to the Senior Notes, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Senior Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Senior Notes and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Senior Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide Holder 52 of a Senior Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Senior Notes in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.11 Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument in writing accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument in writing transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article. SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Senior Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Senior Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Senior Notes. 53 SECTION 6.13 Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Senior Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). SECTION 6.14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents (which may be an affiliate of the Company) with respect to the Senior Notes which shall be authorized to act on behalf of the Trustee to authenticate Senior Notes issued upon exchange, registration of transfer or partial redemption thereof (but not upon original issuance or pursuant to Section 3.7), and Senior Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Senior Notes by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Senior Notes with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Senior Note Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named 54 as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment is made pursuant to this Section, the Senior Notes may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: 55 This is one of the Senior Notes designated and referred to in the within mentioned Indenture. THE BANK OF NEW YORK, as Trustee By:_________________________________ As Authenticating Agent By:_________________________________ Authorized Signatory 56 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 7.1 Company to Furnish Trustee Names and Addresses of Holders; Trustee to Furnish Senior Note Register. (a) The Company will furnish or cause to be furnished to the Trustee: (i) semi-annually, not later than five Business Days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Senior Notes as of such Regular Record Date, and (ii) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Senior Note Registrar. (b) The Trustee shall furnish to the Company a copy of the list maintained as the Senior Note Register from time to time as requested by the Company in writing. 57 SECTION 7.2 Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Senior Note Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Senior Notes, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Senior Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 7.3 Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within sixty (60) days after each May 15 following the date of this Indenture deliver to Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). To the extent that any such report is required by the Trust Indenture Act with respect to any 12-month period, such report shall cover the 12-month period ending March 15 and shall be transmitted by the next succeeding May 15. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which any Senior Notes are listed, with the SEC and with the Company. The Company will promptly notify the Trustee when any Senior Notes are listed on any securities exchange. SECTION 7.4 Reports by Company. The Company shall file with the SEC and shall furnish to the Trustee and the Holders, within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall continue to file with the SEC and to provide to the Trustee and the Holders the annual reports and the information, documents and other reports which are specified in Section 13 or 15(d) of the Exchange Act and applicable to a US corporation subject to such sections, such information, documents and other reports to be filed and provided at the times specified for the filing of such information, documents and reports under such section. The 58 Company also shall comply with the other provisions of Section 314(a) of the Trust Indenture Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). 59 ARTICLE EIGHT AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 8.1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Senior Notes; (b) to provide for uncertificated Senior Notes in addition to or in place of certificated Senior Notes (provided, that such uncertificated Senior Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Senior Notes are described in Section 163(f)(2)(B) of the Code); (c) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company hereunder and under the Senior Notes; (d) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein or in the Senior Notes, or to make any other provisions with respect to matters or questions arising under this Indenture or under the Senior Notes that shall not be inconsistent with the provisions of this Indenture; provided that, in each case, such provisions shall not adversely affect the interests of the Holders; (e) to evidence, and provide for the acceptance of, the appointment of a successor Trustee hereunder; (f) to add any additional Events of Default; (g) to secure the Senior Notes or add a Guarantor; or (h) to comply with any requirement of the SEC or state securities regulators in connection with the qualification of this Indenture under the Trust Indenture Act or any registration or qualification of the Senior Notes under the Securities Act or state securities laws. SECTION 8.2 Supplemental Indentures with Consent of Holders. 60 (a) Except as otherwise provided in Section 8.2(b), with the written consent of the Holders of a majority in principal amount of the Outstanding Senior Notes, by Act of such Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating or waiving any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Senior Note affected thereby, (A) change the Stated Maturity of the principal of, or any installment of interest on, any Senior Note, or reduce the principal amount thereof, premium, if any, or the rate of interest (including any Additional Interest) thereon, or change the coin or currency in which the principal of any Senior Note or any premium or the interest (including any Additional Interest) thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity; (B) reduce the percentage in principal amount of the Outstanding Senior Notes the consent of whose Holders is required for any such amendment or modification, or the consent of whose Holders is required for any waiver (of compliance with the provisions of this Indenture or Defaults hereunder and their consequences) provided for in this Indenture; (C) modify any provision of Section 11.2 or the definitions used therein if the effect of such modification or waiver is to decrease the amount of any payment required to be made by the Company thereunder or extend the maturity date of such payment; (D) modify any of the provisions of this Section 8.2 or Section 5.13 relating to supplemental indentures requiring the consent of Holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Senior Note affected thereby; (E) except as otherwise permitted under the provisions of Article Ten, consent to the assignment or transfer by the Company of any of its rights and obligations under this Indenture; or (F) waive a default in payment with respect to the Senior Notes (other than a default in payment that is due solely because of the acceleration of the Maturity of the Senior Notes). 61 (b) It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act and such notice shall approve the substance thereof. SECTION 8.3 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article Eight or the modifications thereby of the trusts created by this Indenture, the Trustee shall receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 8.4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Senior Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby and entitled to the benefits thereof. SECTION 8.5 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Eight shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 8.6 Reference in Senior Notes to Supplemental Indentures. Senior Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article Eight may, and shall if required by the Trustee, bear a notation in form acceptable to the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Senior Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Senior Notes. SECTION 8.7 Notice of Supplemental Indenture. After an supplemental indenture hereunder becomes effective, the Company shall mail to Holders a notice briefly describing such supplemental indenture; provided, that the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the supplemental indenture. 62 ARTICLE NINE COVENANTS SECTION 9.1 Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any, on) and interest (including any Additional Interest) on the Senior Notes in accordance with the terms of the Senior Notes and this Indenture. The Senior Notes shall be included in the Same-Day Funds Settlement System or equivalent system of the Depositary until maturity to the extent such systems are available. Each Global Senior Note will be paid in accordance with the provisions of Section 4.2 hereof. SECTION 9.2 Maintenance of Office or Agency. The Company will maintain an office or agency in a Place of Payment where Senior Notes may be presented or surrendered for payment and where Senior Notes may be surrendered for registration of transfer or exchange. Initially, the Company hereby designates the Corporate Trust Office for all such purposes. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentations and surrenders. The Company may also from time to time designate one or more other offices or agencies where the Senior Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Senior Notes for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 9.3 Money for Senior Notes Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to the Senior Notes, it will, on or before each due date of the principal of or any premium or interest (including any Additional Interest) on any of the Senior Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest (including any Additional Interest) so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure to act. Whenever the Company shall have one or more Paying Agents for the Senior Notes, it will, prior to each due date of the principal of or any premium or interest (including any Additional Interest) on any Senior Notes, deposit with a Paying Agent, in immediately available funds, a sum sufficient to pay such amount, such sum to be held as provided by the Trust 63 Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section that such Paying Agent will: (1) hold all sums held by it for the payment of principal of (and premium, if any) or interest (including any Additional Interest) on Senior Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Senior Notes) in the making of any such payment of principal (and premium, if any) or interest (including any Additional Interest); and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium or interest (including any Additional Interest) on any Senior Note and remaining unclaimed for two years after such principal, premium or interest (including any Additional Interest) has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Senior Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. 64 SECTION 9.4 Statement by Officers as to Default. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate (one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company), stating whether or not to the best knowledge of the signers thereof the Company is, or was during the preceding year, in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be or shall have been in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) When any Default has occurred and is continuing under this Indenture, or if the trustee for or the holder of any other evidence of Indebtedness of the Company or any Subsidiary gives notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness in the principal amount of less than 5% of the Company's Consolidated Net Worth at the quarter end preceding the giving of such notice or taking of such action with respect to a claimed default), the Company shall deliver to the Trustee by registered or certified mail, or by facsimile transmission, confirmed by delivery of the original, an Officers' Certificate specifying such event, notice or other action within five Business Days of its occurrence. SECTION 9.5 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves (in the good faith judgment of the Board of Directors) have been made. SECTION 9.6 Maintenance of Properties. The Company will cause all properties owned by the Company or any Restricted Subsidiary or used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any Subsidiary from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of its Board of Directors, desirable in the conduct of its business or the business of the Company or such Subsidiary and not disadvantageous in any material respect to the Holders. 65 SECTION 9.7 Corporate Existence; Keeping of Books. Subject to Article Ten, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the existence, rights (charter and statutory) and franchises of the Company and its Subsidiaries; provided, however, that the existence of any Subsidiary and any such right or franchise of the Company or any Subsidiary may be terminated if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries and that the loss thereof is not and is not reasonably likely to be disadvantageous in any material respect to the Holders. The Company shall keep, and cause each Subsidiary to keep, proper books and records, in which full and correct entries shall be made of all financial transactions and the assets, liabilities and business of the Company and its Subsidiaries, in each case in accordance with GAAP. SECTION 9.8 Insurance. The Company will at all times maintain and will cause each of its Subsidiaries to maintain (either in the name of the Company or in such Subsidiary's own name) with financially sound and reputable insurers, insurance on all its properties in such amounts as management of the Company reasonably determines is appropriate under the circumstances. SECTION 9.9 Net Worth Maintenance. On the Issue Date, and at all times thereafter determined at the end of each fiscal quarter, the Company shall maintain Consolidated Net Worth equal to (i) $50.0 million plus (ii) a cumulative amount equal to twenty-five percent (25%) of the Consolidated Net Income (but not loss), if any, of the Company and its Subsidiaries for each fiscal quarter commencing with the quarter after the Issue Date. SECTION 9.10 Limitations on Indebtedness. (a) Except for the issuance of the Senior Notes, the Company shall not incur, directly or indirectly, any Indebtedness or issue any Disqualified Capital Stock; provided, however, that the Company may incur Indebtedness or issue Disqualified Capital Stock if, on the date of such incurrence or issuance and after giving effect thereto, (i) no Default or Event of Default has occurred and is continuing or would result therefrom and (ii) the Leverage Ratio does not exceed 2.0 to 1.0. (b) The Company will not create, incur, issue, assume, guarantee or otherwise in any manner become directly or indirectly liable for or with respect to, or otherwise permit to exist, any Junior Indebtedness or Pari Passu Indebtedness (other than Acquired Indebtedness) unless the Stated Maturity of principal (or any required repurchase, redemption, defeasance or sinking fund payments) of such Junior Indebtedness or Pari Passu Indebtedness is after the final Stated Maturity of principal of the Senior Notes. (c) The Company will not permit any Subsidiary to, directly or indirectly, incur any Indebtedness or issue any Disqualified Capital Stock. 66 (d) The Company shall not incur any Indebtedness which would be senior in right of payment to the Senior Notes. (e) The foregoing provisions shall not apply to: (1) Permitted Acquisition Indebtedness of the Company and its Subsidiaries; (2) Permitted Repurchase Facilities of the Company and its Subsidiaries; (3) Guarantees by the Company of (1) and (2); (4) Intercompany Indebtedness owed by the Company to any of its Subsidiaries or owed by any Subsidiary to the Company; (5) Incurrence by the Company of its obligations under the Senior Notes; (6) Non-Recourse Indebtedness of the Company and its Subsidiaries; (7) Securities issued in a securitization by a Securitization Entity formed by or on behalf of the Company or its Subsidiaries, regardless of whether such securities are treated as indebtedness for tax purposes, provided that neither the Company nor any Subsidiary (other than the Securitization Entity formed solely for the purpose of such securitization) is directly or indirectly liable as a guarantor or otherwise (excluding the provision of Credit Support) for such securities or obligations of the Securitization Entity; (8) Unsecured working capital loans to Subsidiaries, not to exceed $5.0 million in the aggregate, provided, however, that such Indebtedness shall be considered to be Indebtedness of the Company for the purpose of the Leverage Ratio; (9) Acquired Indebtedness of Subsidiaries, provided, however, that such Acquired Indebtedness shall be considered to be Indebtedness of the Company for the purpose of the Leverage Ratio; (10) Indebtedness secured by Permitted Liens; or (11) Hedging Obligations directly related to: (i) Indebtedness permitted to be incurred by the Company or its Subsidiaries pursuant to this Indenture; (ii) loans held by the Company or its Subsidiaries pending sale; or (iii) loans with respect to which the Company or any Subsidiary has an outstanding purchase offer or commitment, financing commitment or security interest. (f) For purposes of determining compliance with the foregoing covenant: (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in good faith, will classify such item of Indebtedness and be required to include the amount and type of such Indebtedness in one of the above clauses; and (ii) an item of Indebtedness may be 67 divided and classified in more than one of the types of Indebtedness described above. SECTION 9.11 Limitation on Issuances and Sales of Capital Stock Subsidiaries. Except pursuant to existing agreements, options or option plans, the Company (a) will not permit any Subsidiary to issue or sell any shares of its Capital Stock(other than to the Company or a Wholly Owned Subsidiary) and (b) will not permit any Person to own any shares of Capital Stock of any Subsidiary. SECTION 9.12 Liquidity Maintenance. The Company shall, at all times when the Senior Notes are not rated in an investment grade category by one or more nationally recognized statistical rating organizations, maintain Liquid Assets with a value equal to at least 100% of the required interest (including Additional Interest) payments due on the Senior Notes on the next succeeding semi-annual Interest Payment Date. Liquid Assets of a Subsidiary may be included in such calculation only to the extent that such Liquid Assets may at such time be distributed to the Company without restriction or notice to any Person. Such Liquid Assets shall not be the subject of any pledge, Lien, encumbrance or charge of any kind and shall not be used as collateral or security for Indebtedness for borrowed money or otherwise of the Company or its Subsidiaries nor may such Liquid Assets be used as reserves for any self-insurance maintained by the Company. SECTION 9.13 Limitations on Restricted Payments. The Company will not, and will not permit any Subsidiary to, directly or indirectly, make any Restricted Payment if, at the time of such Restricted Payment or after giving effect thereto, (a) a Default or Event of Default shall have occurred and be continuing; or (b) the Company would fail to maintain sufficient Liquid Assets to comply with the terms of the covenant set forth in Section 9.12 hereof; or (c) the aggregate amount of all Restricted Payments (the amount of such payments, if other than in cash, having been determined in good faith by the relevant Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution filed with the Trustee) declared and made after the Issue Date would exceed the sum of; (i) 25% of the aggregate Consolidated Net Income (or, if such Consolidated Net Income is a deficit, 100% of such deficit) of the Company accrued on a cumulative basis during the period beginning on the first day of the fiscal quarter during which the Issue Date occurred and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment; plus (ii) the aggregate Net Cash Proceeds received by the Company as capital contributions (other than from a Subsidiary) after the Issue Date; plus 68 (iii) the aggregate Net Cash Proceeds and the Fair Market Value of property not constituting Net Cash Proceeds received by the Company from the issuance or sale (other than to a Subsidiary) of Qualified Capital Stock after the issue date of the Senior Notes; plus (iv) 100% of the amount of any Indebtedness of the Company or a Subsidiary that is issued after the issue date of the Senior Notes that is thereafter converted into or exchanged for Qualified Capital Stock of the Company; or (d) the Unsecured Debt Coverage Ratio for the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such Restricted Payment is less than 2.00 to 1.00, determined after giving effect to such Restricted Payment; provided, however, that the foregoing provisions will not prevent (y) the payment of a dividend within 60 days after the date of its declaration if at the date of declaration such payment was permitted by the foregoing provisions or (z) any Permitted Payment. SECTION 9.14 Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Subsidiaries (other than a Securitization Entity) to, create, assume or otherwise cause or suffer to exist or to become effective any consensual encumbrance or restriction on the ability of any such Subsidiary to (a) pay any dividends or make any other distribution on its Capital Stock; (b) make payments in respect of any Indebtedness owed to the Company or any other Subsidiary; or (c) make loans or advances to the Company or any Subsidiary or to guarantee Indebtedness of the Company or any other Subsidiary; other than, in the case of (a), (b) and (c), (1) restrictions imposed by Applicable Law; (2) restrictions existing under agreements in effect on the date of this Indenture; (3) consensual encumbrances or restrictions binding upon any Person at the time such Person becomes a Subsidiary of the Company so long as such encumbrances or restrictions are not created, incurred or assumed in contemplation of such Person becoming a Subsidiary; (4) restrictions with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the assets (which term may include the Capital Stock) of such Subsidiary; 69 (5) restrictions on the transfer of assets which are subject to Liens; (6) restrictions existing under agreements evidencing Permitted Acquisition Indebtedness or Permitted Repurchase Facilities of any Subsidiary if such Indebtedness (i) is made without recourse to, and with no cross-collateralization (which shall not include Guarantees), against the assets of, the Company or any other Subsidiary, and (ii) upon complete or partial liquidation of which the Indebtedness must be correspondingly repaid in whole or in part, as the case may be; and (7) restrictions existing under any agreement that renews, extends, increases, refinances or replaces any of the agreements containing the restrictions in clauses (2), (3) and (6); provided that the terms and conditions of any such restrictions (except for changes in interest rates related to changes in market rates) are not less favorable to the Holders than those under the agreement evidencing or relating to the Indebtedness renewed, extended, increased, refinanced or replaced. SECTION 9.15 Limitations on Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (except that the Company and any of its Subsidiaries may enter into any transaction or series of related transactions with any Subsidiary of the Company without limitation under this covenant) unless: (i) such transactions or series of related transactions is on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than would be available in a comparable transaction in an arm's length dealing with a Person that is not such an Affiliate or, in the absence of such a comparable transaction, on terms that the relevant Board of Directors determines in good faith would be offered to a Person that is not an Affiliate; (ii) with respect to any transaction or series of related transactions involving aggregate payments in excess of $250,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or series of transactions complies with clause (i) above and has been approved by a majority of the Disinterested Directors of the relevant Board of Directors of the Company or such Subsidiary, as the case may be; and (iii) with respect to any transaction or series of related transaction involving aggregate payments in excess of $1,000,000, or in the event that no members of the Board of Directors are Disinterested Directors with respect to any transaction or series of transactions included in clause (ii), (x) in the case of a transaction involving real property, the aggregate rental or sale price of such real property shall be the fair market sale or rental value of such real property as determined in a written opinion by a nationally recognized expert with experience in appraising the terms and conditions of the type of transaction or series of transactions for which approval is required and (y) in all other cases, the Company delivers to the Trustee a written opinion of a nationally recognized expert with experience in appraising the terms and conditions of the type of transaction or series of transactions for which approval is required to the effect that the transaction or series of transactions are fair to the Company or such Subsidiary from a financial point of view. The limitations set forth in this paragraph will not apply to (i) transactions entered into pursuant to any agreement already in effect on the Issue Date and any renewals or extensions thereof not involving modifications materially adverse to the Company or any Subsidiary, (ii) normal banking relationships with an Affiliate on an arms' 70 length basis, (iii) any employment agreement, stock option, employee benefit, indemnification, compensation, business expense reimbursement or other employment-related agreement, arrangement or plan entered into by the Company or any of its Subsidiaries which agreement, arrangement or plan was adopted by the Board of Directors of the Company or such Subsidiary (including a majority of the Disinterested Directors), as the case may be, (iv) any Restricted Payment or Permitted Payment, (v) any transaction or series of transactions in which the total amount involved does not exceed $125,000, or (vi) services rendered and obligations incurred by the Company or any of its Subsidiaries pursuant to existing agreements or agreements between the Company and/or any of its Subsidiaries. SECTION 9.16 Limitations on Liens and Guarantees. The Company will not create, assume, incur or suffer to exist any Lien (other than a Permitted Lien) upon any of the Company's assets (including the Capital Stock of any Subsidiary) as security for Indebtedness, without effectively providing that the Senior Notes will be equally and ratably secured with (or prior to) such Indebtedness. In addition, the Company will not permit any Subsidiary of the Company, directly or indirectly, to guarantee or assume, or subject any of its assets to a Lien (other than a Permitted Lien) to secure, any Pari Passu Indebtedness or Junior Indebtedness unless (i) such Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a guarantee of, or pledge of assets to secure, the Senior Notes by such Subsidiary on terms at least as favorable to the Holders of the Senior Notes as such guarantee or security interest in such assets is to the holders of such Pari Passu Indebtedness or Junior Indebtedness, except that in the event of a guarantee or security interest in such assets with respect to (x) Pari Passu Indebtedness, the guarantee or security interest in such assets under the supplemental indenture shall be made pari passu to the guarantee or security interest in such assets with respect to such Pari Passu Indebtedness or (y) Junior Indebtedness, any such guarantee or security interest in such assets with respect to such Junior Indebtedness shall be subordinated to such Subsidiary's guarantee or security interest in such assets with respect to the Senior Notes to the same extent as such Junior Indebtedness is subordinated to the Senior Notes and (ii) such Subsidiary waives and will not in any manner whatsoever claim, or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Subsidiary of the Company as a result of any payment by such Subsidiary under its guarantees. SECTION 9.17 Offer to Purchase upon a Change of Control Event. (a) Upon the occurrence of a Change of Control Event, the Company will offer to repurchase (the "Change of Control Purchase Offer") all Senior Notes from the Holders, and each Holder will have the right to require that the Company repurchase such Holder's Senior Notes, at a purchase price in cash equal to 101% of the principal amount thereof (the "Change of Control Purchase Price") plus accrued and unpaid interest (including any Additional Interest), if any, to the Change of Control Purchase Date (subject to the right of Holders on the relevant Regular Record Date to receive interest (including any Additional Interest) due on an Interest Payment Date occurring prior to such Change of Control Purchase Date), in accordance with the provisions of this Section 9.17. 71 (b) Within 30 days following any Change of Control Event, the Company shall mail a notice to each Holder with a copy to the Trustee (a "Change of Control Purchase Notice") stating: (i) that a Change of Control Event has occurred and that such Holder has the right to require the Company to purchase such Holder's Senior Notes at a Change of Control Purchase Price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest (including any Additional Interest), if any, to the Change of Control Purchase Date (subject to the right of Holders on the relevant Regular Record Date to receive interest (including any Additional Interest) on an Interest Payment Date occurring prior to the Change of Control Purchase Date); (ii) the circumstances and relevant facts regarding such Change of Control Event (including, in the case of any merger, consolidation or sale of all or substantially all assets, information with respect to pro forma results of operations, cash flow and capitalization after giving effect to such Change of Control Event); (iii) the Change of Control Purchase Date (which shall be no earlier than 30 days nor later than 60 days from the date such Change of Control Purchase Notice is mailed); (iv) that, unless the Company defaults in making such payment, any Senior Note accepted for payment pursuant to the Change of Control Purchase Offer shall cease to accrue interest (including any Additional Interest) after the Change of Control Purchase Date; (v) that Holders electing to have a Senior Note purchased pursuant to any Change of Control Purchase Offer shall be required to surrender the Senior Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice, at least three Business Days before the Change of Control Purchase Date; and (vi) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the last Business Day prior to the Change of Control Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Senior Note (and identification number) the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Senior Note purchased. (c) Holders electing to have a Senior Note purchased will be required to surrender the Senior Note, with the form entitled "Option of Holder to Elect Purchase" duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Change of Control Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later 72 than one Business Day prior to the Change of Control Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Senior Note (and identification number) which was delivered by the Holder for purchase by the Company and a statement that such Holder is withdrawing his election to have such Senior Note purchased. (d) On the Change of Control Purchase Date, all Senior Notes purchased by the Company in a Change of Control Purchase Offer shall be delivered to the Trustee for cancellation, and the Company shall pay the Change of Control Purchase Price plus accrued and unpaid interest (including any Additional Interest), if any, to the Holders entitled thereto. (e) On or before the Change of Control Purchase Date, the Company will deliver to the Trustee an Officers' Certificate stating that the Senior Notes purchased in the Change of Control Purchase Offer are accepted for payment by the Company in accordance with the terms of this Section. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Change of Control Purchase Date) pay to each tendering Holder an amount equal to the Change of Control Purchase Price of the Senior Notes tendered by such Holder plus interest (including any Additional Interest) accrued thereon (subject to the right of Holders on the relevant Regular Record Date to receive interest (including any Additional Interest) due on the relevant Interest Payment Date). The Company will publicly announce the results of the Change of Control Purchase Offer on the Change of Control Purchase Date. (f) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other applicable securities laws or regulations in connection with the repurchase of Senior Notes pursuant to this Section 9.17. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 9.17, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 9.17 by virtue thereof. SECTION 9.18 Payments for Consent. The Company shall not, and shall not 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 as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Senior Notes unless such consideration is paid to all Holders that provide such consent or so waive or agree to amend. SECTION 9.19 Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 9.5 to 9.16, inclusive, with respect to the Senior Notes if before the time of compliance the Holders of a majority in principal amount of the Outstanding Senior Notes shall, by act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such 73 waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE TEN MERGER, CONSOLIDATION AND TRANSFER OF ASSETS SECTION 10.1 Merger, Consolidation or Transfer of Assets of the Company. The Company shall not consolidate with or merge with or into, or sell, assign, convey, transfer, lease or otherwise dispose of, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America or any state thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the Company's obligations under the Senior Notes and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction, the Successor Company would be able to incur an additional $1.00 of Indebtedness without violating Section 9.10(a) hereof; and (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer, sale, assignment, conveyance, lease or other disposition and such supplemental indenture (if any) comply with this Indenture and all conditions precedent provided for herein relating to such transaction have been complied with. SECTION 10.2 Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any sale, assignment, conveyance, transfer, lease or other disposition of the properties and assets of the Company substantially as an entirety in accordance with Section 10.1, the Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Successor Company herein, and in the event of any such sale, assignment, conveyance, transfer or other disposition, the Company (which term shall for this purpose mean the Successor Company), except in the case of a lease, shall be discharged of all obligations and covenants under this Indenture and the Senior Notes and may be dissolved and liquidated. SECTION 10.3 Senior Notes to Be Secured in Certain Events. If, upon any such consolidation of the Company with or merger of the Company into any other corporation, or upon any sale, assignment, conveyance, transfer, lease or other disposition of the property of the Company substantially as an entirety to any other Person, any property or assets of the Company would thereupon become subject to any Lien to secure Pari Passu Indebtedness or Junior Indebtedness, then unless such Lien could be created pursuant to Section 9.16 without equally and ratably securing the Senior Notes, the Company, prior to or 74 simultaneously with such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition, will, as to such property or assets, secure the Senior Notes Outstanding (together with, if the Company shall so determine, any other Indebtedness of the Company now existing or hereinafter created which is not subordinate in right of payment to the Senior Notes) equally and ratably with the Pari Passu Indebtedness or prior to the Junior Indebtedness which upon such consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition is to become secured as to such property or assets by such Lien. 75 ARTICLE ELEVEN REDEMPTION OF SENIOR NOTES SECTION 11.1 Applicability of Article. Any redemption of Senior Notes before their Stated Maturity shall be in accordance with their terms and in accordance with this Article. SECTION 11.2 Optional Redemption. The Senior Notes will not be redeemable prior to August 1, 2002, except as provided on the reverse of the Form of Senior Note set forth in Section 2.3. SECTION 11.3 Election to Redeem; Selection by Trustee of Senior Notes to Be Redeemed. Any election to redeem Senior Notes shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Senior Notes, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Senior Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Senior Notes to be redeemed pursuant to this Section 11.3. If less than all the Senior Notes are to be redeemed, the particular Senior Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Senior Notes not previously called for redemption, by such method as the Trustee in its sole discretion shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Senior Notes or any integral multiple thereof) of the principal amount of Senior Notes of a denomination larger than the minimum authorized denomination for Senior Notes. The Trustee shall promptly notify the Company in writing of the Senior Notes selected for redemption and, in the case of any Senior Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Senior Notes shall relate, in the case of any Senior Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Senior Notes which has been or is to be redeemed. SECTION 11.4 Notice of Redemption. 76 Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Senior Notes to be redeemed, at his address appearing in the Senior Note Register. All notices of redemption shall identify the Senior Notes to be Redeemed (including CUSIP numbers) and shall state: (1) the Redemption Date, (2) the Redemption Price and accrued interest (including Additional Interest), if any, (3) if less than all the Outstanding Senior Notes are to be redeemed, the identification (and, in the case of partial redemption of any Senior Notes, the principal amounts) of the particular Senior Notes to be redeemed, (4) that on the Redemption Date the Redemption Price and accrued interest (including Additional Interest), if any, will become due and payable upon each such Senior Note to be redeemed and, if applicable, that interest (including Additional Interest) thereon will cease to accrue on and after said date, and (5) the place or places where such Senior Notes are to be surrendered for payment of the Redemption Price and accrued interest (including Additional Interest), if any. Notice of redemption of Senior Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. SECTION 11.5 Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 9.3) an amount of money in immediately available funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest (including Additional Interest) on, all the Senior Notes which are to be redeemed on that date. SECTION 11.6 Senior Notes Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Senior Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest, including any Additional Interest) such Senior Notes shall cease to bear interest. Upon surrender of any such Senior Note for redemption in accordance with said notice, such Senior Note shall be paid by the Company at the Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that installments of interest whose stated maturity is on or prior to the 77 Redemption Date shall be payable to the Holders of such Senior Notes, or one or more Predecessor Senior Notes, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 3.8. If any Senior Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, subject to Section 1.13 hereof, until paid, bear interest (including any Additional Interest) from the Redemption Date at the rate prescribed therefor in the Senior Note. SECTION 11.7 Senior Notes Redeemed in Part. Any Senior Note which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Senior Note without service charge, a new Senior Note or Senior Notes of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Senior Note so surrendered. ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE SECTION 12.1 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a Board Resolution, at any time, elect to have either Section 12.2 or 12.3 be applied to all Outstanding Senior Notes upon compliance with the conditions set forth below in this Article. SECTION 12.2 Legal Defeasance and Discharge. Upon the Company's exercise under Section 12.1 hereof of the option applicable to this Section 12.2, the Company shall, subject to the satisfaction of the conditions set forth in Section 12.4, be deemed to have been discharged from its obligations with respect to all Outstanding Senior Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the Outstanding Senior Notes, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 12.5 and the other Sections of this Indenture referred to in (a) and (b) below, and the Company shall be deemed to have satisfied all its other obligations under the Senior Notes and this Indenture (and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Outstanding Senior Notes to receive solely from the trust fund described in Section 12.4, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest (including any Additional Interest) on such Senior Notes as and when such payments are due, (b) 78 the Company's obligations with respect to such Senior Notes under Sections 3.5, 3.6, 3.7, 9.2, 9.3 and 9.5, (c) the rights, powers, trusts, duties and immunities of the Trustee and any Authenticating Agent hereunder and the Company's obligations in connection therewith and (d) this Article. Subject to compliance with this Article, the Company may exercise its option under this Section 12.2 notwithstanding the prior exercise of its option under Section 12.3. SECTION 12.3 Covenant Defeasance. Upon the Company's exercise under Section 12.1 of the option applicable to this Section 12.3, the Company shall, subject to the satisfaction of the conditions set forth in Section 12.4, be released from its obligations under the covenants contained in Article Nine (except Sections 9.1, 9.2, 9.5 and 9.7) with respect to the Outstanding Senior Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Notes shall thereafter be deemed not Outstanding for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed Outstanding for all other purposes hereunder (it being understood that such Senior Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the Outstanding Senior Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 5.1, but, except as specified above, the remainder of this Indenture and such Senior Notes shall be unaffected thereby. SECTION 12.4 Conditions to Legal or Covenant Defeasance. The following shall be the conditions precedent to the effectiveness of any Legal Defeasance or Covenant Defeasance: (a) the Company shall (i) irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, unencumbered cash in United States dollars, unencumbered U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in a written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee, to pay the principal of, premium, if any, and interest (including any Additional Interest) on the outstanding Senior Notes on the stated date for payment thereof or on the applicable Redemption Date, as the case may be, and the Company must specify whether the Senior Notes are being defeased to maturity or to a particular Redemption Date, and (ii) irrevocably instruct the Trustee to apply such cash and U.S. Government Obligations to such payments with respect to the Senior Notes; (b) in the case of an election under Section 12.2, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the 79 Outstanding Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to 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; (c) in the case of an election under Section 12.3 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States confirming that the Holders of the Outstanding Senior Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance has not occurred; (d) no Default or Event of Default shall have occurred and be continuing (i) on the date of such deposit (other than a Default or Event of Default resulting from the Incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Senior Notes pursuant to this Article concurrently with such Incurrence) and (ii) insofar as Section 5.1(f) hereof is concerned, at any time during the period ending on the 91st day after the date of deposit (such condition not being satisfied until such 91st day) ; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 12.5 Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 12.6, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 12.4 in respect of the Outstanding Senior Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of the Senior Notes and this Indenture, to the payment, either directly or through any Paying Agent (excluding the Company acting as Paying Agent) as the Trustee may 80 determine, to the Holders of such Senior Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest (including any Additional Interest), but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 12.4 or the principal and interest received in respect thereof. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the written request of the Company any money or U.S. Government Obligations held by it as provided in Section 12.4 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 12.4), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 12.6 Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or U.S. Government Obligations in accordance with Section 12.2 or 12.3, as the case may be, by reason of any order or judgment of any court or Governmental Authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Senior Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.2 or 12.3 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 12.2 or 12.3, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest (including any Additional Interest) on any Senior Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Senior Notes to receive such payment from the money held by the Trustee or Paying Agent. 81 ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.1. No Recourse Against Others. A director, officer, employee, stockholder or incorporator, as such, of the Company shall not have any liability for any obligations of the Company under the Senior Notes 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 Senior Note waives and releases all such liability. SECTION 13.2. Execution in Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. * * * * * 82 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. RESOURCE AMERICA, INC. By:_______________________________ Name:_____________________________ Title:____________________________ THE BANK OF NEW YORK, as Trustee By:_______________________________ Name:_____________________________ Title:____________________________ 83 EX-10.C 6 EXHIBIT 10(C) SENIOR NOTES REGISTRATION RIGHTS AGREEMENT Dated as of July 22, 1997 among RESOURCE AMERICA, INC. and FRIEDMAN, BILLINGS, RAMSEY & CO., INC. REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into this 22nd day of July, 1997, between Resource America, Inc., a Delaware corporation (the "Company") and Friedman, Billings, Ramsey & Co., Inc. (the "Initial Purchaser,"). This Agreement is made pursuant to the Purchase Agreement, dated as of July 22, 1997, between the Company and the Initial Purchaser (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchaser of $115 million aggregate principal amount of 12% Senior Notes due 2004 (the "Notes"). In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchaser and its direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in or pursuant to the Purchase Agreement or the Offering Memorandum dated July 16, 1997, in respect of the Notes, as applicable. All references to Sections herein are to Sections of this Agreement unless otherwise indicated. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Closing Time" shall mean the Closing Time as defined in the Purchase Agreement. "Commission" shall mean the Securities and Exchange Commission. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Exchange Notes" shall mean the 12% Notes, issued by the Company containing terms identical to the Notes in all material respects (except that (i) interest thereon shall accrue from the last interest payment date on which interest was paid on the Notes or, if no interest has been paid, from the date of original issue of the Notes, (ii) the transfer restrictions on the Notes shall be modified or eliminated, as appropriate, and (iii) certain provisions relating to an increase in the stated rate of interest of the Notes shall be eliminated), to be offered to Holders of the Notes in exchange for the Notes pursuant to the Exchange Offer. 2 "Exchange Offer" shall mean the exchange offer by the Company of Exchange Notes for Registrable Notes pursuant to Section 2.1. hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Failure to Register" shall have the meaning set forth in Section 3 hereof. "Holders" shall mean the Initial Purchaser, for so long as it owns any Registrable Notes, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Notes. "Indenture" shall mean the Indenture dated as of July 22, 1997 between the Company and The Bank of New York, a New York banking corporation, as trustee, as the same may be amended from time to time in accordance with the terms thereof, providing for the issuance of the Notes. "Initial Purchaser" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Notes; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Notes covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Senior Note/Registrable Notes" shall mean one or more of the Notes subject to the Indenture; provided, however, that a Senior Note shall cease to be a Registrable Senior Note when (i) a Registration Statement with respect to such Senior Note shall have been declared effective under the Securities Act and such Notes shall have been transferred pursuant to such Registration Statement, (ii) such Senior Note shall have been sold pursuant to Rule 144 (or any similar provision then in force, but not Rule 3 144A) under the Securities Act, or shall be saleable pursuant to paragraph (k) of Rule 144 (or any similar provision then in effect) or pursuant to an opinion of counsel that a transfer may be effected without compliance with the Securities Act under circumstances which will result in the Senior Note being freely tradeable by the purchaser provided such purchaser is not an affiliate of the Company, (iii) such Note shall have ceased to be outstanding or (iv) such Note shall have been exchanged for an Exchange Note upon the consummation of the Exchange Offer. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and the reasonable fees of its counsel) that is required to be retained by any Holder of Registrable Notes in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Notes or Registrable Notes), (iii) all expenses of any Persons engaged by the Company to prepare or assist in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Notes on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees of counsel to the underwriters or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Notes by a Holder, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, and (viii) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, and the expenses of any such Holder's counsel relating to the sale or disposition of Registrable Notes by a Holder. "Registration Statement" shall mean any registration statement of the Company which covers any of the Exchange Notes or Registrable Notes pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Rule 144" shall mean Rule 144 under the 1933 Act, or any successor rule. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. 4 "Shelf Registration" shall mean a registration effected pursuant to Section 2.2 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Notes required to be registered on an appropriate form for purposes of an offering on a continuous basis pursuant to Rule 415, under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Trustee" shall mean the trustee with respect to the Notes under the Indenture. 2. Registration Under the 1933 Act. 2.1 Exchange Offer. (a) The Company shall (i) prepare and, not later than December 30, 1997, file with the Commission an Exchange Offer Registration Statement under the Securities Act with respect to a proposed offer (the "Exchange Offer") to the Holders to issue and deliver to such Holders, in exchange for the Registrable Notes, a like principal amount of Exchange Notes, (ii) use its best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or prior to February 16, 1998, (iii) use its best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer, subject to its use by Participating Broker-Dealers (as defined below) as contemplated in Section 3(f) below, and (iv) use its best efforts to cause the Exchange Offer to be consummated not later than March 30, 1998. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company, within the meaning of Rule 405 under the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Notes and, if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such Exchange Notes) and to trade such Exchange Notes from and after each such Holder's receipt of the Exchange Notes without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. 5 (b) In connection with the Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Exchange Offer open for not less than 30 calendar days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) use the services of the Depositary for the Exchange Offer; (iv) permit Holders to withdraw tendered Registrable Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open, by sending to the institution specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Notes delivered for exchange, and a statement that such Holder is withdrawing his election to have such Notes exchanged; and (v) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. (c) As soon as practicable after the close of the Exchange Offer, the Company shall: (i) accept for exchange all Registrable Notes duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which is an exhibit thereto; (ii) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver Exchange Notes to each Holder of Registrable Notes equal in principal amount to the Registrable Notes of such Holder so accepted for exchange. Interest on each of the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Registrable Notes surrendered in exchange therefor or, if no interest has been paid on the Registrable Notes, from the date of original issue of the Registrable Notes. The Exchange Offer shall not be subject to any conditions, other than that (i) the Exchange Offer, or the making of any exchange by a Holder, does not violate applicable law or 6 any applicable interpretation of the staff of the Commission, (ii) no action or proceeding shall have been instituted or threatened in any court by or before any governmental agency with respect to the Exchange Offer which, in the Company's judgment, might impair the ability of the Company to proceed with the Exchange Offer, or (iii) there shall not have been adopted or enacted any law, statute, rule or regulation which, in the Company's judgment, would materially impair the ability of the Company to proceed with the Exchange Offer. Each Holder of Registrable Notes (other than Participating Broker-Dealers (as defined below)) who wishes to exchange such Registrable Notes for Exchange Notes will be required to represent that (i) it is not an affiliate of the Company, (ii) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (iii) it has no arrangement with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes, and (iv) it is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of the Exchange Notes. The Company shall inform the Initial Purchaser of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchaser shall have the right, subject to applicable law and at its expense, to contact such Holders and otherwise facilitate the tender of Registrable Notes in the Exchange Offer. 2.2 Shelf Registration. (a) (i) If, because of any change in law or applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof or if for any other reason the Exchange Offer Registration Statement is not declared effective on or prior to February 16, 1998, (ii) if for any other reason the Exchange Offer is not consummated on or prior to March 30, 1998, or (iii) upon the request of the Initial Purchaser (with respect to any Registrable Notes which it acquired directly from the Company) following consummation of the Exchange Offer if such Initial Purchaser shall hold Registrable Notes which it acquired directly from the Company and if such Initial Purchaser is not permitted, in the opinion of counsel to such Initial Purchaser, pursuant to applicable law or applicable interpretation of the staff of the Commission, to participate in the Exchange Offer, the Company shall, at the Company's cost, subject to Section 2.3 hereof, (A) as promptly as practicable, file with the Commission, and thereafter shall use its best efforts to cause to be declared effective on or prior to March 30, 1998 (or promptly in the event of a request by the Initial Purchaser), a Shelf Registration Statement relating to the offer and sale of the Registrable Notes by the Holders from time to time in accordance with the methods of distribution selected by the Majority Holders and set forth in such Shelf Registration Statement. In the event that a Shelf Registration Statement is required to be filed upon the request of the Initial Purchaser pursuant to clause (iii) above, the Company shall file and use its best efforts to have declared effective by the Commission both an Exchange Offer Registration Statement pursuant to Section 2.1 hereof with respect to all Registrable Notes and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of 7 Registrable Notes held by such Initial Purchaser after completion of the Exchange Offer; (B) use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming a part thereof to be usable by Holders identified as selling security holders in such Shelf Registration Statement for a period of two years from the date the Shelf Registration Statement is declared effective by the Commission or until such earlier date as all Registrable Notes shall have been disposed of or on which all Registrable Notes shall be saleable without registration pursuant to Rule 144 (or any similar provision then in effect), or as a result of any changes in the existing registration requirements under the Securities Act which eliminate the Holders' need for the Shelf Registration Statement, or upon receipt of an opinion of counsel satisfactory to the Initial Purchaser which provides that all Registrable Notes may be resold without registration in a transaction that would result in the Registrable Notes being freely tradeable provided that the purchaser is not an affiliate of the Company (the "Effectiveness Period"); and (C) notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming a part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that the Company shall be entitled to rely on the information provided to them by the Holders with respect to such Holders. (b) The Company further agrees, if necessary, to supplement or amend the Shelf Registration Statement if reasonably requested by the Majority Holders with respect to information relating to the Holders and otherwise as required by Section 3(b) hereof, to use their best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable and to furnish to the Holders of Registrable Notes copies of any such supplement or amendment promptly after its being used or filed with the Commission. 8 2.3 Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2 and, in the case of any Shelf Registration Statement, will reimburse the Holders or Initial Purchaser for the reasonable fees and disbursements of one firm or counsel designated in writing by the Majority Holders to act as counsel for the Holders of the Notes in connection therewith, and, in the case of an Exchange Offer Registration Statement, will reimburse the Initial Purchaser, as applicable, for the reasonable fees and disbursements of one firm or counsel in connection therewith (however, the reimbursement of such fees and disbursements on behalf of the Holders or the Initial Purchaser shall not exceed an amount to be agreed upon by the Company and the Initial Purchaser prior to the filing of any such Registration Statement). Each Holder shall pay all expenses of its counsel, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Notes pursuant to the Shelf Registration Statement. 2.4. Effectiveness. (a) The Company will be deemed not to have used its best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if it voluntarily takes any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Notes covered thereby not being able to exchange or offer and sell such Registrable Notes during the period unless (i) such action is required by applicable law or (ii) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company complies with the requirements of Section 3(b) hereof, if applicable, as promptly as practicable. (b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the Commission; provided, however, that if, after a Shelf Registration Statement has been declared effective, the offering of Registrable Notes pursuant to such Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Shelf Registration Statement will be deemed not to be effective during the period of such interference, until the offering of Registrable Notes pursuant to such Shelf Registration Statement may legally resume. 2.5. Additional Interest. In the event that either (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to December 30, 1997, (ii) the Exchange Offer Registration Statement is not declared effective on or prior to February 16, 1998, or (iii) the Exchange Offer is not consummated on or prior to March 30, 1998 or a Shelf Registration Statement is not declared effective on or prior to March 30, 1998 (each a "Registration Default") additional interest (the "Registration Penalty") will accrue on the Notes from and including the day following such Registration Default. The Registration Penalty will be paid semi-annually in arrears, with the first semi-annual payment due on the first interest or distribution payment date, 9 as applicable, following the date on which such Registration Penalty begins to accrue. The Registration Penalty shall be equal to one-half of one percent (0.50%) per annum following December 30, 1997 in the case of (i) above, February 16, 1998 in the case of clause (ii) above or March 30, 1998 in the case of (iii) above, which rate will be increased by an additional one-half of one percent (0.50%) per annum for each 90-day period that any such additional interest continues to accrue; provided, that the aggregate increase in the Note interest rate will in no event exceed one percent per annum (1.0%). Upon (x) the filing of the Exchange Offer Registration Statement after December 30, 1997, (y) the effectiveness of the Exchange Offer Registration Statement after February 16, 1998, or (z) the day before the date of the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after March 30, 1998, the interest rate borne by the Notes from the date of such filing, effectiveness or the day before the date of the consummation, as the case may be, will be reduced by the full amount of the Registration Penalty; provided, however, that, if after any such reduction in interest rate, a different event specified in clause (i), (ii) or (iii) above occurs, the interest rate may again be increased by the applicable Registration Penalty and thereafter reduced pursuant to the foregoing provisions. At no time will a Registration Penalty in excess of one percent (1.00%) be payable pursuant to the provisions of this Registration Rights Agreement. 2.6 Specific Enforcement. Without limiting the remedies available to the Initial Purchaser and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2.1 and Section 2.2 hereof may result in material irreparable injury to the Initial Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2.1 and Section 2.2 hereof. 3. Registration Procedures. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company shall: (a) prepare and file with the Commission a Registration Statement, within the time period specified in Section 2, on the appropriate form under the Securities Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Notes by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement and such supplements to the Prospectus as may be necessary under applicable law; and comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Notes or Exchange Notes, as applicable, covered by each Registration 10 Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) in the case of a Shelf Registration, (i) notify each Holder of the Registrable Notes, at least five days prior to filing, that a Shelf Registration Statement with respect to the Registrable Notes is being filed and advise such Holders that the distribution of the Registrable Notes will be made in accordance with the method selected by the Holders of a majority in aggregate principal amount of the Registrable Notes being registered; and (ii) furnish to each Holder of the Registrable Notes, to counsel for the Initial Purchaser, to one firm or counsel for the Holders and to each underwriter of an underwritten offering of the Registrable Notes, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits (including those incorporated by reference) in order to facilitate the public sale or other disposition of the Registrable Notes; and (iii) subject to the penultimate paragraph of Section 3, hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of the Registrable Notes in connection with the offering and sale of the Registrable Notes covered by the Prospectus or any amendment or supplement thereto; (d) use its best efforts to register or qualify the Registrable Notes or Exchange Notes, as applicable, under all applicable state securities or "blue sky" laws of such jurisdiction as any Holder (or Participating Broker-Dealer with respect to Exchange Notes) of the Registrable Notes or Exchange Notes, as applicable, covered by a Registration Statement and each underwriter of an underwritten offering of the Registrable Notes shall reasonably request by the time the applicable Registration Statement is declared effective by the Commission, to cooperate with the Holders in connection with any filings required to be made with the NASD, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Notes owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d) or (ii) take any action which would subject it, its board of directors or its officers to general service of process or taxation in any such jurisdiction where it or they are not then so subject; (e) in the case of a Shelf Registration, notify each Holder of the Registrable Notes and counsel for the Initial Purchaser promptly and, if requested by such Holder or counsel, confirm such advice in writing promptly (i) when a Shelf Registration Statement has become effective, (ii) of any request by the Commission or any state securities authority for post-effective amendments and supplements to a Shelf Registration Statement and Prospectus or for additional information after the Shelf Registration Statement has become effective, (iii) of 11 the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Shelf Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Shelf Registration Statement and the closing of any sale of Registrable Notes covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering of the Registrable Notes cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Shelf Registration Statement or the Prospectus untrue in any material respect or which requires the making of any changes in such Shelf Registration Statement or Prospectus in order to make the statements therein not misleading, (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of any determination by the Company that a post-effective amendment to a Shelf Registration Statement would be appropriate; (f) (i) in the case of the Exchange Offer (A) include in the Exchange Offer Registration Statement a "Plan of Distribution" section covering the use of the Prospectus included in the Exchange Offer Registration Statement by broker-dealers who have exchanged their Registrable Notes for Exchange Notes for the resale of such Exchange Notes, (B) furnish to each broker-dealer who desires to participate in the Exchange Offer, without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such broker-dealer may reasonably request, (C) include in the Exchange Offer Registration Statement a statement that any broker-dealer who holds Registrable Notes acquired for its own account as a result of market-making activities or other trading activities (a "Participating Broker-Dealer"), and who receives Exchange Notes for Registrable Notes pursuant to the Exchange Offer, may be a statutory underwriter and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, (D) subject to the penultimate paragraph of Section 3, hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Participating Broker-Dealer in connection with the sale or transfer of the Exchange Notes covered by the Prospectus or any amendment or supplement thereto, and (E) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Registrable Notes, the undersigned represents that the Registrable Notes were acquired by it as a result of market-making or other trading activities and acknowledges that 12 it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act;" and (y) a statement to the effect that by a Participating Broker-Dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Notes, the Participating Broker-Dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act; and (ii) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its best efforts to cause to be delivered at the request of an entity representing the Participating Broker-Dealers (which entity shall be the Initial Purchaser, unless it elects not to act as such representative) only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last date on which exchanges will be accepted and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (D) below; and (iii) to the extent any Participating Broker-Dealer participates in the Exchange Offer, the Company shall use its best efforts to maintain the effectiveness of the Exchange Offer Registration Statement for a period of 180 days following the closing of the Exchange Offer; and (iv) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(b) hereof or take any other action as a result of this Section 3(f), during the period commencing 180 days after the last date for which exchanges are accepted pursuant to the Exchange Offer (as such period may be extended by the Company) and Participating Broker-Dealers shall not be authorized by the Company and shall not deliver such Prospectus after such period in connection with resales contemplated by this Section 3; and (v) (A) in the case of an Exchange Offer, furnish counsel for the Initial Purchaser and (B) in the case of a Shelf Registration, furnish one firm or counsel for the Holders of the Registrable Notes, copies of any request by the Commission or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; and 13 (vi) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order. (g) in the case of a Shelf Registration, furnish to each Holder of the Registrable Notes, and each underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of the Registrable Notes to facilitate the timely preparation and delivery of certificates representing the Registrable Notes to be sold and not bearing any restrictive legends; and enable such Registrable Notes to be in such denominations (consistent with the provisions of the Indenture), and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of the Registrable Notes; (i) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Section 3(e)(ii)-(vii) hereof, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence or discovery of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, the Company agrees promptly to notify each Holder of such determination, to amend or supplement the Prospectus if necessary to correct any untrue statement or omission therein and to furnish each Holder such numbers of copies of the Prospectus, as amended or supplemented, as such Holder may reasonably request; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, (a) provide copies of such document to the Initial Purchaser, on behalf of such Holders, and their counsel and (b) make representatives of the Company (as shall be reasonably requested by the Majority Holders of the Registrable Securities, or the Initial Purchaser on behalf of such 14 Holders), available for discussion of such document and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchaser, on behalf of such Holders, and its counsel shall not have previously been advised and furnished a copy or to which the Initial Purchaser, on behalf of such Holders, or its counsel shall reasonably object; (k) obtain a CUSIP number for all Exchange Notes or Registrable Notes, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the Exchange Notes or the Registrable Notes, as the case may be, in a form eligible for deposit with the Depositary; (l) (i) cause the Indenture to be qualified under the Trust Indenture Act of 1939 (the "TIA") in connection with the registration of the Notes, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions (including those reasonably requested by the Majority Holders) in order to expedite or facilitate the disposition of such Registrable Notes and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations and warranties to the Holders of such Registrable Notes and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by such underwriters; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in aggregate principal amount of the Registrable Notes being sold), addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; 15 (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and use its best efforts to have such letters addressed to the selling Holders of the Registrable Notes, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of the Registrable Notes, which agreement shall be in form, substance and scope customary for similar offerings; (v) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section; and (vi) deliver such documents and certificates as are customarily delivered in similar offerings and as may be reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes being sold and the managing underwriters, if any. The above shall be done at (i) the effectiveness of such Shelf Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder. In the case of any underwritten offering, the Company shall provide written notice to the Holders of all of the Registrable Notes of such underwritten offering at least 30 days prior to the filing of a Prospectus supplement for such underwritten offering. Such notice shall (x) offer each such Holder the right to participate in such underwritten offering, (y) specify a date, which shall be no earlier than 10 days following the date of such notice, by which the Holder must inform the Company of its intent to participate in such underwritten offering and (z) include the instructions such Holder must follow in order to participate in such underwritten offering; (n) in the case of a Shelf Registration Statement, upon the execution of a confidentiality agreement reasonably requested by the Company, in accordance with such procedural conditions as the Company shall reasonably impose, make available for inspection by representatives of the Holders of the Registrable Notes and any underwriters participating in any disposition pursuant to a Shelf Registration Statement and any one firm or counsel or accountant retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the officers, directors, employees and any other agents of the Company to supply all information reasonably requested by any such 16 representative, underwriter, special counsel or accountant in connection with a Registration Statement; (o) (i) a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to a Prospectus, provide copies of such document to the Initial Purchaser and make such changes in any such document prior to the filing thereof as the Initial Purchaser may reasonably request; and (ii) in the case of a Shelf Registration Statement, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such documents to the Holders of the Registrable Notes, to the Initial Purchaser, to one firm or counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of the Registrable Notes, if any, make such changes in any such document prior to the filing thereof as counsel for the Company and counsel for the Majority Holders and the underwriter or underwriters may reasonably agree and make representatives of the Company (as shall be reasonably requested by the Majority Holders of the Registrable Securities, or the Initial Purchaser on behalf of such Holders or any underwriter), available for discussion of such document; provided that any party receiving any document pursuant to this clause (ii) who does not raise any objections to the filing of such document within five calendar days after receipt of such document shall be deemed to have no objection to the filing of such document; (p) in the case of a Shelf Registration Statement, use its best efforts to cause all of the Registrable Notes to be listed on any securities exchange on which similar securities issued by the Company are then listed if so requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Notes, if any; (q) in the case of a Shelf Registration Statement, use its best efforts to cause the Registrable Notes to be rated with the appropriate rating agencies if so requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Securities, if any; (r) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and (s) cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration Statement, in the performance of any due diligence investigation by any underwriter and its counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD). In the case of a Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of the Registrable Notes to 17 furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Notes as the Company may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Notes pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Notes that was current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of the Registrable Notes pursuant to a Shelf Registration Statement as a result of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii)-(vii) hereof, the Company shall be deemed to have used its best efforts to keep the Shelf Registration Statement effective during such period of suspension provided that the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Shelf Registration Statement. 4. Underwritten Registrations. If any of the Registrable Notes covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Majority Holders and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 5. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless the Initial Purchaser, each participating Holder, each Participating Broker-Dealer, each other person who participates in an offering of the Registrable Notes, including underwriters (as defined in the Securities Act and referred to herein as "Underwriters"), and each person, if any, who controls any participating Holder, Initial Purchaser or any other participating person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each of the foregoing being an "Indemnitee"), as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any 18 amendment thereto) pursuant to which Exchange Notes or Registrable Notes were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including fees and disbursements of one firm or counsel chosen by the Indemnitees, provided that. notwithstanding Section 5(c), notice is promptly provided by any party seeking reimbursement), reasonably incurred in investigating, preparing or defending against any litigation or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser, any Holder or any Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) In the case of a Shelf Registration Statement, each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Initial Purchaser, each Underwriter and the other selling Holders, and each of their respective "controlling persons" (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the directors of the Company and each of the Company's officers who signed the Shelf Registration Statement against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable 19 for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of such Holder's Registrable Notes pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have on account of this indemnity agreement except as provided in Section 5(a)(iii). An indemnifying party may participate at its own expense in the defense of such action. If it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the indemnified parties defendant in such action, unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. (d) In order to provide for just and equitable contribution in circumstances under which the indemnity provided for in this Section 5 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company, the Holders and the Initial Purchaser shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity incurred by the Company, the Holders and the Initial Purchaser; provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. As between the Company, the Holders and the Initial Purchaser, such parties shall contribute to the aggregate losses, liabilities, claims, damages and expense of the nature contemplated by such indemnity agreement in such proportions as shall be appropriate to reflect (i) the relative benefits received by the Company on the one hand, the Holders on another hand and the Initial Purchaser on another hand, from the offering of the Exchange Notes or Registrable Notes included in such offering, and (ii) the relative fault of the Company on the one hand, the Holders on another hand and the Initial Purchaser on another hand, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations. The Company, the Holders and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 5 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the relevant equitable considerations. For purposes of this Section 5, each Person, if any, who controls the Initial Purchaser or a Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to 20 contribution as the Initial Purchaser or such Holder, and each trustee of director of the Company, each officer of the Company who signed the Registration Statement, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. The parties hereto agree that any underwriting discount or commission or reimbursement of fees paid to Initial Purchaser pursuant to the Purchase Agreement shall not be deemed to be a benefit received by Initial Purchaser in connection with the offering of the Exchange Notes or Registrable Notes included in such offering. 6. Miscellaneous. 6.1 Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the Exchange Act, the Company covenants that it will file any reports required to be filed by it under Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the Commission thereunder, and that if it ceases to be so required to file such reports it will upon the request of any Holder of the Registrable Notes (a) make publicly available such information, if any, as is necessary to permit sales pursuant to Rule 144 under the Securities Act), provided all of the other applicable provisions of Rule 144 can be met by the Holder, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the Securities Act, if sales can otherwise be made under Rule 144A, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by, but only to the extent such exemptions apply, (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the Commission. Upon the request of any Holder of the Registrable Notes, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 6.2 No Inconsistent Agreements. The Company has not entered into, and will not after the date of this Agreement enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or which otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the or the Company's other issued and outstanding securities under any such agreements. 6.3 Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Notes affected by such amendment, modification, supplement, waiver or departure has been obtained by the Company; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Notes unless consented to in writing by such Holder. 6.4 Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, 21 or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6.4, which address initially is, with respect to Initial Purchaser, the address set forth in the Purchase Agreement; and (b) if to the Company, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6.4. All such notices and communications shall be deemed to have been duly given; at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture, at the address specified in such Indenture. 6.5 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Notes in violation of the terms of the Purchase Agreement. If any transferee of any Holder shall acquire Registrable Notes, in any manner, whether by operation of law or otherwise, such Registrable Notes shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Notes such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. 6.6 Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights. 6.7 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 6.8 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 6.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. 6.10 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the 22 validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. RESOURCE AMERICA, INC. By: _________________________________________ Name: ______________________________________ Title: ______________________________________ CONFIRMED AND ACCEPTED, As of the date first above written: FRIEDMAN, BILLINGS, RAMSEY & CO., INC. By: _____________________________________ Name: _____________________________________ Title:_____________________________________ 24 EX-23 7 CONSENT OF GRANT THORNTON LLP Exhibit 23(a) CONSENT OF GRANT THORNTON LLP We have issued our report dated October 25, 1996 accompanying the consolidated financial statements of Resource America, Inc. and subsidiaries appearing in the Annual Report on Form 10-K for the year ended September 30, 1996 which are incorporated by reference in this Registration Statement. We consent to the incorporation by reference in the Registration Statement of the aforementioned reports and to the use of our name as it appears under the caption "Experts." /s/ Grant Thornton LLP -------------------------- GRANT THORNTON LLP Cleveland, Ohio November 14, 1997 -----END PRIVACY-ENHANCED MESSAGE-----