Document:

ex1060.htm

Exhibit 10.61

 

CONSULTING AGREEMENT

 

 

THIS CONSULTING AGREEMENT (this “Agreement”) is made and entered into as of the 28th day of July, 2010 (the “Effective Date”) by and between ACG CONSULTING, LLC, a Delaware limited liability company, (the “Consultant”) and NORTH BAY RESOURCES, INC., a Delaware corporation (the “Client”) (Client and Consultant collectively the “Parties”).

 

RECITALS

 

A. Consultant is a limited liability company organized for the purposes, inter alia, of developing and providing economic research and consultation services to the public. Consultant possesses specialized expertise (the “Consultant’s Specialized Expertise”) in the employment based EB‐5 visa program administered by the United States Citizenship and Immigration Services (“USCIS”) under the Immigration Act of 1990, as amended (the “EB‐5 Program”). CONSULTANT (i) IS NOT A BROKER/DEALER, (ii) DOES NOT RAISE CAPITAL, AND (iii) DOES NOT PROVIDE LEGAL SERVICES OR LEGAL ADVICE.

 

B. Client is a for profit corporation organized for the purposes, inter alia, of acquiring, developing, and exploiting natural resource properties with extensive reserves of precious metals, including gold, silver, platinum, and palladium, as well as base metals, including copper, zinc, lead, molybdenum, etc. in the United States of America (the “U.S.”) and Canada. Client possesses specialized expertise (the “Client’s Specialized Expertise”) in evaluating, acquiring, developing, and exploiting natural resource properties. Client is desirous acquiring and operating the Ruby Mine located in Sierra County, California. The Ruby Mine is a placer drift mine, which features a system of gold‐bearing Tertiary channels that have produced desirable coarse jewelry gold and impressive specimen nuggets since the 1800's and is considered to be the largest channel mines of modern times (the “Proposed Project”).

 

C. Client wishes to engage Consultant to provide certain consulting services, advice, and assistance in obtaining EB‐5 Financing in the amount of SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,500,000.00) for the Proposed Project under the EB‐5 Program from foreign nationals via subscription of foreign nationals to securities (“Securities”) which will be offered and sold only to persons who are not citizens of the U.S. and who are physically located outside the U.S. in reliance upon Regulation S (“Regulation S”) under the Securities Act of 1933, as amended (the “Securities Act”).

 

D. Client wishes to obtain approval of USCIS for the designation of a regional center under the EB‐5 Program that would include as its geographical area the following counties within the state of California: Amador; Butte; Calaveras; El Dorado; Mariposa, Nevada; Placer; Sacramento; Sierra; Tuolumne; Plumas; and Yuba through which regional center Client proposes to obtain EB‐5 Financing to facilitate the development and operation of the Proposed Project (the “Regional Center”). Client further wishes to seek preapproval of the Proposed Project from USCIS upon obtaining approval by USCIS of the Regional Center.

 

E. Consultant is desirous of providing such consulting services, advice, and assistance to Client in accordance with the terms and conditions set forth in this Agreement.

 

  

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NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be bound legally, do hereby covenant and agree as follows:

 

1. Defined Words and Phrases. Defined words and phrases are in italics the first time they appear and when they are defined. Except as otherwise specified, definitions are contained in Section 20 hereof.

 

2. Consulting Services. With the full cooperation of Client and to the extent Consultant deems necessary, appropriate, and/or feasible, in Consultant’s sole discretion, Consultant agrees to familiarize itself with the business, operations, properties, financial condition, and prospects of obtaining EB‐5 Financing for the Proposed Project.

Consultant agrees to provide the following consulting services, advice, and assistance (the “Consulting Services”) to Client:

 

2.1 Advice, Counsel and Assistance. Consultant agrees to provide advice, counsel, and assistance to Client that is directed toward the goal of obtaining EB‐5 Financing for the Proposed Project under the EB‐5 Program. Such advice, counsel, and assistance, in cooperation with Client, includes, inter alia, the following:

 

2.1.1 the filing of an application with USCIS for the creation of the Regional Center under the EB‐5 Program through a to‐be‐formed special purpose entity ”, which will be owned Forty Nine percent (49%) by Client and Fifty One percent (51%) by Consultant. It being understood and agreed that the Regional Center, when approved by USCIS, will serve as a legal vehicle through which Client can solicit investments from foreign nationals under the EB‐5 Program in reliance upon Regulation S to provide EB‐5 Financing for the Proposed Project;

 

2.1.2 upon obtaining approval of the Regional Center by USCIS, the filing by Consultant, on behalf of Client, of a written request seeking USCIS’s preapproval of the Proposed Project and its recognition that the Proposed Project can reasonably be expected to create ten full‐time direct, indirect, and/or induced jobs within a “reasonable time” period for each investment made by each foreign investor in compliance with the EB‐5 Program;

 

2.1.3 on behalf of Client, retaining the services of legal professionals and economists relative to the inclusion of the Proposed Project in the filing of the application for approval of the Regional Center and the pre‐approval of the Proposed Project under the EB‐5 Program;

 

2.1.4 on behalf of Client, retaining and engaging the services of securities attorneys for the preparation of the requisite private placement memoranda and exhibits thereto so that the Securities may be offered to foreign nationals outside the United States under the EB‐5 Program;

 

2.1.5 on behalf of Client, obtaining all econometric impact studies and reports and legal documents that will be included in Consultant’s application for USCIS’ approval of the Regional Center as they relate to the Proposed Project;

 

  

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2.1.6 making commercially reasonable efforts to assist Client in the introduction to, and engagement of, foreign immigration brokers, finders, and legal professionals through the Regional Center to raise capital for the Proposed Project via subscription of foreign nationals to the Securities under the Securities Act and the EB‐5 Program; and

 

2.1.7 assisting with the execution of a marketing strategy plan and a comprehensive budget directed toward Client’s successful solicitation of purchasers of the Securities by foreign nationals physically located outside the United States.

 

2.2 Confidential Private Placement Memoranda. Upon obtaining approval of the Regional Center by USCIS, Consultant on behalf of Client and at Client’s request, will cause to be prepared, various complete EB‐5 compliant confidential private placement memoranda (the “Memoranda” and each a “Memorandum”), in order to offer and sell Securities through the Regional Center only to non‐U.S. persons in reliance upon Regulation S, directed toward raising investment capital under the EB‐5 Program from foreign nationals outside the United States through foreign immigration brokers, finders, and legal professionals under the EB‐5 Program. Each Memorandum will describe Client’s Proposed Project, its operations, properties, financial condition, and prospects of the development of Proposed Project.

 

With respect to any Memorandum prepared pursuant to this Agreement, the Parties acknowledge and agree as follows:

 

2.2.1 each Memorandum, in so far as it describes the Proposed Project and Client, shall be based entirely upon information supplied by Client, and Client hereby warrants and represents that the information supplied by Client, or pertaining to Client, shall be complete and accurate in all material respects, shall not be misleading, and shall not violate the anti‐fraud provisions of the Securities Act;

 

2.2.2 from time to time, Client agrees to furnish Consultant with such additional information about Client and the Proposed Project, its operations, business and financial condition such that the information about Client contained in the Memorandum shall at all times continue to be complete and accurate in all material respects, shall not be misleading, and shall not violate the anti‐fraud provisions of the Securities Act;

 

2.2.3 Consultant under any circumstance shall not be deemed to have been responsible for the accuracy and/or the completeness of any Memorandum in so far as it describes the Proposed Project and/or Client; and

 

2.2.4 any Memorandum, when completed, shall not be used, reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose without the prior written consent of Consultant;

 

2.3 Marketing Budget: Consultant and Client agree as follows regarding the marketing services to be provided by Consultant:

 

  

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2.3.1 the Parties hereby approve the initial marketing budget (the “Initial Marketing Budget”) set forth in Exhibit A attached hereto and incorporated herein by reference. The Parties further acknowledge that the Initial Marketing Budget represents the agreement of the Parties with respect to the amount of its funding and the items for which the funds will be expended. Client agrees to fund the Initial Marketing Budget in an amount of not less than ONE HUNDRED TEN THOUSAND AND NO/100 DOLLARS ($110,000.00), which funding amount shall become due and payable in increments as follows: (i) a first payment in the amount of FORTY THOUSAND AND NO/100 DOLLARS ($40,000.00) shall become due and payable upon the occurrence of any successful raise of EB‐5 Financing; (ii) a second payment in the amount of FORTY THOUSAND AND NO/100 DOLLARS ($40,000.00) shall become due and payable within thirty (30) days from the date on which the first payment is due to be paid; and (iii) a third payment in the amount of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00) shall become due and payable within sixty (60) days from the date on which the first payment is due to be paid. The Initial Marketing Budget may be revised from time to time by written agreement of the Parties in the event the Initial Marketing Budget proves to be insufficient to pay the costs and expenses of the preparation of the Memoranda and the marketing of the Securities; and

 

2.3.2 the Parties acknowledge and agree (i) that the Securities will be offered and sold only to non‐U.S. persons who are physically located outside the United States, and (ii) not to commit any act that would place in jeopardy the reliance upon Regulation S or would otherwise violate the laws of the United States or any other relevant foreign jurisdiction when marketing the Securities.

 

2.4 Due Diligence. Consultant may, but shall not be required to, undertake due diligence with respect to the proposed financial and business transactions involving Client and the Proposed Project, including investigation and advice relating to the EB‐5 Program or other financial programs for the benefit of Client.

 

2.5 Additional Services. Consultant may provide such further and additional services as are necessary to fulfill its engagement as may be mutually agreed upon in writing by the Parties.

 

2.6 Commercially Reasonable Efforts. Consultant represents and warrants that it will devote such time and commercially reasonable efforts as may be reasonably necessary to perform the services of Consultant under this Agreement. CLIENT EXPRESSLY ACKNOWLEDGES AND AGREES THAT CONSULTANT DOES NOT IN ANY MANNER WHATSOEVER GUARANTEE A POSITIVE RESULT CONCERNING (i) THE APPROVAL OF THE HEREIN CONTEMPLATED APPLICATION TO BE DESIGNATED AS A REGIONAL CENTER BY USCIS UNDER THE EB‐5 PROGRAM; (ii) THE INVESTMENT BY FOREIGN NATIONALS OF CAPITAL INTO THE PROPOSED PROJECT UNDER THE EB‐5 PROGRAM, AND (iii) THE SUCCESSFUL CONSUMMATION OF ANY RAISE OF CAPITAL THROUGH THE SALE OF THE SECURITIES UNDER THE EB‐5 PROGRAM.

 

2.7 Limitation of Services.

 

2.7.1 It is expressly acknowledged that Consultant has not agreed with Client, in this Agreement or in any other agreement, verbal or written, to offer or sell any security, or be a market‐maker or securities dealer in the offering of any security.

2.7.2 Any Compensation paid to Consultant under this Agreement is not, and

 

  

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shall not be construed as, compensation for the offer or sale of any security or for the purpose of making a market or acting as a dealer with respect to any offering of a security, or for the submission of an application to offer or make a market in any security.

 

2.7.3 Notwithstanding anything contained herein to the contrary, nothing hereunder shall obligate Consultant to make any minimum number of introductions of foreign immigration brokers, finders, and legal professionals to Client.

2.8 Exclusive Right to Provide Consulting Services. Client hereby grants to Consultant the exclusive right to provide the Consulting Services to Client for the Proposed Project, thereby enabling Consultant to receive the benefit of its bargain under this Agreement, subject only to Client, through the Regional Center, achieving the milestones of success in obtaining EB‐5 funds from the sale of the Securities as set forth in Exhibit B attached hereto and incorporated herein by reference.

If at any time during the Term of this Agreement, Client pursues any EB‐5 funding for any project that is similar to the business of the Proposed Project, Consultant shall have the exclusive right, but not the obligation, to provide similar consulting services to Client for reasonable compensation under similar terms and conditions set forth in this Agreement for the Proposed Project. In the event Client chooses to pursue any EB‐5 funding for any project that is similar to the business of the Proposed Project, Client shall immediately give Consultant written notice of such action, whereupon Consultant shall have ten (10) Business Days in which to give Client written notice that Consultant is either (i) exercising its exclusive right to provide similar consulting services to Client for reasonable compensation under similar terms and conditions set forth in this Agreement for the Proposed Project, or (ii) declining to exercise its rights to provide similar consulting services to Client for reasonable compensation under similar terms and conditions set forth in this Agreement for the Proposed Project.

3. Term. The term of this Agreement shall be for ten (10) years commencing on the Effective Date hereof and terminating at twelve o’clock midnight on the day and date which is one day prior to the tenth (10th) anniversary hereof. Thereafter, this Agreement may be renewed for subsequent terms upon the written agreement of the Parties.

4. Reimbursement and Compensation. As a material consideration for Consultant to incur the obligations of Consultant under this Agreement and as a material inducement for Consultant to execute and perform its obligations under this Agreement, Client hereby agrees to compensate and reimburse Consultant as follows:

4.1 Reimbursement for Initial Expenses. Upon Consultant filing an application with USCIS seeking such agency’s approval of the Regional Center, Client shall promptly reimburse Consultant for the initial expenses (the “Initial Expenses”) incurred by Consultant on behalf of Client in obtaining the USCIS required econometric impact studies, reports and legal documents relating only to the Proposed Project, including the preparation of the initial Memoranda. The total amount of such reimbursements of the Initial Expenses referenced in this Section 4.1; Section 2.1.3; Section 2.1.4; and Section 2.1.5 of this Agreement shall not exceed the sum of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) in aggregate and shall be reimbursed upon Consultant filing an application with USCIS seeking such agency’s approval of the Regional Center or in the alternative Client may execute and deliver to Consultant, under terms and conditions acceptable to Consultant, in its sole discretion, a convertible debenture (the “Debenture”) in favor of Consultant in the principal amount of FIFTY THOUSAND AND

 

  

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NO/100 DOLLARS ($50,000.00). The Debenture shall bear interest at the rate of Eight Percent (8%) and shall be applied to the principal amount of the Debenture. ACG shall have the right at its election from the date upon which the application is filed with USCIS for approval of the Regional Center and thereafter at any time to convert all or part of the outstanding and unpaid Cash Portion of the Compensation and accrued interest into shares of fully paid and non‐assessable shares of common stock of NBR (as such stock exists on the date of issuance of the Debenture, or any shares of capital stock of NBR into which such stock is hereafter changed or reclassified as common stock) (the “Common Stock”) as per the following conversion formula: The number of shares issued through conversion is equal to the conversion amount of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) divided by the prevailing market price on the date of conversion. As of the Effective Date of this Agreement and for the remaining period during which the conversion right exists, NBR shall reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of the Debenture. NBR represents that upon issuance, such shares will be duly and validly issued, fully paid and non‐assessable. NBR agrees that the Debenture will, at issuance, constitute full authority of its officers, agents and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of the Debenture.

 

The Parties agree that upon Consultant filing an application with USCIS seeking such agency’s approval of the Regional Center said reimbursement of the Initial Expenses shall be deemed to be due and payable to Consultant under any circumstance. If for any reason, or no reason, Client fails to pay, or cause to reimburse Consultant the for the Initial Expenses when due as aforesaid, then Client shall immediately assign, convey and set over unto Consultant all its ownership interest in the SPE referenced in Section 2.1.1 hereof.

 

4.2 Equity Portion of the Consideration. Upon the successful completion of any raise, or a combination of raises, of capital resulting from the sale of Securities made through the Regional Center for providing EB‐5 Financing for the Proposed Project in the aggregate amount of SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,500,000.00) (the “Raised Funds”), Client shall promptly assign to Consultant a forty percent (40%) ownership interest in the equity of the Proposed Project remaining after deducting any amount of equity in the Proposed Project that has been assigned to any third party equity provider prior to any successful raise of the EB‐5 Financing, if any, provided however, in the event the entire SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,500,000.00) in EB‐5 Financing is raised then in no event shall Consultant’s equity ownership interest in the Proposed Project be reduced to a percentage that is less than Forty Percent (40%) of the entire equity ownership of the Proposed Project (the “Consultant’s Equity Interest”) . In the event the Raised Funds are obtained by Client in tranches, then upon the successful completion of any such tranche, Client shall promptly assign to Consultant an ownership interest in the equity of Proposed Project in the same proportion (ratio) as the amount of the tranche is to the Raised Funds (the “Consultant’s Pro‐Rata Equity”).

 

The mathematical computation of Consultant’s Pro‐Rata Equity shall be calculated by multiplying the amount of Consultant’s Equity Interest by a fraction, the numerator of which is the dollar amount of the tranche and the denominator of which is the Raised Funds. The Parties agree that under any circumstance Consultant’s Equity Interest shall not exceed Forty Percent (40%) ownership interest in the equity of the Proposed Project and shall not be less than Forty Percent (40%) ownership interest in the equity of the Proposed Project if and when the Raised Funds are actually delivered to, or made available to, the Owner Entity.

 

  

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Upon the successful completion of any raise of capital resulting from the sale of Securities made through the Regional Center for funding of the Proposed Project, Client shall promptly assign, set over, and convey to Consultant, or its assignee(s), Consultant’s Equity Interest if the entire amount of the Raised Funds are obtained by Client and if Client obtains any portion of the Raised Funds in tranches, then Client shall promptly assign, set over, and convey to Consultant or its assignee(s) Consultant’s Pro‐Rata Equity.

 

The Parties expressly acknowledge and agree that upon the assignment of Consultant’s Equity Interest or Consultant’s Pro‐Rata Equity that Consultant shall be entitled to receive a percentage of all Net Income derived from the Proposed Project in the same proportional amounts as its then existing ownership in the equity of the Proposed Project. Further, Consultant will be responsible for a like proportion of all losses of the Proposed Project; provided, however, that under no circumstance shall any member, manager, partner, or investor of, or in, Consultant be required to personally guarantee the payment of any debt of the Proposed Project.

 

4.3Compensation the Result of Negotiations. The Parties expressly acknowledge and agree that Consultant’s Equity Interest and Consultant’s Pro‐Rata Equity are the results of vigorous negotiations between the Parties and (i) are strictly based upon the quality and extent of the consulting services provided by Consultant to Client, and (ii) a reasonable and an acceptable method of estimating the value of Consultant’s services to be provided under the this Agreement.

 

5. Representations and Warranties of Client. Client hereby represents and warrants that any information supplied, or to be supplied from time to time, to Consultant pursuant to this Agreement in connection with any services to be performed hereunder by Consultant on behalf of Client shall be true, complete and correct as of the date of such dissemination and shall not fail to state a material fact which will result in such information being misleading. Client represents and warrants that it shall constantly update all information provided to Consultant to ensure that all information possessed by Consultant is true, correct, and current. Client represents and warrants that it fully understands that in order for the foreign EB‐5 investors to be able to count the indirect and induced jobs created by the investment into the Proposed Project, that the geographical location of the Proposed Project is required to be located within a Targeted Employment Area pursuant to the provisions of the EB‐5 Program, and that if the exact geographical location of any of the Proposed Project is determined not to be located within a Targeted Employment Area, that Client and Consultant shall each use commercially reasonable efforts to cause the geographical location of the Proposed Project to be included within a Targeted Employment Area through a process of adjusting the geographical location of the Proposed Project together with other areas to cause the geographical area to meet the definition of a Targeted Employment Area such that when the adjusted geographical area is considered as a whole, the adjusted geographical area will cause the Proposed Project to be located within a Targeted Employment Area. Client hereby acknowledges that the Proposed Project shall create at least ten (10) direct, indirect, and induced jobs for EACH FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) invested in the Proposed Project by each foreign investor as contemplated by the EB‐5 Program. Client hereby acknowledges that the ability of Consultant to adequately provide the Consulting Services and effectuate introductions of foreign immigration brokers, finders, and legal professionals with respect to potential investments in the Proposed Project is dependent upon the prompt dissemination of accurate,

  

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correct, and complete information to Consultant. Client further represents and warrants that this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action; that Client has the full right, power and capacity to execute and deliver this Agreement and perform its obligations hereunder; that the execution and delivery of this Agreement and the performance by Client of its obligations pursuant to this Agreement do not constitute a breach of, or a default under, any agreement or instrument to which Client is a party or by which it or any of its assets are bound; and that this Agreement, upon execution and delivery of the same by the Parties, constitutes a legally valid and binding obligation of the Parties enforceable in accordance with its terms. Client further represents and warrants that Client fully understands that Consultant (i) is not a Broker/Dealer, (ii) does not raise capital, and (iii) will not provide any legal services or legal advice to Client.

 

The representations and warranties set forth herein shall survive any termination of this Agreement.

 

6. Indemnification.

 

6.1 By Client. Client hereby agrees to indemnify, defend and hold harmless Consultant, its directors, officers, principals, employees, agents, affiliates, shareholders, members, managers, representatives, consultants, successors and assigns from and against any and all claims, damages, losses, liability, deficiencies, actions, causes of action, suits, proceedings, costs, expenses or legal expenses arising out of or resulting from: (i) any breach of a representation, warranty or covenant contained in this Agreement by Client; (ii) any activities or services performed hereunder by Consultant, unless such Losses were the result of the intentional misconduct or gross negligence of Consultant; and/or (iii) any and all costs and expenses (including reasonable attorneys' and paralegals' fees) related to the foregoing.

 

Consultant shall promptly notify Client in writing of any fact or circumstance which may give rise to liability under this Section 6 after such fact or circumstance comes to the attention of Consultant. Client and its legal representatives shall compromise or defend any such matter involving asserted liability through counsel of Client’s own choosing, at Client’s expense; provided, however, that in the event of litigation, Client shall take all actions necessary in order to protect Consultant. In the event Client undertakes to compromise or defend any such liability, Client shall notify Consultant in writing promptly of such intention to do so, and Consultant shall cooperate with Client and its counsel in the compromising of, or the defending against, any such liabilities or claims. Consultant shall have the right to employ counsel at Consultant’s own expense to monitor the defense in any such claim. Should Client fail or refuse to defend any such claim, Consultant shall have the right to compromise said liability, or shall defend same, in which event Client shall be liable for all sums expended by Consultant in compromising and/or defending any such liability. The indemnification provisions hereunder shall survive any termination of this Agreement.

 

6.2 By Consultant. Consultant hereby agrees to indemnify, defend and hold harmless Client, its directors, officers, principals, employees, agents, affiliates, shareholders, members, managers, representatives, consultants, successors and assigns from and against any and all claims, damages, losses, liability, deficiencies, actions, causes of action, suits, proceedings, costs, expenses or legal expenses arising out of or resulting from: (i) any breach of a representation, warranty or covenant contained in this Agreement by Consultant; (ii) any activities or services performed hereunder by Client,

 

  

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unless such Losses were the result of the intentional misconduct or gross negligence of Client; and/or (iii) any and all costs and expenses (including reasonable attorneys' and paralegals' fees) related to the foregoing.

 

Client shall promptly notify Consultant in writing of any fact or circumstance which may give rise to liability under this Section 6 after such fact or circumstance comes to the attention of Client. Consultant and its legal representatives shall compromise or defend any such matter involving asserted liability through counsel of Consultant’s own choosing, at Consultant’s expense; provided, however, that, in the event of litigation, Consultant shall take all actions necessary in order to protect Client. In the event Consultant undertakes to compromise or defend any such liability, Consultant shall notify Client in writing promptly of such intention to do so, and Client shall cooperate with Consultant and its counsel in the compromising of, or the defending against, any such liabilities or claims. Client shall have the right to employ counsel at Client’s own expense to monitor the defense in any such claim. Should Consultant fail or refuse to defend any such claim, Client shall have the right to compromise said liability, or shall defend same, in which event Consultant shall be liable for all sums expended by Client in compromising and/or defending any such liability. The indemnification provisions hereunder shall survive any termination of this Agreement.

 

7. EB‐5 Investor Return on Investment.

 

7.1 The Parties understand and acknowledge that until such time as the entire amount of the loaned funds provided by the EB‐5 Lender Entity to the Owner Entities has been repaid to the EB‐5 Lender Entity, that the EB‐5 Lender Entity may require, depending on the terms and conditions of the loan documents to be executed at the closing of the loan, that the Owner Entity pay a preferred return of up to six percent (6%) per annum on the unpaid portion of such loaned funds; and

 

7.2 The Parties understand and acknowledge that in order to secure the timely return of all EB‐5 Financing loaned by the EB‐5 Lender Entity to the Owner Entity that the EB‐5 Lender Entity may require the Owner Entity to grant to the EB‐5 Lender Entity a security interest in and to, and may be required to pledge, assign and grant to the EB‐5 Lender Entity, subject only to any secured senior debt financing, its then owned and thereafter acquired, right, title, interest, and share in the land, plant, and equipment of the Proposed Project (the “Assets”) as a security title to, and a continuing security interest in, the Assets. In such an eventuality the security interest may be granted to the EB‐5 Lender Entity by appropriate recorded security instruments evidencing such lien hold security interest in the Assets, which may not be released or be deemed satisfied until the entire amount of the EB‐5 Financing has been returned to the EB‐5 investors.

 

8.  Distribution of Net Income. Client shall cause the Net Income of the Proposed Project to be distributed as follows:

First, until the first $3,000,000.00 of the EB‐5 Financing is returned to the EB‐5 investors, 80% of the cash will be returned to the EB‐5 investors and 20% to owners of the Owner Entity.

 

Second, after the first $3,000,000.00 of the EB‐5 Financing is returned to the EB‐5 investors and until the entire amount of the EB‐5 Financing has been returned to the EB‐5 investors, 70% of the cash will be returned to the EB‐5 investors and 30% to owners of the Owner Entity.

 

  

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Third, after the entire amount of the EB‐5 Financing has been returned to the EB‐5 investors, 100% of the cash will be returned to owners of the Owner Entity.

 

9. Owner Entity and Governance.

 

9.1 The Parties agree to jointly organize an appropriate special purpose entity that will own and operate the businesses of the Proposed Project (the “Owner Entity”). Client shall contribute as its initial capital contribution to the Owner Entity the following: (i) a cash payment of FIVE HUNDRED AND NO/100 DOLLARS ($500.00); (ii) the mining plant, furnishing and equipment of the Proposed Project; and (iii) Client’s Specialized Expertise. Consultant shall contribute as its initial capital contribution to the Owner Entity the following: (i) the cash payment of FIVE HUNDRED AND NO/100 DOLLARS ($500.00) in cash; (ii) the Consulting Services; and (iii) Consultant’s Specialized Expertise. The initial ownership/membership interest in the Owner Entity will be held ninety five percent (95%) by Client and five percent (5%) by Consultant. Client will assign, set over, and convey additional ownership/membership interest in the Owner Entity to Consultant in accordance with Section 4 of this Agreement.

 

The organizational documents of the Owner Entity shall provide that governance of the Owner Entity shall be through a board of directors or like body (the “Governing Body”). The appointment of the members of the Governing Body shall be allocated between Client and Consultant on a pro rata basis of their ownership/membership interest in the Owner Entity, provided however, that from the date on which the Owner Entity is organized and at all times subsequent thereto, at least one (1) member of the Governing Body shall be appointed by Consultant. The by‐laws or operating agreement of the Owner Entity shall provide, inter alia, that the number of members of the Governing Body shall be adjusted from time to time so as to reflect Client’s and Consultant’s respective ownership/membership interest in the Owner Entity. Additionally, the by‐laws or operating agreement of the Owner Entity shall provide that if the initial capital contributions made by the owner/members of the Owner Entity shall not be sufficient to operate the Owner Entity, then any such required or desired capital shall be satisfied by the Owner Entity borrowing such capital. The initial by‐laws or operating agreement of the Owner Entity and any amendment thereto shall be approved by written agreement of the Parties prior to becoming effective.

 

9.2 The Parties hereby acknowledge and agree that in the event the Owner Entity fails to achieve the “Milestones” set forth in Exhibit B hereof that the Owner Entity shall be entitled to seek and obtain financing through sources other than EB‐5 Financing to make up any deficiency in the amount of the EB‐5 Financing.

 

9.3 The Parties hereby expressly acknowledge and agree that all compensation to be paid to the officers, directors, and key employees of the Owner Entity shall be subject to the prior written approval of the Parties.

 

10. Third Party Construction Contractors and Owner Entity Payroll Records: With respect to the payroll records and related tax filings of the Owner Entity and any third‐party construction contractors, Client expressly acknowledges and agrees as follows:

 

10.1 that (i) the EB‐5 Program is essentially a jobs producing program resulting from foreign nationals investing capital in U.S. enterprises in exchange for, inter alia, permanent investor

 

  

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visas in the United States; (ii) the regulations promulgated by USCIS require each investor to prove that the investment created or can be expected to create within a reasonable period of time ten (10) full‐time direct, indirect and/or induced jobs (the “Requisite Jobs”); (iii) with respect to the creation of direct jobs, documentation as evidence that such jobs were created within a reasonable period of time includes payroll records, Forms W‐2, Forms 941 Employer’s Quarterly Federal Tax Return, Forms I‐9, and other relevant tax documents for all employees; and (iv) the proof of creating indirect and induced jobs may be based on reasonable econometric methodologies approved by USCIS, prospective contract engagements, detailed business plans, and other appropriate documentation concerning business activities as they relate to job creation;

 

10.2 that under the regulations promulgated by USCIS relating to whether construction jobs can be counted as direct jobs created by the investment will depend on whether the construction jobs last for a minimum period of two (2) years. Client agrees that in making proof to USCIS that the direct construction jobs were actually created by the investment in the Proposed Project that Client shall require all third‐party construction contractors and their subcontractors to provide to the Regional Center all payroll records, Forms W‐2, Forms 941 Employer’s Quarterly Federal Tax Return, Forms I‐9, and other relevant tax documents for all employees who perform work in the construction of the Proposed Project; and

10.3 that in making proof to USCIS that all direct jobs at the facility of the Proposed Project were actually created or will be created within a reasonable period of time by the investment in the Proposed Project, Client shall provide to the Regional Center all payroll records, Forms W‐2, Forms 941 Employer’s Quarterly Federal Tax Return, Forms I‐9, and other relevant tax documents for all employees who perform work at the plant facility of the Proposed Project.

11. Amendment. No modification, waiver, amendment, discharge, or change of this Agreement shall be valid unless the same is evidenced by a written instrument executed by the Parties hereto or their successors and assigns.

12. Notices. Any notices, requests or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or courier or mailed by United States certified mail, return receipt requested, postage prepaid and addressed to each party at its address as set forth below. Any such notice, request, or other communication shall be considered given or delivered, as the case may be, on the date of hand or courier delivery or on the date of deposit in the United States mail as provided above. Rejection or other refusal to accept or inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice, request, or other communication. By giving at least five (5) days' prior written notice thereof to the other Parties hereto, a party hereto may from time to time and at any time change her, his, or its mailing address hereunder.

 

	
Client:   

 

 

 

 

Consultant:   

	PO Box 162 

Skippack, PA 19474 USA

FAX: 215‐661‐8959

Email: p@northbayresources.com

 

229 East 20th Avenue, Suite 9 

Gulf Shores, AL 36542 USA

Fax #: 251‐948‐4705 

Email: kirklandpaul@gmail.com

 

  

11

  

 

13. Entire Agreement. This Agreement is the final expression of all of the understandings and agreements between the Parties hereto. All prior agreements between the Parties hereto, whether written or oral, are merged herein and there is no unwritten oral agreement in existence between the Parties hereto, their directors, officers, principals, employees, agents, affiliates, shareholders, members, managers, and/or representatives. This Agreement may not be contradicted by evidence of any prior oral agreement between the Parties.

14. Severability. The invalidity, illegality, or unenforceability of any provision or provisions of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect, nor shall the invalidity, illegality, or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal, or unenforceable in any respect, this Agreement shall be reformed, construed, and enforced as if such invalid, illegal, or unenforceable provision had never been contained herein.

15. Enforcement. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware, without application of the principles of conflict of laws. If it becomes necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, and such legal action results in a final judgment in favor of such party (the "Prevailing Party"), then the party or parties against whom said final judgment is obtained shall reimburse the Prevailing Party for all direct, indirect and incidental expenses incurred, including, but not limited to, all costs of investigations and all attorney's fees at all trial and appellate levels, court costs at all trial and appellate levels and other expenses incurred throughout all negotiations, trials or appeals undertaken in order to enforce the Prevailing Party's rights hereunder. Any suit, action, or proceeding with respect to this Agreement shall be brought in the state or federal courts located in Delaware. The Parties hereto do hereby accept the exclusive jurisdiction and venue of those courts for the purpose of any such suit, action, or proceeding. The Parties hereby irrevocably waive, to the fullest extent permitted by law, any objection that any Party may now or hereafter have to the venue of any suit, action or proceeding arising out of or relating to this Agreement or any judgment entered by any court in respect thereof brought in Delaware and hereby further irrevocably waive any claim that any suit, action, or proceeding brought in Delaware has been brought in an inconvenient forum.

16. Binding Nature; No Third Party Beneficiary. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties, and their respective representatives, successors and assigns, and is made solely and specifically for their benefit. No other person shall have any rights, interest, or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third‐party beneficiary or otherwise.

17. Time of Essence. Time is of the essence with respect to this Agreement and all obligations hereunder.

18. Waiver. Client or Consultant may, at any time or times, at its election, waive any of the conditions to its obligations hereunder by written waiver expressly detailing the extent of such waiver (and no other waiver or alleged waiver by such party shall be effective for any purpose). No express or

 

  

12

  

implied consent to or waiver of any breach or default by a party in the performance by such party of its obligation under this Agreement shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance by such party of the same or any other obligations of such party under this Agreement. Failure on the part of a party to complain of any act or failure to act by the other party or to declare the other party in default, irrespective of how long such failure continues, shall not constitute a waiver by such failing party of the rights of such failing party under this Agreement, except as otherwise specified in this Agreement.

 

19. Construction. Neither this Agreement nor any uncertainty or ambiguity in this Agreement shall be construed or resolved using any presumption against any party to this Agreement, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by the Parties and their respective legal counsel, or each party has had the opportunity to have its legal counsel review this Agreement and, in the case of any ambiguity or uncertainty, this Agreement shall be construed according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the Parties to this Agreement. The Parties acknowledge that they have had the opportunity to participate equally in the drafting of this Agreement and that in the event of a dispute, no party shall be treated, for any purpose, as the author of this Agreement nor have any ambiguity resolved against the author on account of this Agreement.

20. Definitions.

 

20.1 As used throughout this Agreement:

 

"Business Day" means any day other than Saturday, Sunday or federal holiday.

 

"EB‐5 Financing" means any funds obtained from foreign nationals under the EB‐5 Program and loaned to the Owner Entity for the development of the Proposed Project. EB‐5 Financing may be used to facilitate the obtainment of senior debt financing for the Proposed Project and may be subordinated to senior debt financing by written agreement between the Owner Entity and the EB‐5 Lender Entity. All such EB‐5 Financing is required to be repaid to the EB‐5 Lender Entity within ninety (90) days after the fifth (5th) anniversary of the date on which the funding of the EB‐5 Financing occurred.

 

“EB‐5 Lender Entity” means the limited partnership that issues the Securities in order to provide EB‐5 Financing for the Proposed Project and the legal entity into which each of the foreign EB‐5 Investors will deposit their respective EB‐5 investments of $500,000.00 in exchange for a unit interest as a limited partner in the limited partnership. Such limited partnership entity will serve as the legal vehicle through which the limited partners will loan EB‐5 funds to the Proposed Project.

 

“Net Income” means the amount of money remaining after all costs, depreciation, interest, and taxes have been deducted from total sales of the products for each fiscal year of the Owner Entity of the Proposed Project.

 

“Targeted Employment Area” means a (i) rural area not within any standard metropolitan statistical area or within any city or town having a population of 20,000 or more; or (ii) a high unemployment area that has experienced an average unemployment rate of 150 percent of the national average unemployment rate.

 

  

13

  

20.2 The following table indicates the location in this Agreement of the other terms defined herein:

 

	 Defined Term	Location
	 	 
	
Agreement

Effective Date

Consultant 

Client 

Parties 

Consultant’s Specialized Expertise 

USCIS 

EB‐5 Program  

U.S.

Client’s Specialized Expertise 

Proposed Project

Securities

Regulation S 

Securities Act  

Regional Center 

Consulting Services

Memoranda 

Memorandum 

Initial Marketing Budget 

Initial Expenses

Debenture 

Raised Funds

Consultant’s Equity Interest

Consultant’s Pro Rata Equity

Losses

Assets

Owner Entity

Governing Body

Milestones

Requisite Jobs

Prevailing Party

	
Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 1

Page 2

Page 3

Page 3

Page 4

Page 5

Page 5

Page 6

Page 6

Page 6

Page 8

Page 9

Page 9

Page 9

Page 10

Page 10

Page 11

 

21. Counterparts and Facsimiles. This Agreement may be executed in any number of counterparts, including facsimile signatures which shall be deemed as original signatures. All executed counterparts shall constitute one Agreement, notwithstanding that all signatories are not signatories to the original or the same counterpart.

 

22. Acknowledgement by Parties. Each Party hereof acknowledges and agrees that it has read this Agreement in its entirety and that it understands and agrees to be bound by the terms and conditions as set forth in this Agreement. The Parties expressly waive the right to protest the reasonableness of and guarantees the performance of the respective obligations, warranties, and covenants contained in this Agreement, whether corporate or individual. The Parties represent and warrant one to the other that the individuals executing this Agreement are executing the same voluntarily for and as the act of the respective party for which he or she is executing this Agreement and

 

  

14

  

that he or she has full authority to execute this Agreement and obligate the respective party for which he or she is executing this Agreement to be bound by the terms and conditions as set forth in this Agreement.

[Signatures on Following Page]

 

  

15

  

  

16

  

  

17

  

EXHIBIT A

 

[To the foregoing Consulting Agreement by and between ACG CONSULTING, LLC, and NORTH BAY RESOURCES, INC.]

 

 

 

	
Initial Marketing Budget

	 
	 
	
Source of Funds:

	  	
Amount

	 	 	 
	
NORTH BAY RESOURCES, INC.

	
$

	
110,000.00

	 	 	 
	
Expense Items:

	  	  
	 	 	 
	
Preparation of EB‐5 Compliant PPM

	
$

	
15,000.00 (each)

	
Brochures of Project (2 Languages)

	
$

	
5,000.00

	
EB‐5 Econometric Modeling

	
$

	
15,000.00

	
EB‐5 Compliant Business Plan

	
$

	
1,500.00

	
Foreign Offering Events (2)

	
$

	
35,000.00 (each)

	
Passcode protected Website for EB‐5

	
$

	
3,500.00

 

  

18

  

EXHIBIT B

 

[To the foregoing Consulting Agreement by and between ACG CONSULTING, LLC, and NORTH BAY RESOURCES, INC.]

 

Milestone

 

$3,000,000 within two (2) years from the date of the Initial Memorandum

 

  

19cpssexh41.htm

 

____________________________

 

 

 

INDENTURE

 

 

 

Dated as of August __, 2010,

 

 

by and between

 

 

CONSUMER PORTFOLIO SERVICES, INC., as obligor

 

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

a national banking association, as trustee

 

 

 

____________________________

 

$50,000,000.00

 

 

Renewable Unsecured Subordinated Notes

 

  

  

  

TABLE OF CONTENTS

 

	  ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE	 
	
Section 1.1

	
Definitions.

	
6

	
Section 1.2

	
Other Definitions.

	
6

	
Section 1.3

	
Incorporation by Reference of Trust Indenture Act.

	
7

	
Section 1.4

	
Rules of Construction.

	
8

	
ARTICLE II THE SECURITIES

	
 

	
Section 2.1

	
Security Terms; Amount; Accounts; Interest; Maturity.

	
11

	
Section 2.2

	
Written Confirmation; Rejection; Rescission.

	
12

	
Section 2.3

	
Registrar and Paying Agent.

	
13

	
Section 2.4

	
Paying Agent to Hold Money in Trust.

	
13

	
Section 2.5

	
List of Holders.

	
13

	
Section 2.6

	
Transfer and Exchange.

	
 

	
Section 2.7

	
Payment of Principal and Interest; Principal and Interest Rights Preserved.

	
14

	
Section 2.8

	
Outstanding Securities.

	
15

	
Section 2.9

	
Treasury Securities.

	
15

	
Section 2.10

	
Defaulted Interest.

	
15

	
Section 2.11

	
Temporary Notes.

	
16

	
Section 2.12

	
Execution, Authentication And Delivery.

	
16

	
Section 2.13

	
Book-Entry Registration.

	
17

	
Section 2.14

	
Initial and Periodic Statements.

	
18

	
Section 2.15

	
Appointment of Agents.

	
18

	
Section 2.16

	
CUSIP/ISIN Numbers.

	
18

	
ARTICLE III REDEMPTION AND REPURCHASE

	
 

	
Section 3.1

	
Redemption of Securities at the Company’s Election.

	
19

	
Section 3.2

	
Repurchase of Securities at the Holder’s Request.

	
19

	
ARTICLE IV COVENANTS

	
 

	
Section 4.1

	
Payment of Securities.

	
21

	
Section 4.2

	
Maintenance of Office or Agency.

	
22

	
Section 4.3

	
SEC Reports and Other Reports.

	
22

	
Section 4.4

	
Compliance Certificate.

	
23

	
Section 4.5

	
Stay, Extension and Usury Laws.

	
23

	
Section 4.6

	
Liquidation.

	
24

	
Section 4.7

	
Financial Covenants

	
24

	
Section 4.8

	
Restrictions on Dividends and Certain Transactions with Affiliates

	
24

	
Section 4.9

	
Securitization Transactions and Additional Indebtedness.

	
24

	
ARTICLE V SUCCESSORS

	
 

	
Section 5.1

	
When the Company May Merge, etc.

	
25

	
Section 5.2

	
Successor Entity Substituted.

	
25

	
ARTICLE VI DEFAULTS AND REMEDIES

	
25

	
Section 6.1

	
Events of Default.

	
25

	
Section 6.2

	
Acceleration.

	
26

	
Section 6.3

	
Other Remedies.

	
27

	
Section 6.4

	
Waiver of Past Defaults.

	
27

	
Section 6.5

	
Control by Majority.

	
27

	
Section 6.6

	
Limitation on Suits.

	
28

  

  

  

	
Section 6.7

	
Rights of Holders to Receive Payment.

	
28

	
Section 6.8

	
Collection Suit by Trustee.

	
28

	
Section 6.9

	
Trustee May File Proofs of Claim.

	
28

	
Section 6.10

	
Priorities.

	
29

	
Section 6.11

	
Undertaking for Costs.

	
30

	
ARTICLE VII TRUSTEE

	
 

	
Section 7.1

	
Duties of Trustee.

	
30

	
Section 7.2

	
Rights of Trustee.

	
31

	
Section 7.3

	
Individual Rights of Trustee.

	
33

	
Section 7.4

	
Trustee’s Disclaimer.

	
33

	
Section 7.5

	
Notice of Defaults.

	
33

	
Section 7.6

	
Reports by Trustee to Holders.

	
33

	
Section 7.7

	
Compensation and Indemnity.

	
33

	
Section 7.8

	
Replacement of Trustee.

	
34

	
Section 7.9

	
Successor Trustee by Merger, etc.

	
35

	
Section 7.10

	
Eligibility; Disqualification.

	
36

	
Section 7.11

	
Preferential Collection of Claims Against Company.

	
36

	
ARTICLE VIII DISCHARGE OF INDENTURE

	
 

	
Section 8.1

	
Termination of Company’s Obligations.

	
36

	
Section 8.2

	
Application of Trust Money.

	
37

	
Section 8.3

	
Repayment to Company.

	
37

	
Section 8.4

	
Reinstatement.

	
38

	
ARTICLE IX AMENDMENTS

	
 

	
Section 9.1

	
Without Consent of Holders.

	
38

	
Section 9.2

	
With Consent of Holders.

	
39

	
Section 9.3

	
Compliance with Trust Indenture Act.

	
40

	
Section 9.4

	
Effect of Consents.

	
40

	
Section 9.5

	
Notation on or Exchange of Securities.

	
40

	
Section 9.6

	
Trustee to Sign Amendments, etc.

	
40

	
ARTICLE X SUBORDINATION

	
 

	
Section 10.1

	
Agreement to Subordinate.

	
41

	
Section 10.2

	
Liquidation; Dissolution; Bankruptcy.

	
41

	
Section 10.3

	
Default of Senior Debt.

	
42

	
Section 10.4

	
When Distribution Must Be Paid Over.

	
43

	
Section 10.5

	
Notice by Company.

	
43

	
Section 10.6

	
Subrogation.

	
44

	
Section 10.7

	
Relative Rights.

	
44

	
Section 10.8

	
Subordination May Not Be Impaired by the Company

	 44
	  	
or Holders of Senior Debt.

	
 

	
Section 10.9

	
Distribution or Notice to Representative.

	
44

	
Section 10.10

	
Rights of Trustee and Paying Agent.

	
46

	
Section 10.11

	
Authorization to Effect Subordination.

	
46

	
Section 10.12

	
Article Applicable to Paying Agent.

	
46

	
Section 10.13

	
Miscellaneous.

	
46

	
ARTICLE XI MISCELLANEOUS

	
 

	
Section 11.1

	
Trust Indenture Act Controls.

	
47

	
Section 11.2

	
Notices.

	
47

 

  

  

  

 

	
Section 11.3

	
Communication by Holders with Other Holders.

	
48

	
Section 11.4

	
Certificate and Opinion as to Conditions Precedent.

	
48

	
Section 11.5

	
Statements Required in Certificate or Opinion.

	
49

	
Section 11.6

	
Rules by Trustee and Agents.

	
49

	
Section 11.7

	
Legal Holidays.

	
49

	
Section 11.8

	
No Recourse Against Others.

	
49

	
Section 11.9

	
Duplicate Originals.

	
49

	
Section 11.10

	
Governing Law.

	
50

	
Section 11.11

	
No Adverse Interpretation of Other Agreements.

	
50

	
Section 11.12

	
Successors.

	
50

	
Section 11.13

	
Severability.

	
50

	
Section 11.14

	
Counterpart Originals.

	
50

	
Section 11.15

	
Table of Contents, Headings, etc.

	
50

	
Section 11.16

	
USA Patriot Act.

	
50

	
Section 11.17

	
Force Majeure

	
51

 

EXHIBITS:

 

A – Form of Note

 

 

  

  

  

 

CROSS-REFERENCE TABLE

	 *Trust Indenture Act Section	
Indenture Section

	
310(a)(1)

	
7.10

	
(a)(2)

	
 7.10

	
(a)(3)

	
N.A.

	
(a)(4)

	
N.A.

	
(a)(5)

	
N.A.

	
(b)

	
7.8; 7.10

	
(c)

	
N.A.

	
311(a)

	
7.11

	
(b)

	
7.11

	
(c)

	
N.A.

	
312(a)

	
2.5

	
(b)

	
11.3

	
(c)

	
11.3

	
313(a)

	
7.6

	
(b)(1)

	
N.A.

	
(b)(2)

	
7.6

	
(c)

	
7.6; 11.2

	
(d)

	
7.6

	
314(a)

	
4.3; 4.4; 11.2

	
(b)

	
N.A.

	
(c)(1)

	
11.4

	
(c)(2)

	
11.4

	
(c)(3)

	
11.4; 1.1

	
(d)

	
N.A.

	
(e)

	
11.5

	
(f)

	
N.A.

	
315(a)

	
7.1(b)

	
(b)

	
7.5; 11.2

	
(c)

	
7.1(a)

	
(d)

	
7.1(c)

	
(e)

	
6.11

	
316(a)(last sentence)

	
2.9

	
(a)(1)(A)

	
6.5

	
(a)(1)(B)

	
6.4

	
(a)(2)

	
N.A.

	
(b)

	
6.7

	
(c)

	
N.A.

	
317(a)(1)

	
6.8

	
(a)(2)

	
6.9

	
(b)

	
2.4

	
318(a)

	
11.1

 

N.A. means not applicable

* This Cross Reference Table is not part of the Indenture

  

  

  

THIS INDENTURE is hereby entered into as of [   ], 2010 by and between Consumer Portfolio Services, Inc., a California corporation (the “Company”), as obligor, and Wells Fargo Bank, National Association, a national banking association, as trustee (the “Trustee”).

 

The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the renewable, unsecured, subordinated debt securities of the Company issued pursuant to the Company’s registration statement on Form S-1, filed with the Securities and Exchange Commission on or about August 20, 2010 (the “Registration Statement”):

 

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1 Definitions.

 

“Account” means the record of beneficial ownership of a Security maintained by the Registrar.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

 

“Agent” means any Registrar, Paying Agent or co-registrar of the Securities or any Person appointed and retained by the Company to perform certain of the duties or obligations, or exercise certain of the rights and discretions, of the Company hereunder, on behalf of the Company pursuant to Section 2.15 hereof.

 

“Board of Directors” means the Board of Directors of the Company or any authorized committee of the Board of Directors.

 

“Business Day” means any day other than a Legal Holiday.

 

“Company” means Consumer Portfolio Services, Inc., a California corporation, unless and until replaced by a successor in accordance with Article V hereof and thereafter means such successor.

 

“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is originally dated, located at 45 Broadway, 14th Floor, New York, New York 10006, Attention: Consumer Portfolio Services, Inc. Administrator.

 

“CUSIP” means the Committee on Uniform Securities Identification Procedures.

 

  

  

  

 

 “Default” means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fiscal Year” means a year ending December 31.

 

“GAAP” means, as of any date, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect from time to time.

 

“Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

 

“Holder” means a Person in whose name a Security is registered.

 

“Indebtedness” means, with respect to any Person and without duplication, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including capital lease obligations) or the expenditure for any services or representing any hedging obligations, including without limitation, any such balance that constitutes an accrued expense or an account or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and hedging obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, (a) the Guarantee of items that would be included within this definition, and (b) liability for items that would arise by operation of a Person’s status as a general partner of a partnership.

 

“Indenture” means this Indenture as amended or supplemented from time to time.

 

“Interest Accrual Period” means, as to each Security, the period from the later of the Issue Date of such Security or the last Payment Date upon which an interest payment was made until and including the day before the following Payment Date during which interest accrues on each Security with respect to any Payment Date.

 

“ISIN” means the International Securities Identification Number.

 

 “Issue Date” means, with respect to any Security, the date on which such Security is deemed registered on the books and records of the Registrar, which shall be (i) the date the Company accepts funds for the purchase of the Security if such funds are received prior to 12:01 p.m. (Central Time) on a Business Day, or if such funds are not so received, on the next Business 

 

  

INDENTURE-Page 2

  

 

Day, or (ii) the date that the Security is renewed as of the Maturity Date pursuant to Section 2.1(e).

 

“Maturity Date” means, with respect to any Security, the date on which the principal of such Security becomes due and payable as therein provided.

 

“Maturity Record Date” means, with respect to any Security, as of 11:59 p.m. of the date 15 days prior to the Maturity Date or Redemption Date applicable to such Security.

 

“Notice of Maturity” means a written notice from the Company to a Holder (as further described in Section 2.1(d)) that the Holder’s Securities will be maturing on the related Maturity Date occurring within 15 days but not less than 10 days of the delivery of such notice.

 

“Obligations” means, with respect to any Indebtedness, any principal, premium, interest (including Post-Petition Interest), penalties, fees, indemnifications, reimbursements, damages and other liabilities or amounts of whatever nature payable under the documentation governing, or with respect to, any such Indebtedness.

 

“Officer” means the Chairman of the Board or principal executive officer of the Company, the President or principal operating officer of the Company, the Chief Financial Officer or principal financial officer of the Company, the Treasurer, Controller or principal accounting officer of the Company, Secretary or any Executive or Senior Vice-President of the Company.

 

“Officers’ Certificate” means a certificate signed by two Officers, one of whom must be the principal executive officer, principal operating officer, principal financial officer or principal accounting officer of the Company; provided, however, that if the opinion of an accountant is required pursuant to TIA § 314(c)(3), the certificate must be signed by an Officer who is an accountant.

 

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

 

“Outstanding Notes” means any notes issued pursuant to that certain indenture dated [   ], 2010 between the Trustee and the Company, to the extent the obligations evidenced by such notes have not been discharged by payment.

 

“Pari Passu Debt” means any Indebtedness of the Company that is payable on a pari passu basis with the Securities, including without limitation the Outstanding Notes.

 

“Payment Account” means the bank account designated by the Holder to receive payments of interest and/or principal due on such Holder’s Securities, as may be amended by the Holder by written notice to the Registrar from time to time.

 

“Payment Date” means (i) with respect to any Security for which monthly interest payments are required to be made, the first day of the following calendar month or such other date as is designated by the Holder pursuant to subsection 2.1(c), (ii) with respect to any Security for which interest is required to be made quarterly, semi-annually or annually, the same day of 

 

  

INDENTURE-Page 3

  

 

the month as the quarterly, semi-annual or annual anniversary of the Issue Date of the Security (except in the case where the Issue Date of a Security is the 29th, 30th or 31st day of the month and there is no like date in the anniversary month, in which case the Payment Date for such month shall be the first day of the following month) and (iii) with respect to each Security, the Maturity Date (or such date following the Maturity Date on which payment is made pursuant to subsection 2.1(d) hereof), the Repurchase Date or the Redemption Date of the Security; provided, that if any such day in the preceding clauses (i) through (iii) is not a Business Day, the Business Day immediately following such day.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Post-Effective Amendment” means any amendment to the Registration Statement filed after the initial date of effectiveness thereof, and any other registration statement filed with respect to the offering of the Securities after the initial date of effectiveness of the Registration Statement.

 

“Post-Petition Interest” means interest accruing after the commencement of any bankruptcy or insolvency case or proceeding with respect to the Company or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, at the rate applicable to the related Indebtedness, whether or not such interest is an allowable claim in any such proceeding.

 

“Prospectus” means the prospectus included in the Registration Statement or Post-Effective Amendment at the time such Registration Statement or Post-Effective Amendment was declared effective by the SEC, as supplemented by any prospectus supplement (including interest rate supplements) relating to the Securities that are filed with the SEC with respect to the Registration Statement or to any Post-Effective Amendment, in either case pursuant to Rule 424 under the Securities Act or to any successor rule of the SEC that permits supplementation or modification of the prospectus included in registration statements under the Securities Act.  References herein to the Prospectus shall be deemed to refer to and include the documents incorporated therein by reference.

 

“Qualified Sales and Financing Transaction” means any transaction or series of transactions (including without limitation the performance and liquidation or termination of such transactions) that may be entered into, sponsored or conducted by the Company or any of its Affiliates pursuant to which the Company or any of its Affiliates may sell, convey, finance, pledge or otherwise transfer to (a) a Special Purpose Entity (in the case of a transfer by the Company or any of its Affiliates) or (b) any other Person (in the case of a transfer by the Company or a Special Purpose Entity), or may grant a security interest in or pledge, any Receivables, any securities backed by or any interests in Receivables (whether now existing or arising or acquired in the future) and any assets related thereto including, without limitation, all collateral securing such Receivables, all contracts and contract rights and all guarantees or other obligations in respect of such Receivables, proceeds of such Receivables and other assets (including contract rights), which are customarily sold, transferred or pledged as security in connection with asset securitization, secured financing or other transactions involving 

 

  

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Receivables, including the ability to finance and sell the residual interests retained from all such transactions, or securities backed by or representing interests in such residual interests.

 

“Receivables” means installment sale contracts, loans evidenced by promissory notes secured by assets, leases, mortgages or other finance receivables or instruments purchased, originated or owned by the Company or any of its Affiliates.

 

“Redemption Notice” means a written notice from the Company to the Holders (as further described in Section 2.1(f)) stating that the Company is redeeming all or a specified portion of Securities pursuant to Section 3.1, with a copy to the Registrar and the Trustee.

 

“Redemption Price” means, with respect to any Security to be redeemed, the principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up to and not including the Redemption Date for such Security.

 

“Regular Record Date” means, with respect to each Payment Date, as of 11:59 p.m. of the date 15 days prior to such Payment Date.

 

“Repayment Election” means a written notice from a Holder to the Company (as further described in Section 2.1(d)) stating that repayment of the Holder’s Securities is required in connection with the maturity of such Securities.

 

“Repurchase Price” means, with respect to any Security to be repurchased, the principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up to and not including the Repurchase Date for such Security, minus the Repurchase Penalty, if any.

 

“Repurchase Request” means a written notice from a Holder to the Company (as further described in Section 2.1(g)) stating that such Holder is making an irrevocable request for the Company to repurchase such Holder’s Securities pursuant to Section 3.2.

 

“Responsible Officer” when used with respect to the Trustee, means any officer in its Corporate Trust Office, including any vice president, assistant vice president, trust officer, assistant trust officer or any other officer of the Trustee in its Corporate Trust Office 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 because of his or her knowledge of and familiarity with the particular subject.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security” or “Securities” means, the Company’s renewable, unsecured, subordinated notes issued under this Indenture.

 

“Senior Debt” means any Indebtedness other than the Securities and any Pari Passu Debt (whether outstanding on the date hereof or thereafter created) incurred by the Company (including its subsidiaries) whether such Indebtedness is or is not specifically designated by the 

 

  

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Company as being “Senior Debt” in its defining instruments.  Without limiting the generality of the foregoing, the term "Senior Debt" shall include any and all Indebtedness and other liabilities and Obligations owed by the Company to Levine Leichtman Capital Partners IV, L.P. (or any of its affiliates) as of the date of this Indenture, and any and all Indebtedness and other liabilities and Obligations owed by the Company to Levine Leichtman Capital Partners IV, L.P. (or any of its affiliates) thereafter, unless such Indebtedness is specifically designated in its defining instruments as not being Senior Debt .

 

“Special Purpose Entities” means Affiliates of the Company formed for the specific purpose of securitizing auto loan receivables or facilitating the Company’s warehouse, residual and other financing facilities.

 

“Subscription Agreement” means a Subscription Agreement entered into by a Person under which such Person has committed to purchase certain Securities as identified thereby and which is in substantially the form filed as Exhibit 4.4 to the Registration Statement.

 

“Servicing Agent” means such person or persons as Company may appoint in that capacity, by notice to the Trustee, and, absent any such appointment, shall mean the Company.

 

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

 

“Total Permanent Disability” means a determination by a physician approved by the Company that the Holder of a Security who is a natural person, who was gainfully employed on a full time basis at the Issue Date of such Security is unable to work on a full time basis during the succeeding twenty-four months. For purposes of this definition, “working on a full time basis” shall mean working at least forty hours per week.

 

“Trustee” means Wells Fargo Bank, National Association, a national banking association organized and existing under the laws of the United States of America, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

 

“U.S. Government Obligations” means direct obligations of the United States of America, or any agency or instrumentality thereof for the payment of which the full faith and credit of the United States of America is pledged.

 

“Written Confirmation” means a written confirmation of the acceptance of a subscription for, or the transfer or pledge of, a Security or Securities in the form of a transaction statement executed or issued by the Company or its duly authorized Agent and delivered to the Holder of such Security or Securities with a copy to the Registrar and the Trustee, which is in substantially the form of Exhibit 4.3 to the Registration Statement.

 

Section 1.2 Other Definitions.

	Term	 	Defined in Section 
	
“Bankruptcy Law”

	 	 6.1

 

  

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	 Term	 	Defined in Section 
	
“Custodian”

	 	 6.1
	
“Event of Default”

	 	 6.1
	
“Legal Holiday”

	 	 11.7
	
“Paying Agent”

	 	 2.3
	
“Payment Blockage Period”

	 	 10.3
	
“Payment Notice”

	 	 10.3
	
“Redemption Date”

	 	 2.1(f)
	
“Registrar”

	 	 2.3
	
“Registration Statement”

	 	 Introduction
	
“Repurchase Date”

	 	 3.2(d)
	
“Repurchase Penalty”

	 	 3.2(b)
	
“Securities Register”

	 	 2.3

Section 1.3 Incorporation by Reference of Trust Indenture Act.

 

(a) Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

 

“indenture securities” means the Securities;

 

“indenture security holder” means any Holder of the Securities;

 

“indenture to be qualified” means this Indenture;

 

“indenture trustee” or “institutional trustee” means the Trustee;

 

“obligor” on the Securities means the Company or any successor obligor upon the Securities.

 

(b) All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a SEC rule under the TIA have the meanings so assigned to them.

 

Section 1.4 Rules of Construction.

 

Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) references to GAAP, as of any date, shall mean GAAP in effect in the United States as of such date; (d) “or” is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; and (f) provisions apply to successive events and transactions.

 

  

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ARTICLE II

THE SECURITIES

Section 2.1 Security Terms; Amount; Accounts; Interest; Maturity.

 

(a) Unlimited Amount and Form of Security.  The outstanding aggregate principal amount of Securities to be issued hereunder (absent an amendment to the Registration Statement) is limited to $50 million, provided, however, that the Company may, without the consent of any Holder, increase such aggregate principal amount of Securities which may be outstanding at any time.  The Securities are unsecured obligations of the Company and shall be subordinate in right of payment to the Senior Debt of the Company as further described in Article X.  The Securities are an obligation and liability of the Company, and not of any other Person, including, without limitation, any shareholder, director, Officer, employee, Affiliate or Agent of the Company.  The Securities are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, any other governmental or private fund, any securities insurer or any other Person.

 

In the event issued in certificated form pursuant to Section 2.13(b): (i) the Securities, together with the Trustee’s certificate of authentication, shall be in substantially the form set forth as Exhibit A to this Indenture, with any 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 Securities, as evidenced by their execution of the Securities; (ii) any portion of the text of any Securities may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Securities; and (iii) the Securities may be subject to notations, legends or endorsements required by law, stock exchange rule, or agreements to which the Company is subject or usage.

 

(b) Book-Entry; Denominations; Term.  Except as provided in Section 2.13(b), each Security shall neither be issued as, nor evidenced by, a promissory note or certificated security, but rather each Security shall be issued in book entry or uncertificated form, in which the record of beneficial ownership of each such Security shall be established and maintained as Accounts by the Registrar pursuant to Section 2.13.  In connection with the issuance of each Security in book entry form in accordance with Section 2.13, each such Security shall be deemed to be represented in an uncertificated form that includes the same terms and provisions as those set forth in the form of Security in Exhibit A to this Indenture, and the related Account for each such Security shall be deemed to include these same terms and provisions.

 

Each Security shall be in such denominations as provided by this Indenture and as may be designated from time to time by the Company, but in no event in an original denomination less than $1,000. Separate purchases may not be cumulated to satisfy the minimum denomination requirements. Each Security shall have a term of three or six 

 

  

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months, or one, two, three, four, five or ten years, as designated by the Holder at the time of purchase, subject to the Company’s acceptance thereof.

 

(c) Interest and Interest Payments.  Each Security shall bear interest from and commencing on its Issue Date at such rate of interest as the Company shall determine from time to time, which rate may vary from Holder to Holder depending upon the aggregate principal amount of Securities held by such Holder and all immediate family members, as set forth in the Prospectus; provided, however, that the interest rate of each Security will be fixed for the term of such Security upon issuance, subject to change upon the renewal of the Security at maturity.  Interest on the Securities will compound daily based on a calendar year consisting of 365 days and the Holder thereof may elect to have interest paid monthly, quarterly, semi-annually, annually, or upon maturity, which payments shall be made on the Payment Date, except that a Holder who elects monthly payments may select the day of the month on which to receive interest payments; provided that no interest shall be paid to a Holder until the expiration of the Holder’s rescission right under Section 2.2(b) and, if the monthly interest payment date selected by the Holder is within five Business Days of the Issue Date of the Security, the first interest payment will be made in the following month and will include all of the interest earned since the Issue Date.  If the Holder does not elect an interest payment option, interest will be paid on the Maturity Date of the Note.  A Holder may change this election once during the term of the Security, subject to the Company’s approval, which change shall be effective by the first Business Day following the 45th day after receipt of written notice from the Holder requesting such change.

 

(d) Repayment Election at Maturity.  The Company will send each Holder of a Security (existing as of the applicable Maturity Record Date) a Notice of Maturity approximately 15 but not less than 10 days prior to the Maturity Date of the Security held by such Holder reminding such Holder of the pending maturity of the Security and reminding the Holder that the automatic renewal provision described in Section 2.1(e) will take effect, unless (i) the Company states in the Notice of Maturity that it will not allow the Holder to renew the Security (in which case the Company shall pay the Holder principal and accrued interest with regard to the Security on the Maturity Date), or (ii) the Holder delivers a Repayment Election to the Company for the payment of all principal and interest due on the Security as of the Maturity Date so that such Repayment Election is received by the Company within 15 days after the Maturity Date.  Such Notice of Maturity shall also state that payment of principal of a Security shall be made upon presentation of a Repayment Election requiring payment of such Security and shall specify the place where such Repayment Election may be presented.  Upon or following the delivery of a Notice of Maturity for a Security, the Holder thereof, in their discretion, may deliver to the Company a Repayment Election; provided that such Repayment Election must be delivered to the Company no later than 15 days after the Maturity Date.  If a Holder delivers a Repayment Election requiring repayment on or prior to the 15th day following the Maturity Date, no interest will accrue after the Maturity Date and the Holder will be sent payment upon the later of the Maturity Date or five days following the date the Company receives such Repayment Election from the Holder; provided that if the Company has previously paid interest to the Holder for periods after the Maturity Date, such interest shall be deducted from such payment.

 

  

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The Notice of Maturity also shall state that the Holder may, and the Holder may, submit a Repayment Election for the repayment of the maturing Security and use all or a portion of the proceeds thereof to purchase a new Security with a different term.  To exercise this option, the Holder shall complete a new Subscription Agreement for the new Security and send it along with the Holder’s Repayment Election to the Company.  The Issue Date of the new Security shall be the Maturity Date of the maturing Security.  Any proceeds from the maturing Security that are not applied to the purchase of the new Security shall be sent to the Holder of such maturing Security.

 

If a Security pays interest only on the Maturity Date, then the Notice of Maturity also shall state that the Holder may, and the Holder may, submit an “interest-only” Repayment Election in which the Holder requires the payment of the accrued interest that such Holder has earned on the maturing Security up to the Maturity Date and allows the principal amount of such maturing Security to renew in the manner provided in subsection (e) below.

 

(e) Automatic Renewal.  If a Holder of such Security has not delivered a Repayment Election for repayment of the Security on or prior to the 15th day following the Maturity Date, and the Company did not notify the Holder of its intention to repay the Security in the Notice of Maturity, then such maturing Security shall be extended automatically for an additional term equal to the original term, and shall be deemed to be renewed by the Holder and the Company as of the Maturity Date of such maturing Security.  A maturing Security will continue to renew as described herein absent a Redemption Notice or Repurchase Request by the Holder or an indication by the Company that it will repay and not allow the Security to be renewed in the Notice of Maturity.  Interest on the renewed Security shall accrue from the Issue Date thereof, which is the first day of such renewed term (i.e., the Maturity Date of the maturing Security).  Such renewed Security will be deemed to have the identical terms and provisions of the maturing Security, including provisions relating to payment, except that the interest rate payable during the term of the renewed Security shall be the interest rate which is being offered by the Company on other Securities having the same term and to Persons holding the same aggregate principal amount of Securities (including holdings of immediate family members, as described in the Prospectus) as of the Issue Date of such renewal.  If other Securities having the same term are not then being issued on the Issue Date of such renewal, the interest rate upon renewal will be the rate specified by the Company on or before the Maturity Date of such Security, or the then existing rate of the Security being renewed if no such rate is specified.  If the maturing Security pays interest only on the Maturity Date, then, except as provided in subsection (d) above, all accrued interest thereon shall be added to the principal amount of the renewed Security upon renewal.

 

Notwithstanding the foregoing or anything in Section 2.1(d) to the contrary, if a Repayment Election is given or is due at a time when the Company has determined that a Post-Effective Amendment was required but not yet effective, the Company will provide notice to the Holder (including a copy of the Prospectus), and the Holder will be entitled to rescind his or her Repayment Election, if made, or to make a Repayment Election, if not previously made, by delivering a written rescission of the earlier Repayment Election, 

 

  

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or a Repayment Election, as the case may be, to the Company no later than 10 days following the postmark date on the Company’s notice of such Post-Effective Amendment.

 

(f) Redemption Notice from Company.  Pursuant to Section 3.1, each Security shall be redeemable by the Company at any time, without penalty, upon the delivery of a Redemption Notice to the Holder of such Security.  Such Redemption Notice shall set forth a date for the redemption of such Security (the “Redemption Date”) that is at least 30 days after the date that such Redemption Notice has been delivered by the Company to the Holder hereunder.

 

(g) Repurchase Request by Holder.  Pursuant to and subject to the limitations set forth in Section 3.2, each Security shall be subject to repurchase at the request of the Holder upon the delivery of a Repurchase Request to the Company.  Subject to the limitations on repurchase and the Repurchase Penalties described in Section 3.2, the payment of interest and principal due upon the repurchase of a Security shall be made to the Holder on a Repurchase Date that is within 10 days of the delivery of such Repurchase Request to the Company or, in the case of a repurchase of a Security in connection with the death or Total Permanent Disability of a Holder, a Repurchase Date that is within 10 days after the Company’s receipt of satisfactory establishment or such Holder’s death or Total Permanent Disability.

 

(h) Terms of Securities.  The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, and the Holders by accepting the Securities, expressly agree to such terms and provisions and to be bound hereby and thereby.  In case of a conflict, the provisions of this Indenture shall control.

 

Section 2.2 Written Confirmation; Rejection; Rescission.

 

(a) Except with respect to an automatically renewed Security pursuant to Section 2.1(e), a Security shall not be validly issued to a Person until the following have occurred:  (i) such Person has remitted good and available funds for the full principal amount of such Security to the Company or a duly authorized Agent of the Company; (ii) a Written Confirmation of the acceptance of the subscription is sent by the Company or a duly authorized Agent of the Company to such Person; and (iii) an Account is established by the Registrar in the name of such Person as the Holder of such Security pursuant to Section 2.13 hereof.  Whenever a Person should elect to assign to the Company that Person’s right to receive cash in payment of an Outstanding Note, the Company may deem that Person to have remitted good and available funds. The Company or a duly authorized Agent of the Company, in their sole discretion, may reject any subscription from a Person for the purchase of Securities, in which event any funds received or deemed received from such Person pursuant to such subscription shall be promptly returned to such Person.  No interest shall be paid on any funds returned on a rejected subscription.

 

  

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(b) For a period of five Business Days following the mailing by the Company of (i) a Written Confirmation that evidences the valid issuance of a Security at the time of original purchase (but not upon transfer or automatic renewal of a Security), or (ii) notice from the Company that a Holder’s purchase of a Security occurred at a time when a Post-Effective Amendment was required but not yet effective (which notice shall be accompanied by a copy of the Prospectus), such Holder shall have the right to rescind the Security and receive repayment of the principal by presenting a written request for such rescission to the Company.  Such written request for rescission (A) if personally delivered or delivered via facsimile or electronic transmission, must be received by the Company on or prior to the 5th Business Day following the mailing of such Written Confirmation or post-effective amendment notice by the Company or (B) if mailed must be postmarked on or before the 5th Business Day following the mailing by the Company of such Written Confirmation or post-effective amendment notice.  Repayment of the principal shall be made within 10 days of the Company’s receipt of such request from the Holder. No interest shall be paid on any such rescinded Security.

 

Section 2.3 Registrar and Paying Agent.

 

(a) The Company shall maintain (i) an office or agency where Securities may be presented for registration of transfer or for exchange (“Registrar”) and (ii) an office or agency where Securities may be presented for payment (“Paying Agent”).  The Registrar shall keep a register of the Securities and of their transfer and exchange, which shall include the name, address for notices and Payment Account of the Holder and the payment election information, principal amount, term and interest rate for each Security (the “Securities Register”).  The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar, and the term “Paying Agent” includes any additional paying agent.  The Company may change any Paying Agent or Registrar without prior notice to any Holder; provided that the Company shall promptly notify the Holders and the Trustee in writing of the name and address of any Agent not a party to this Indenture.  The Company may act as Paying Agent and/or Registrar.  In the event the Company uses any Agent other than the Company or the Trustee, the Company shall enter into an appropriate agency agreement with such Agent, which agreement shall incorporate the provisions of the TIA or provide that the duties performed thereunder are subject to and governed by the provisions of this Indenture.  The agreement shall implement or be subject to the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent.  If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.7 hereof.  In no event shall the Trustee be liable for the acts or omissions of any predecessor Paying Agent or Registrar.

 

(b) Pursuant to Section 2.15, the Company hereby elects to act as the initial Servicing Agent and Registrar and as agent for service of notices and demands in connection with the Securities.  The Company shall act as Registrar and agent for service of notices and demands in connection with the Securities until such time as the Company gives the Trustee written notice to the contrary.  Also pursuant to Section 2.15, the

 

  

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Company hereby appoints Wells Fargo Bank, National Association as the initial Paying Agent.

 

Section 2.4 Paying Agent to Hold Money in Trust.

 

Prior to each Payment Date, the Company shall deposit with the Paying Agent sufficient funds to pay principal and interest then so becoming due and payable in cash. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Securities, and will notify the Trustee promptly in writing of any default by the Company in making any such payment. While any such default continues, the Trustee shall require a Paying Agent (if other than the Company) to pay all money held by it to the Trustee.  The Company at any time may require a Paying Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money delivered to the Trustee.  If the Company acts as Paying Agent, then the Company shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. The Company shall notify the Trustee in writing at least five days before the Payment Date of the name and address of the Paying Agent if a person other than the Trustee is named Paying Agent at any time or from time to time.

 

Section 2.5 List of Holders.

 

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Registrar shall furnish to the Trustee within 10 days after the end of each fiscal quarter during the term of this Indenture and at such other times as the Trustee may request in writing, a copy of the current Securities Register as of such date as the Trustee may reasonably require and the Company shall otherwise comply with TIA § 312(a).

 

Section 2.6 Transfer and Exchange.

 

(a) The Securities are not negotiable instruments and cannot be transferred without the prior written consent of the Company (which consent shall not be unreasonably withheld).  Requests to the Registrar for the transfer of any Security shall be:

 

(i) made to the Registrar in writing on a form supplied by the Registrar;

 

(ii) duly executed by the Holder of the Security, as reflected on the Registrar’s records as of the date of receipt of such transfer request, or such Holder’s attorney duly authorized in writing;

 

(iii) accompanied by the written consent of the Company to the transfer (which consent may not be unreasonably withheld); and

 

  

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(iv) if requested by the Company or the Registrar, an opinion of Holder’s counsel (which counsel shall be reasonably acceptable to the requesting party) that the transfer does not violate any applicable securities laws and/or a signature guarantee.

 

(b) Upon transfer of a Security, the Company, or the Registrar on behalf of the Company, will provide the new registered owner of the Security with a Written Confirmation that will evidence the transfer of the Security in the Securities Register and will establish a corresponding Account.

 

(c) The Company or the Registrar may assess reasonable service charges to a Holder for any registration or transfer or exchange, and the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange pursuant to Section 9.5 hereof).

 

(d) With respect to the relevant Regular Record Date, the Company shall treat the individual or entity listed on each Account maintained by the Registrar as the absolute owner of the Security represented thereby for purposes of receiving payments thereon and for all other purposes whatsoever.

 

Section 2.7 Payment of Principal and Interest; Principal and Interest Rights Preserved.

 

(a) Each Security shall accrue interest at the rate specified for such Security in the Securities Register and such interest shall be payable on each Payment Date following the Issue Date for such Security, until the principal thereof becomes due and payable.  Any installment of interest payable on a Security that is caused to be punctually paid or duly provided for by the Company on the applicable Payment Date shall be paid to the Holder in whose name such Security is registered in the Securities Register on the applicable Regular Record Date with respect to the Securities outstanding, by electronic deposit to such Holder’s Payment Account as it appears in the Securities Register on such Regular Record Date.  The payment of any interest payable in connection with the payment of any principal payable with respect to such Security on a Maturity Date shall be payable as provided below.  In the event any payments made by electronic deposit are not accepted into the Holder’s Payment Account for any reason, such funds shall be held in accordance with Sections 2.4 and 8.3 hereof.  Any installment of interest not punctually paid or duly provided for shall be payable in the manner and to the Holders as specified in Section 2.10 hereof.

 

(b) Each of the Securities shall have stated maturities of principal as shall be indicated on such Securities or in the Written Confirmation and as set forth in the Securities Register.  The principal of each Security shall be paid in full as of the Maturity Date thereof pursuant to Section 2.1(d), unless the term of such Security is renewed pursuant to Section 2.1(e) hereof or such Security becomes due and payable at an earlier date by acceleration, redemption, repurchase or otherwise.  Interest on each Security shall be due and payable on each Payment Date at the interest rate applicable to such Security for the Interest Accrual Period related to such Security and such Payment Date. 

 

  

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Notwithstanding any of the foregoing provisions with respect to payments of principal of and interest on the Securities, if the Securities have become or been declared due and payable following an Event of Default, then payments of principal of and interest on the Securities shall be made in accordance with Article VI hereof.  If definitive, certificated securities are issued, then the principal payment made on any Security on any Maturity Date (or the Redemption Price or the Repurchase Price of any Security required to be redeemed or repurchased, respectively), and any accrued interest thereon, shall be payable on or after the Maturity Date, Redemption Date or the Repurchase Date therefore at the office or agency of the Company maintained by it for such purpose pursuant to Section 2.3 hereof or at the office of any Paying Agent for such Security.

 

(c) All computations of interest due with respect to any Security shall be made, unless otherwise specified in the Security, based upon a 365-day year.

 

Section 2.8 Outstanding Securities.

 

(a) The Securities outstanding at any time are the outstanding principal balances of all Accounts representing the Securities maintained by the Company or such other entity as the Company designated as Registrar.

 

(b) If the principal amount of any Security is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.

 

(c) Subject to Section 2.9 hereof, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

 

Section 2.9 Treasury Securities.

 

In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any Affiliate of the Company shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be fully protected in conclusively relying on any such direction, waiver or consent, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.

 

Section 2.10 Defaulted Interest.

 

If the Company defaults in a payment of interest on any Security, it shall pay the defaulted interest (as determined by the Company) plus, to the extent lawful, any interest payable on the defaulted interest, to the Holder of such Security on a subsequent special Payment Date, which date shall be at the earliest practicable date, but in all events within 15 days following the scheduled Payment Date of the defaulted interest, in each case at the rate provided in the Security. The Regular Record Date for the scheduled Payment Date shall be the record date for the special Payment Date. Prior to any such special Payment Date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holder(s) a notice that states the special Payment Date and the amount of such interest to be paid.

 

  

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Section 2.11 Temporary Notes.

 

If Securities are issued in certificated form in the limited circumstances contemplated under Section 2.13(b), pending the preparation of definitive Securities, the Company may execute, and direct that the Trustee authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities, in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.

 

If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Registrar without charge to the Holder.

 

Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.

 

Section 2.12 Execution, Authentication And Delivery.

 

(a) Subject to subsection (b) below, the Securities shall be executed on behalf of the Company by an Officer and attested by its Secretary or Assistant Secretary. The signature of any of these officers on the Securities may be manual or facsimile.  Securities 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 Securities or did not hold such offices at the date of such Securities.

 

At the time of and from time to time after the execution and delivery of this Indenture, the Company will deliver definitive or certificated forms of Securities, if any, executed by the Company to the Trustee for authentication, together with a direction from the Company for the authentication and delivery of such Securities.  The Trustee in accordance with such direction from the Company shall authenticate and deliver such Securities as in this Indenture provided and not otherwise.  Securities issued hereunder shall be dated as of their Issue Date.

 

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security an authentication executed by or on behalf of the Trustee by manual signature, and such authentication upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of the Indenture.

 

  

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(b) Notwithstanding the preceding subsection (a) of this Section, in connection with the issuance of each Security in book-entry form pursuant to Section 2.13, each Security shall be deemed to be executed and attested to by the Company and authenticated and delivered by the Trustee, in the same manner as provided in the preceding subsection (a), upon the delivery by the Company (or the Company’s duly authorized Agent) to the Holder of such Security of a Written Confirmation, with a copy of such Written Confirmation delivered to the Trustee, and the establishment by the Registrar of an Account for such Security in the name of the Holder pursuant to Section 2.13 hereof.

 

Section 2.13 Book-Entry Registration.

 

(a) The Registrar shall maintain a book-entry registration and transfer system through the establishment and maintenance of Accounts for the benefit of Holders of Securities as the sole method of recording the ownership and transfer of ownership interests in such Securities. The registered owners of the Accounts established by the Registrar in connection with the purchase or transfer of the Securities shall be deemed to be the Holders of the Securities outstanding for all purposes under this Indenture.  The Company (or its duly authorized Agent) shall promptly notify the Registrar of the acceptance of a subscriber’s order to purchase a Security by providing a copy of the accepted Subscription Agreement and the related Written Confirmation, and upon receipt of such notices, the Registrar shall establish an Account for such Security by recording a credit to its book-entry registration and transfer system to the Account of the related Holder of such Security for the principal amount of such Security owned by such Holder and issue a Written Confirmation to the Holder, with a copy being delivered to the Trustee, on behalf of the Company.  The Registrar shall make appropriate credit and debit entries within each Account to record all of the applicable actions under this Indenture that relate to the ownership of the related Security and issue Written Confirmations to the related Holders as set forth herein, with copies being delivered to the Trustee, on behalf of the Company.  For example, the total amount of any principal and/or interest due and payable to the Holders of the Accounts maintained by the Registrar as provided in this Indenture shall be credited to such Accounts by the Registrar within the time frames provided in this Indenture, and the amount of any payments of principal and/or interest distributed to the Holders of the Accounts as provided in this Indenture shall be debited to such Accounts by the Registrar.  The Trustee may review the book-entry registration and transfer system as it deems necessary to ensure the Registrar’s compliance with the terms of the Indenture.

 

(b) Book-entry Accounts evidencing ownership of the Securities shall be exchangeable for definitive or certificated forms of Securities in denominations of $1,000 and any amount in excess thereof and fully registered in the names as each Holder directs only if (i) the Company at its option advises the Trustee and the Registrar in writing of its election to terminate the book-entry system, or (ii) after the occurrence of any Event of Default, Holders of a majority of the aggregate outstanding principal amount of the Securities (as determined based upon the latest quarterly statement provided to the Trustee pursuant to Section 2.5 hereof) advise the Trustee in writing that the continuation of the book-entry system is no longer in the best interests of such Holders and the Trustee 

 

  

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notifies all Holders of the Securities, of such event and the availability of certificated forms of securities to the Holders of Securities.

 

Section 2.14 Initial and Periodic Statements.

 

(a) Subject to the rejection of a Subscription Agreement pursuant to Section 2.2(a), the Registrar shall send Written Confirmations to initial purchasers, registered owners, registered pledgees, former registered owners and former pledgees, within two Business Days of its receipt of proper notice regarding the purchase, transfer or pledge of a Security, with copies of such Written Confirmations being delivered to the Trustee, on behalf of the Company.

 

(b) The Registrar shall send each Holder of a Security (and each registered pledgee) via U.S. mail not later than 10 Business Days after each quarter end in which such Holder had an outstanding balance in such Holder’s Account, a statement which indicates as of the quarter end preceding the mailing: (i) the balance of such Account; (ii) interest credited for the period; (iii) repayments, redemptions or repurchases, if any, during the period; and (iv) the interest rates paid on the Securities in such Account during the period. The Registrar shall provide additional statements as the Holders or registered pledgees of the Securities may reasonably request from time to time. The Registrar may charge such Holders or pledgees requesting such statements a fee to cover the charges incurred by the Registrar in providing such additional statements.

 

Section 2.15 Appointment of Agents.

 

The Company may from time to time engage Agents to perform its obligations and exercise its rights and discretion under the terms of this Indenture.  In each such case, the Company will provide the Trustee with a copy of each agreement under which any such Agent is engaged and the name, address, telephone number and capacity of the Agent appointed.  If any such Agent shall resign, or such Agent’s engagement is terminated by the Company, subsequent to the Agent’s appointment by the Company under this Section 2.15, the Company shall promptly notify the Trustee in writing of such resignation or termination, along with the name, address, telephone number and capacity of any successor Agent.  Notwithstanding any engagement of an Agent hereunder, the Company shall remain obligated to fulfill each of its obligations under this Indenture.

 

Section 2.16    CUSIP/ISIN Numbers

 

The Company in issuing the Notes may use CUSIP and ISIN numbers (in each case, if then generally in use) and, if so, the Trustee shall use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Company will as promptly as practicable notify the Trustee in writing of any change in the CUSIP and ISIN numbers.

 

 

  

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ARTICLE III

 

REDEMPTION AND REPURCHASE

Section 3.1 Redemption of Securities at the Company’s Election.

 

(a) The Company may redeem, in whole or in part, any Security prior to the scheduled Maturity Date of the Security by providing pursuant to Section 2.1(f) a Redemption Notice to the Holder thereof listed on the records maintained by the Registrar, which notice shall include the Redemption Date and the Redemption Price to be paid to the Holder on the Redemption Date. No interest shall accrue on a Security to be redeemed under this Section 3.1 for any period of time after the Redemption Date for such Security, provided that the Company or the Paying Agent has timely tendered the Redemption Price to the Holder.

 

(b) The Company shall have no mandatory redemption or sinking fund obligations with respect to any of the Securities.

 

(c) In its sole discretion, the Company may offer certain Holders the ability to extend the maturity of an existing Security through the redemption of such Security and the issuance of a new Security. This redemption option shall not be subject to the 30 day notice of redemption described in Section 2.1(f).

 

Section 3.2 Repurchase of Securities at the Holder’s Request.

 

(a) Repurchase Upon Death or Disability.  Subject to subsection (c) below, within 45 days of the death or Total Permanent Disability of a Holder who is a natural person (including Securities held in an individual retirement account), the estate of such Holder (in the event of death) or such Holder (in the event of Total Permanent Disability) may request that the Company repurchase, in whole and not in part, without penalty, the Security held by such Holder, by delivering to the Company a Repurchase Request.  If a Security is held jointly by natural persons who are legally married, then a Repurchase Request may be made when either registered Holder of such Security dies or becomes subject to a Total Permanent Disability, the surviving Holder or the disabled Holder may request that the Company repurchase in whole and not in part, without penalty, such Security as jointly held by the Holders by delivering to the Company a Repurchase Request.  In the event a Security is held jointly by two or more natural persons that are not legally married, neither of these persons shall have the right to request that the Company repurchase such Security unless all joint holders of such Security have either died or suffered a Total Permanent Disability.  If the Security is held by a Holder who is not a natural person, such as a trust, partnership, corporation or other similar entity, the right to request repurchase upon death or disability does not apply.

 

  

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(b) Repurchase Upon Holder’s Election.  Subject to subsection (c) below, a Holder may request the Company to repurchase, in whole and not in part, the Security held by such Holder by delivering a Repurchase Request to the Company.  Any such requested repurchase shall be made only at the Company’s discretion and, if made, will be subject to an early Repurchase Penalty to be deducted from the payment of such Holder’s Repurchase Price on the Repurchase Date.  The early repurchase penalty (the “Repurchase Penalty”) shall equal the following:  (i) with respect to a Security with a three month maturity, the interest accrued on a simple interest basis on such Security from the Issue Date to the Repurchase Date at the existing interest rate thereof, but not to exceed three months of simple interest on such Security, or (ii) with respect to a Security with a maturity of six months or longer, the interest accrued on a simple interest basis on such Security from the Issue Date to the Repurchase Date at the existing interest rate thereof, but not to exceed six months of simple interest on such Security.

 

(c) Limitation on Repurchases.  The Company will only be required to repurchase Securities for which Repurchase Requests have been received pursuant to paragraph (a) above, and, if accepted by the Company, paragraph (b) above, to the extent that the aggregate Repurchase Price for all Securities for which Repurchase Requests are then outstanding in any calendar quarter would not exceed the greater of (i) two percent of the aggregate outstanding principal balance of all Securities as of the last day of the previous calendar quarter or (ii) $1 million.  For the purposes of applying such limits on the aggregate Repurchase Price for outstanding Repurchase Requests, such outstanding Repurchase Requests will be honored in the order of the date received or, in the case of Repurchase Requests made in connection with a Holder’s death or Total Permanent Disability, the later of the date received or the date such death or Total Permanent Disability is established to the reasonable satisfaction of the Company, and to the extent any Repurchase Request is not paid in the quarter received or so established due to such limitations, it will be honored in the subsequent quarter, to the extent possible, subject to the applicability of such limits on aggregate Repurchase Requests in each subsequent quarter.  For the avoidance of doubt, in the event that the Company would otherwise be required to repurchase a Security hereunder in a given quarter by reason of the priority of the Repurchase Request (as established in this Section) but for the fact that the Repurchase Price exceeds the amount remaining under the forgoing limitations (after giving effect to all other Repurchase Requests having priority during such quarter), the Company may, at its option, effect a partial repurchase of such Security, up to the portion of the Repurchase Price covered by the amount remaining, and carry the Repurchase Request for the balance of such Security forward as provided above.

 

(d) Repurchase Date.  To the extent a Security for which a Repurchase Request has been received during the then current calendar quarter is determined not to be subject to the limitation in subsection (c) above and thus, will be repurchased during the current quarter, then the Company shall designate a date for the repurchase of such Security (the “Repurchase Date”), which date shall not be more than 10 days after the Company’s receipt of the Repurchase Request or, in the case of a Repurchase Request following the death or Total Permanent Disability of the Holder, 10 days after the Company’s receipt of satisfactory establishment of such Holder’s death or Total Permanent Disability.  On the Repurchase Date, the Company shall pay the Repurchase Price to the Holder (or the 

 

  

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estate of the Holder, in the case of a request following death) in accordance with Section 2.7.  With respect to a Security for which a Repurchase Request has been received during a prior calendar quarter and for which the Repurchase Price was not paid during such prior calendar quarter, but rather the Repurchase Request has been carried over to and is still outstanding in the current calendar quarter (because of the limitation in subsection (c) above), the Company shall designate a Repurchase Date not later than the tenth (10th) day after the start of such calendar quarter, unless subsection (c) is again applicable, in which case such obligation shall be met not later than the tenth (10th) day after the start of the next calendar quarter during which such limitation is no longer applicable.  No interest shall accrue on a Security to be repurchased under this Section 3.2 for any period of time on or after the Repurchase Date for such Security, provided that the Company or the Paying Agent has timely tendered the Repurchase Price to the Holder or the estate of the Holder, as the case may be.

 

(e) Waiver and Modification of Repurchase Policies.  The Company may waive or reduce any early Repurchase Penalty in its sole discretion and may modify at any time its policy on the repurchase of Securities at the request of Holders; provided that no such modification shall adversely affect the rights of Holders to the repurchase of Securities for which Repurchase Requests are then outstanding.

 

ARTICLE IV

 

COVENANTS

Section 4.1 Payment of Securities.

 

(a) Subject to Article X, the Company shall duly pay the principal of and interest on each Security on the dates and in the manner provided under this Indenture.  Principal and interest (to the extent such interest is paid in cash) shall be considered paid on the date due if the Paying Agent, if other than the Company, holds, at least one Business Day before that date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal and interest then due; provided, however, that principal and interest shall not be considered paid within the meaning of this Section 4.1 if money is held by the Paying Agent for the benefit of holders of Senior Debt pursuant to the provisions of Article X hereof. Such Paying Agent shall return to the Company, no later than five days following the date of payment, any money (including accrued interest, if any) that exceeds such amount of principal and interest paid on the Securities in accordance with this Section 4.1.

 

(b) Subject to Article X, to the extent lawful, the Company shall pay interest (including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate borne by the Securities, compounded semi-annually; it shall pay interest (including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate, compounded semi-annually.

 

  

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Section 4.2 Maintenance of Office or Agency.

 

(a) The Company will maintain an office or agency (which may be an office of the Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. 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, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

(b) The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. 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.

 

(c) The Company hereby designates its office at 19500 Jamboree Road, Irvine, California 92612, as one such office or agency of the Company in accordance with Section 2.3.

 

Section 4.3 SEC Reports and Other Reports.

 

(a) The Company shall provide to the Trustee, within 45 days after filing with the SEC, paper copies or, if such documents are readily available on the SEC’s website, notification of the availability of, the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.  The Company shall otherwise comply with the periodic reporting requirements as set forth in TIA § 314(a), and the Company shall file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations.  Notwithstanding anything to the contrary herein, the Trustee shall have no duty to review such documents for purposes of determining compliance with any provisions of the Indenture.

 

(b) The Company, or such other entity as the Company shall designate as Registrar, shall provide the Trustee at intervals of not more than six months with management reports which provide the Trustee with such information regarding the Accounts maintained by the Company for the benefit of the Holders of the Securities as the Trustee may reasonably request which information shall include at least the following for the relevant time interval from the date of the immediately preceding report: (i) the outstanding balance of each Account at the end of the period; (ii) interest credited for the period; (iii) repayments, repurchases and redemptions, if any, made during the period; 

 

  

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and (iv) the interest rate paid on each Security in such Account maintained by the Registrar during the period.

 

(c) Notwithstanding any provision of this Indenture to the contrary, the Company shall not have any obligation to maintain any of its securities (other than the Securities hereunder), including without limitation its common stock, as securities registered under the Exchange Act or the Securities Act, as amended, or as securities listed and publicly traded on any national securities exchange.

 

Section 4.4 Compliance Certificate.

 

(a) The Company shall deliver to the Trustee, within 120 days after the end of each Fiscal Year, beginning in 2011, an Officers’ Certificate stating that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of their knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of their knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities are prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

 

(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to Section 4.3 above shall be accompanied by a written statement of the Company’s independent public accountants that in making the examination necessary for certification of such financial statements nothing has come to their attention which would lead them to believe that the Company has violated the provisions of Section 4.1 of this Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.

 

(c) The Company will, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

 

Section 4.5 Stay, Extension and Usury Laws.

 

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, 

 

  

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any stay, extension or usury 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 beneficial advantage of any such law, and covenants that it will not, by resort to any such law, 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 has been enacted.

 

Section 4.6 Liquidation.

 

The Board of Directors or the stockholders of the Company shall not adopt a plan of liquidation that provides for, contemplates or the effectuation of which is preceded by (a) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, otherwise than (i) substantially as an entirety (Section 5.1 of this Indenture being the Section hereof which governs any such sale, lease, conveyance or other disposition substantially as an entirety), or (ii) and Qualified Sales and Financing Transaction, and (b) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and of the remaining assets of the Company to the holders of capital stock of the Company, unless the Company, prior to making any liquidating distribution pursuant to such plan, makes provision for the satisfaction of the Company’s Obligations hereunder and under the Securities as to the payment of principal and interest.

 

Section 4.7 Financial Covenants.

 

[intentionally omitted].

 

Section 4.8 Restrictions on Dividends.

 

The Company covenants that, so long as any of the Securities are outstanding, it shall not declare or pay any dividends or other payments of cash or other property solely on account of its capital stock to its common or preferred stockholders (other than any dividend payable in shares of or rights to acquire shares of the Company’s capital stock on a pro rata basis to all stockholders), unless no Event of Default specified under Section 6.1(a) or (b) then exists or would exist immediately following the declaration or payment of such dividend or other payment.

 

Section 4.9 Securitization Transactions and Additional Indebtedness.

 

Notwithstanding any provision to the contrary within this Indenture, the Company shall not be prohibited, restricted or otherwise limited under this Indenture from entering into, sponsoring or conducting any Qualified Sales and Financing Transaction.

 

Except as otherwise provided in Section 4.8(b), the Company shall not be prohibited, restricted or otherwise limited from incurring or refinancing any Indebtedness subsequent to the date hereof, which Indebtedness will have such terms and provisions as the Company and the lender thereof may agree upon without any restriction or limitation hereunder and such Indebtedness will likely be senior in right of payment to the Securities.

 

  

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ARTICLE V

 

SUCCESSORS

Section 5.1 When the Company May Merge, etc.

 

(a) The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation, limited liability company or limited partnership organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the obligations of the Company pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Securities and this Indenture; and (iii) immediately after such transaction no Default or Event of Default exists.

 

(b) The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers’ Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture. The Trustee shall be entitled to conclusively rely upon such Officers’ Certificate and Opinion of Counsel.

 

Section 5.2 Successor Entity Substituted.

 

Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1, the successor entity or Person formed by such consolidation or into or with which the Company, is merged or to which such sale, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor entity or Person has been named as the Company herein, and upon such succession and substitution, the Company shall be released from all of its obligations and liabilities under this Indenture and the Securities.

 

ARTICLE VI

 

DEFAULTS AND REMEDIES

Section 6.1 Events of Default.

 

An “Event of Default” occurs if:

 

  

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(a) the Company fails to pay interest on a Security when the same becomes due and payable and such failure continues for a period of 15 days, whether or not such payment is prohibited by the provisions of Article X hereof;

 

(b) the Company fails to pay the principal amount of any Security when the same becomes due and payable on any Payment Date, and such failure continues for a period of 15 days, whether or not prohibited by the provisions of Article X hereof;

 

(c) the Company fails to observe or perform any material covenant, condition or agreement on the part of the Company under this Indenture or the breach by the Company of any material representation or warranty of the Company under this Indenture, and such failure or breach continues unremedied for a period of 60 days after the Company’s receipt of written notice of such failure or breach;

 

(d) the Company defaults in any other payment obligation of the Company (other than a payment obligation relating to a Qualified Sales and Financing Transaction) with an outstanding principal amount in excess of $1,000,000, such default results in such payment obligation becoming or being declared immediately due and payable and such declaration is not rescinded or annulled within a period of 60 days after the Company’s receipt of written notice of such declaration;

 

(e) the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) admits in writing its inability to pay debts as the same become due; or

 

(f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a custodian of the Company or for all or substantially all of its property; (iii) orders the liquidation of the Company, and in each case the order or decree remains unstayed and in effect for 120 consecutive days.

 

The term “Bankruptcy Law” means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors. The term “custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

 

A Default under clause (c) of this Section 6.1 (except for a Default with respect to Section 4.6 or 5.1) is not an Event of Default until the Trustee or the Holders of at least a majority in principal amount of the then outstanding Securities notify the Company in writing of the Default and the Company does not cure the Default or such Default is not waived within 60 days after receipt of the notice pursuant to Section 6.4. The notice must specify the Default, demand that it be remedied and state that the notice is a “Notice of Default.”

 

Section 6.2 Acceleration.

 

If an Event of Default (other than an Event of Default specified in clauses (e) or (f) of Section 6.1) occurs and is continuing, the Trustee by notice to the Company or the Holders of at 

 

  

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least a majority in principal amount of the then outstanding Securities by written notice to the Company and the Trustee may declare the unpaid principal of and any accrued interest on all the Securities to be due and payable. Upon such declaration, all unpaid principal of and accrued interest on all Securities shall be due and payable immediately; provided, however, that if any Indebtedness or Obligation is outstanding pursuant to, or with respect to, the Senior Debt, such a declaration of acceleration by the Holders shall not become effective until the later of (i) the day which is five Business Days after the receipt by each of the Company and the holders of Senior Debt of such written notice of acceleration or (ii) the date of acceleration of any Indebtedness under any Senior Debt; and provided, further, that, so long as any Senior Debt is outstanding, any such declaration by the Trustee or the Holders shall not become effective if any period during which the Company is not permitted to make payment on account of the Securities pursuant to Section 10.3 is then in effect.  If an Event of Default specified in clause (e) or (f) of Section 6.1 occurs, all unpaid principal of and accrued interest on all Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

 

Section 6.3 Other Remedies.

 

If an Event of Default occurs and is continuing, the Trustee may, after a declaration of acceleration under Section 6.2 above, pursue any available remedy to collect the payment of principal or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.  The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

 

Section 6.4 Waiver of Past Defaults.

 

Holders of a majority in principal amount of the then outstanding Securities by notice to the Trustee may, on behalf of the Holders of all Securities, waive any existing Default or Event of Default and its consequences under this Indenture, including without limitation a rescission of an acceleration pursuant to Section 6.2, except for a continuing Default or Event of Default in the payment of interest on or the principal of any Security held by a non-consenting Holder, or except for a waiver that would conflict with any judgment or decree.  Upon actual receipt of any such notice of waiver by a Responsible Officer of the Trustee, 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 Event of Default or impair any right consequent thereon.

 

Section 6.5 Control by Majority.

 

The Holders of a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it, provided, that indemnification for the Trustee’s fees and expenses, in a form reasonably satisfactory to the Trustee, shall have been provided. However, the Trustee may refuse to follow any direction that conflicts with law or this 

 

  

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Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may involve the Trustee in personal liability.

 

Section 6.6 Limitation on Suits.

 

A Holder may pursue a remedy with respect to this Indenture only if:

 

(a) the Holder gives to the Trustee written notice of a continuing Event of Default;

 

(b) the Holders of at least a majority in principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;

 

(c) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

 

(d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

 

(e) during such 60 day period the Holders of a majority in principal amount of the then outstanding Securities do not give the Trustee a direction inconsistent with the request.

 

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

 

Section 6.7 Rights of Holders to Receive Payment.

 

Notwithstanding any other provision of this Indenture, but subject to Article X hereof, the right of any Holder of a Security to receive payment of principal and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder.

 

Section 6.8 Collection Suit by Trustee.

 

If an Event of Default specified in Section 6.1(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid on the Securities and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

 

Section 6.9 Trustee May File Proofs of Claim.

 

(a) The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee 

 

  

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(including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders of the Securities may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities 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.

 

(b) If the Trustee does not file a proper claim or proof of debt in the form required in any such proceeding prior to 30 days before the expiration of the time to file such claims or proofs, then any holder of Senior Debt shall have the right to demand, sue for, collect and receive the payments and distributions in respect of the Securities which are required to be paid or delivered to the holders of Senior Debt as provided in Article X hereof and to file and prove all claims therefor and to take all such other action in the name of the Holders or otherwise, as such holder of Senior Debt may determine to be necessary or appropriate for the enforcement of the provisions of Article X hereof.

 

Section 6.10 Priorities.

 

If the Trustee collects any money pursuant to this Article, it shall, subject to the provisions of Article X hereof, pay out the money in the following order:

 

(a) First: to the Trustee, its agents and counsel for amounts due under Section 7.7, including payment of all compensation, expenses and liabilities incurred, and all advances made, if any, by the Trustee and counsel and the costs and expenses of collection;

 

(b) Second: to holders of Senior Debt to the extent required by Article X hereof;

 

(c) Third: to (i) Holders for amounts due and unpaid on the Securities for principal and interest, and (ii) holders of Pari Passu Debt for amounts due and unpaid on such Pari Passu Debt for principal and interest, ratably, without preference or priority 

 

  

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of any kind, according to the amounts due and payable on the Securities and/or such Pari Passu Debt for principal and interest, respectively; and

 

(d) Fourth: to the Company or to such party as a court of competent jurisdiction shall direct.

 

The Trustee may fix a record date and payment date for any payment to Holders.

 

Section 6.11 Undertaking for Costs.

 

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent (10%) in principal amount of the then outstanding Securities.

 

ARTICLE VII

 

TRUSTEE

Section 7.1 Duties of Trustee.

 

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

 

(b) Except during the continuance of an Event of Default:

 

(i) The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee.

 

(ii) The Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon resolutions, statements, reports, documents, orders, certificates, opinions or other instruments furnished to the Trustee and conforming to the requirements of this Indenture..

 

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

 

(i) This paragraph does not limit the effect of paragraph (b)(i) and (b)(ii) of this Section.

 

  

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(ii) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proven by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts.

 

(iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof.

 

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

 

(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense.

 

(f) The Trustee shall not be liable for interest on any money received by it, except as the Trustee may agree in writing with the Company.  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

 

Section 7.2 Rights of Trustee.

 

(a) The Trustee may conclusively rely upon and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented to it by the proper Person. The Trustee need not investigate any fact or matter stated in the document. The Trustee shall have no duty to inquire as to the performance of the Company’s covenants in Article IV hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or any Event of Default except any Default or Event of Default of which a Responsible Officer shall have received written notification or obtained actual knowledge.

 

Delivery of reports, information and documents to the Trustee under Sections 4.3(a), 4.3(b) and 4.4(b) is for informational purposes only and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely conclusively on Officers’ Certificates).

 

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. 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 from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

 

  

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(c) The Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence or the supervision of any agents, attorneys, custodians or nominees appointed by it with due care.

 

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

 

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

 

(f) None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, 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 indemnity satisfactory to it against such risk or liability is not assured to it.

 

(g) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

 

(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

 

(i) The Trustee shall not be deemed to owe any fiduciary duty to the holders of Pari Passu indebtedness or senior indebtedness of the Company and shall not be liable to any such holder for any action it takes or omits to take within the rights or powers conferred upon it by this Indenture.

 

(j) The Trustee shall not be responsible for any costs, expenses, damages or other liabilities arising (directly or indirectly) as a result of (i) any filing of a claim or proof of debt by holders of senior indebtedness (or their representative) or (ii) any right of holders of senior indebtedness (or their Representative) to file any such claim or proof of debt, in any such case in accordance with this Indenture.

 

(k) The Trustee shall not be deemed to have notice of an Event of Default for any purpose under this Indenture unless notified of such Event of Default by the Company, the Paying Agent (if other than the Company) or a Holder of the Securities.

  

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Section 7.3 Individual Rights of Trustee.

 

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.

 

Section 7.4 Trustee’s Disclaimer.

 

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company’s use of the proceeds from the Securities or any money paid to the Company or upon the Company’s direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Securities or any other document in connection with the sale of the Securities or pursuant to this Indenture other than its certificate of authentication.

 

Section 7.5 Notice of Defaults.

 

If a Default or an Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Event of Default within 90 days after it occurs or as soon as practicable after it is known to a Responsible Officer of the Trustee.  Except in the case of an Event of Default in payment on any Security, the Trustee may withhold the notice if and so long as the Responsible Officer of the Trustee in good faith determines that withholding the notice is in the interests of the Holders.

 

Section 7.6 Reports by Trustee to Holders.

 

(a) Within 60 days of the end of each Fiscal Year, commencing with the fiscal year ending December 31, 2010 and for so long as the Securities remain outstanding, the Trustee shall mail to Holders (with a copy to the Company) a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the 12 months preceding the reporting date, no report need be prepared or transmitted). The Trustee also shall comply with TIA § 313(b). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

 

(b) Commencing at the time this Indenture is qualified under the TIA, a copy of each report mailed to Holders under this Section 7.6 (at the time of its mailing to Holders) shall be filed with the SEC and each stock exchange, if any, on which the Securities are listed in accordance with TIA §313(d). The Company shall promptly notify the Trustee in writing if and when the Securities are listed on any stock exchange or the delisting thereof.

 

Section 7.7 Compensation and Indemnity.

 

(a) The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and its performance of the duties and services required 

 

  

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hereunder as the parties shall agree to in writing from time to time. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

 

(b) The Company shall indemnify the Trustee against any and all losses, damages, claims, liabilities or expenses (including attorney's fees and expenses) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, except as set forth in Section 7.7(d).  The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder.  The Company shall defend the claim and the Trustee shall reasonably cooperate in such defense.  The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel.  The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.

 

(c) The obligations of the Company to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.

 

(d) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or willful misconduct.

 

(e) To secure the Company’s payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on the Securities or to pay Senior Debt.  Such lien shall survive the satisfaction and discharge of this Indenture.

 

(f) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(e) or (f) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

 

Section 7.8 Replacement of Trustee.

 

(a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.8.

 

(b) The Trustee may resign at any time and be discharged from the trust hereby created by so notifying the Company.  The Holders of a majority of the aggregate principal amount of the outstanding Securities may remove the Trustee (including any successor Trustee) at any time by so notifying the Trustee and the Company in writing not less than 30 days prior to the effective date of such removal. The Company may remove the Trustee if:

 

  

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(i) the Trustee fails to comply with Section 7.10 hereof;

 

(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

 

(iii) a Custodian or public officer takes charge of the Trustee or its property;

 

(iv) the Trustee becomes incapable of acting as Trustee under this Indenture, or

 

(v) the Company so elects, provided such replacement Trustee is qualified.

 

(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee.

 

(d) If a successor Trustee does not take office within 30 days after notice that the Trustee has resigned or has been removed, the Company or the Trustee or the Holders of at least a majority in principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee (at the Company's expense).

 

(e) If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10, such Holder may, (at the Company’s expense) petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

 

(f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to all Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the lien provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) hereof shall continue for the benefit of the retiring Trustee.

 

Section 7.9 Successor Trustee by Merger, etc.

 

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

 

  

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Section 7.10 Eligibility; Disqualification.

 

(a) There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state or territory thereof or of the District of Columbia authorized under such laws to exercise corporate trustee power, shall be subject to supervision or examination by Federal, state, territorial or District of Columbia authority and shall have a combined capital and surplus of at least $5,000,000 as set forth in its most recent published annual report of condition.

 

(b) This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1) and (2). The Trustee shall be subject to TIA § 310(b).

 

Section 7.11 Preferential Collection of Claims Against Company.

 

The Trustee shall be subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

 

ARTICLE VIII

 

DISCHARGE OF INDENTURE

Section 8.1 Termination of Company’s Obligations.

 

(a) This Indenture shall cease to be of further effect (except that the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) and its obligations under Section 8.4, and the Company’s, Trustee’s and Paying Agent’s obligations under Section 8.3 shall survive) when, without violating Article X hereof, all outstanding Securities have been paid in full and the Company has paid all sums payable by the Company hereunder.  In addition, the Company may terminate all of its obligations under this Indenture if, without violating Article X hereof:

 

(i) the Company irrevocably deposits in trust with the Trustee or, at the option of the Trustee, with a trustee reasonably satisfactory to the Trustee and the Company under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, money or U.S. Government Obligations sufficient (as certified by a reputable independent public accountant designated by the Company) to pay principal and interest on the Securities to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, provided that (A) the trustee of the irrevocable trust shall have been irrevocably instructed to pay such money or the proceeds of such U.S. Government Obligations to the Trustee and (B) the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal and interest with respect to the Securities;

 

  

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(ii) the Company delivers to the Trustee an Officers’ Certificateand an opinion of counsel stating that all conditions precedent to satisfaction and discharge of this Indenture have been complied with; and

 

(iii) no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit.

 

Then, this Indenture shall cease to be of further effect (except as provided in this paragraph), and the Trustee, on demand of the Company, shall execute proper instruments acknowledging confirmation of and discharge under this Indenture. The Company may make the deposit only if Article X hereof does not prohibit such payment. However, the Company’s obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.2, 7.7(c), 7.8, 8.3 and 8.4 and the Trustee’s and Paying Agent’s obligations in Section 8.3 shall survive until the Securities are no longer outstanding. Thereafter, only the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b), its obligations under Section 8.4 and the Company’s, Trustee’s and Paying Agent’s obligations in Section 8.3 shall survive.

 

(b) After such irrevocable deposit made pursuant to this Section 8.1 and satisfaction of the other conditions set forth herein, the Trustee upon written request shall acknowledge in writing the discharge of the Company’s obligations under this Indenture except for those surviving obligations specified above.

 

(c) In order to have money available on a payment date to pay principal or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest at least one Business Day before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer’s option.

 

Section 8.2 Application of Trust Money.

 

The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.1. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Securities.

 

Section 8.3 Repayment to Company.

 

(a) The Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money or securities held by them at any time.

 

(b) The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal or interest on the Securities that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have either caused notice of such payment to be mailed to each Holder entitled thereto no less than 30 days prior to such repayment or within such period shall have published such notice in a newspaper of 

 

  

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widespread circulation published in Orange County, California.  After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.

 

Section 8.4 Reinstatement.

 

If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.2; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment, as long as no money is owed to the Trustee by the Company, from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

 

ARTICLE IX

 

AMENDMENTS

Section 9.1 Without Consent of the Holders.

 

The Company and the Trustee may amend this Indenture or the Securities without the consent of any Holder:

 

(a) to cure any ambiguity, defect or inconsistency;

 

(b) to comply with Section 5.1;

 

(c) to provide for the issuance of uncertificated Securities or certificated Securities in excess of an aggregate outstanding principal balance of $50 million;

 

(d) to make any change that does not adversely affect the legal rights hereunder of any Holder, including but not limited to, an increase in the aggregate dollar amount of Securities which may be outstanding under this Indenture;

 

(e) make any change in Section 3.2; provided, however, that no such change shall adversely affect the rights of any outstanding or issued Security; or

 

(f) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA.

 

  

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Section 9.2 With Consent of the Holders.

 

(a) The Company and the Trustee may amend this Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities. The Holders of a majority in principal of the then outstanding Securities may also waive on behalf of all Holders any existing Default or Event of Default or compliance with any provision of this Indenture or the Securities. However, without the consent of the Holder of each Security affected, an amendment or waiver under this Section may not (with respect to any Security held by a nonconsenting Holder):

 

(i) reduce the aggregate principal amount of Securities whose Holders must consent to an amendment, supplement or waiver;

 

(ii) reduce the rate of or change the time for payment of interest, including default interest, on any outstanding Security;

 

(iii) reduce the principal of or change the fixed maturity of any Security or alter the redemption provisions or the price at which the Company shall offer to purchase such Security pursuant to Section 3.1 of Article III hereof;

 

(iv) make any Security payable in money other than that stated in the Prospectus;

 

(v) modify or eliminate the right of the estate of a Holder or a Holder to cause the Company to repurchase a Security upon the death or Total Permanent Disability of a Holder pursuant to Article III; provided, however, that the Company may not modify or eliminate such right, as it may be in effect on the Issue Date, of any Security which was issued with such right, and after an amendment under this subsection 9.2(a)(v) becomes effective, the Company shall mail to the Holders of each Security then outstanding a notice briefly describing the amendment;

 

(vi) make any change in Section 6.4 or 6.7 hereof or in this sentence of this Section 9.2;

 

(vii) make any change in Article X that materially adversely affects the rights of any Holders; or

 

(viii) waive a Default or Event of Default in the payment of principal of or interest on any Security (except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount of the Securities and a waiver of the payment default that resulted from such acceleration).

 

(b) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

 

  

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(c) After an amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Security affected thereby a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities.

 

Section 9.3 Compliance with Trust Indenture Act.

 

If at the time this Indenture shall be qualified under the TIA, every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

 

Section 9.4 Effect of Consents.

 

(a) Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent is not made on any Security. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

 

(b) The Company may fix a record date for determining which Holders must consent to such amendment or waivers. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 2.5, or (ii) such other date as the Company shall designate.

 

Section 9.5 Notation on or Exchange of Securities.

 

The Trustee may place an appropriate notation about an amendment or waiver on any Security, if certificated, or any Account statement.  Failure to make any notation or issue a new Security shall not affect the validity and effect of such amendment or waiver.

 

Section 9.6 Trustee to Sign Amendments, etc.

 

The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article IX if, in the Trustee’s reasonable discretion, the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall receive an indemnity reasonably satisfactory to it and to receive and, subject to Section 7.1, shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel (or written advice of counsel, at the Company's expense) as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with 

 

  

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its terms. The Company may not sign an amendment or supplemental indenture until its Board of Directors approves it.

 

ARTICLE X

 

SUBORDINATION

Section 10.1 Agreement to Subordinate.

 

(a) The Company agrees, and each Holder by accepting a Security consents and agrees, that the Indebtedness evidenced by the Securities and the payment of the principal of, and interest on and other amounts owing with respect to, the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, of all Obligations due in respect of Senior Debt of the Company whether outstanding on the date hereof or hereafter incurred, and that the subordination is for the benefit of the holders of Senior Debt.

 

(b) For purposes of this Article X, a payment or distribution on account of the Securities may consist of cash, property or securities, by set-off or otherwise, and a payment or distribution on account of any of the Securities shall include, without limitation, any redemption, purchase or other acquisition of the Securities.

 

Section 10.2 Liquidation; Dissolution; Bankruptcy.

 

(a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon (i) any dissolution or winding-up or total or partial liquidation or reorganization of the Company whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (ii) any bankruptcy or insolvency case or proceeding or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, (iii) any assignment for the benefit of creditors or any other marshaling of assets of the Company, all obligations due, or to become due, in respect of Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) shall first indefeasibly be paid in full, or provision shall have been made for such payment, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before any payment is made on account of the principal of or interest on the Securities.  Upon any such dissolution, winding-up, liquidation or reorganization, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (in order of priority, and when of equal priority, pro rata to such holders of equal priority on the basis of the amounts of Senior Debt held by such holders) or their representative or representatives, or to the 

 

  

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trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been indefeasibly paid in full, or provisions shall have been made for such payment, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt.

 

(b) For purposes of this Article X, the words “cash, property or securities” shall be deemed to include securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated, to at least the same extent as the Securities, to the payment of all Senior Debt then outstanding or to the payment of all securities issued in exchange therefor to the holders of Senior Debt at the time outstanding.  The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article V shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article V.

 

(c)      The provisions of Section 10.2(a) and (b) shall not prohibit, restrict or otherwise limit the Company from entering into, sponsoring or conducting any Qualified Sales and Financing Transaction.

 

Section 10.3 Default of Senior Debt.

 

(a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt, or any amount owing from time to time under or in respect of Senior Debt or in the event that any nonpayment event of default with respect to any Senior Debt shall have occurred and be continuing and shall have resulted in such Senior Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or (b) in the event that any other nonpayment event of default with respect to any Senior Debt shall have occurred and be continuing permitting the holders of such Senior Debt (or a trustee on behalf of the holders thereof) to declare such Senior Debt due and payable prior to the date on which it would otherwise have become due and payable, then the Company shall make no payment, direct or indirect (including any payment which may be payable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities) on account of any Securities unless and until (i) such event of default shall have been cured or waived or shall have ceased to exist or such acceleration shall have been rescinded or annulled, or (ii) in case of any nonpayment event of default specified in (b), during the period (a “Payment Blockage Period”) commencing on the date the Company and the Trustee receive written notice (a “Payment Notice”) of such event of default (which notice shall be binding on the Trustee and the Holders as to the occurrence of such an event of default) from a holder of the Senior Debt to which such default relates and ending on the earliest of (A) 179 days after such date, 

 

  

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(B) the date, if any, on which such Senior Debt to which such default relates is discharged or such default is waived by the holders of such Senior Debt or otherwise cured and (C) the date on which the Trustee receives written notice from the holder of such Senior Debt to which such default relates terminating the Payment Blockage Period.  Notwithstanding the foregoing, during any Payment Blockage Period, the Company shall make payments for rescinded subscriptions under Section 2.2(b) (including subscriptions that occur at a time when a Post-Effective Amendment was required but not yet effective).  The holders of the Senior Debt may deliver up to three (3) Payment Notices to the Company and the Trustee in any 360 day period, provided that in no event shall the cumulative Payment Blockage Periods exceed 179 days in a 360 day period.

 

(b) Subject to the provisions of Sections 6.9 and 10.7, neither the Trustee nor the Holders may take any action to assert, demand, sue for, collect, enforce or realize upon the Securities or the related Obligations or any part thereof in any period during which the Company is not permitted to make payment on account of the Securities pursuant to Section 10.3, unless and only to the extent that the commencement of a legal action may be required to toll the running of any applicable statute of limitations.

 

Section 10.4 When Distribution Must Be Paid Over.

 

(a) If the Trustee or any Holder receives any payment with respect to the Securities, whether in cash, property or securities, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Debt (in order of their priority, and when of equal priority, pro rata to such holders of equal priority on the basis of the amounts of Senior Debt held by such holders) for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, in accordance with the terms of such Senior Debt, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt.

 

(b) With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article X, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article X, except if such payment is made as a result of the willful misconduct or negligence of the Trustee.

 

Section 10.5 Notice by Company.

 

The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Company to violate this Article, but failure to give such notice shall not affect the subordination of the Securities to the Senior Debt provided in this Article.

 

  

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Section 10.6 Subrogation.

 

After all Senior Debt is paid in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Debt, and until the Securities are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Securities) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt.

 

Section 10.7 Relative Rights.

 

(a) This Article defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall:

 

(i) impair, as between the Company and Holders, the obligations of the Company, which are absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms;

 

(ii) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt; or

 

(iii) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders.

 

(b) If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default.

 

Section 10.8 Subordination May Not Be Impaired by the Company or Holders of Senior Debt.

 

(a) No right of any present or future holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Securities and the Obligations related thereto shall be prejudiced or impaired by any act or failure to act by any such holder or by the Company, the Trustee or any Agent or by the failure of the Company to comply with this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

 

(b) Without limiting the effect of the preceding paragraph, any holder of Senior Debt may at any time and from time to time without the consent of or notice to any other holder or to the Trustee, without impairing or releasing any of the rights of any holder of Senior Debt under this Indenture, upon or without any terms or conditions and in whole or in part:

 

(i) change the manner, place or term of payment, or change or extend the time of payment of, renew or alter any Senior Debt or any other liability of the Company to such holder, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the provisions of this Article X shall apply to the Senior Debt as so changed, extended, renewed or altered;

 

(ii) notwithstanding the provisions of Section 5.1 hereof, sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, any Senior Debt or any other liability of the Company to such holder or any other liabilities incurred directly or 

 

  

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indirectly in respect thereof or hereof or any offset thereagainst;

 

(iii) exercise or refrain from exercising any rights or remedies against the Company or others or otherwise act or refrain from acting or, for any reason, fail to file, record or otherwise perfect any security interest in or lien on any property of the Company or any other Person; and

 

(iv) settle or compromise any Senior Debt or any other liability of the Company to such holder, or any security therefor, or any liability incurred directly or indirectly in respect thereof.

 

(c) All rights and interests under this Indenture of any holder of Senior Debt and all agreements and obligations of the Trustee, the Holders, and the Company under Article VI and under this Article X shall remain in full force and effect irrespective of (i) any lack of validity or enforceability of any agreement or instrument relating to any Senior Debt or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Trustee, any Holder, or the Company.

 

(d) Any holder of Senior Debt is hereby authorized to demand specific performance of the provisions of this Article X, whether or not the Company shall have complied with any of the provisions of this Article X applicable to it, at any time when the Trustee or any Holder shall have failed to comply with any of these provisions. The Trustee and the Holders irrevocably waive any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.

 

Section 10.9 Distribution or Notice to Representative.

 

(a) Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their representative.

 

(b) Upon any payment or distribution of assets of the Company referred to in this Article X, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending or upon any certificate of any representative of any holder of Senior Debt or of the liquidating trustee or agent or other Person making any distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X.

 

  

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Section 10.10  Rights of Trustee and Paying Agent.

 

(a) Notwithstanding the provisions of this Article X or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution by the Trustee, or the taking of any action by the Trustee, and the Trustee or Paying Agent may continue to make payments on the Securities unless it shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Securities to violate this Article, which notice, unless specified by a holder of Senior Debt as such, shall not be deemed to be a Payment Notice. The Trustee may conclusively rely on such notice. Only the Company or a holder of Senior Debt may give the notice. Nothing in this Article X shall apply to amounts due to, or impair the claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.

 

(b) The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.

 

Section 10.11 Authorization to Effect Subordination.

 

Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination as provided in this Article X, and appoints the Trustee his attorney-in-fact for any and all such purposes.

 

Section 10.12 Article Applicable to Paying Agent.

 

In case at any time any Paying Agent (other than the Trustee or the Company) shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article X shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article X in addition to or in place of the Trustee.

 

Section 10.13 Miscellaneous.

 

(a) The agreements contained in this Article X shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made.

 

(b) The Trustee shall notify all holders (at the Company's expense) of Senior Debt (of whose identity the Trustee has received reasonable advance written notice) of the existence of any Default or Event of Default under Section 6.1 promptly after a Responsible Officer of the Trustee actually becomes aware thereof; provided, however, that at least five Business Days prior to the notification of any holder of Senior Debt under this Section 10.13, the Trustee shall provide the Company with notice of its 

 

  

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intent to provide such notification, provided further, however, that no defect in the form or delivery of the Trustee’s notice to the Company shall preclude the timely notice by the Trustee to the holders of Senior Debt.

 

ARTICLE XI

 

MISCELLANEOUS

Section 11.1 Trust Indenture Act Controls.

 

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA § 318(c), the imposed duties shall control.

 

Section 11.2 Notices.

 

(a) Any notice, instruction, direction, request or other communication by the Company, the Trustee or any other holder of Senior Debt to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested),  telecopier or overnight air courier guaranteeing next day delivery, to the other’s address:

 

If to the Company:

 

Consumer Portfolio Services, Inc.

19500 Jamboree Road

Irvine, CA 92612

 

Attention:  Chief Financial Officer

Telecopier: 949-753-6897

 

With a copy to:

 

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, TX 75201

 

Attention:  Mark W. Harris

Telecopier:  214-659-4773

 

If to the Trustee:

 

Wells Fargo Bank, National Association

45 Broadway, 14th Floor

New York, New York  10006

 

Attention:  Corporate Trust Services

Telecopier:  (212) 515-1589

 

  

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If to a holder of Senior Debt, such address as such holder of Senior Debt shall have provided in writing to the Company and the Trustee.

 

(b) The Company, the Trustee or a holder of Senior Debt by notice to the Company and the Trustee may designate additional or different addresses for subsequent notices or communications.

 

(c) All notices and communications (other than those sent to Holders) 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 receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

 

(d) Any notice or communication to a Holder shall be mailed by first-class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

 

(e) If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

 

(f) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

 

Section 11.3 Communication by Holders with Other Holders.

 

Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Trustee shall be subject to § 312(b).  The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

 

Section 11.4 Certificate and Opinion as to Conditions Precedent.

 

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

 

(a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and

 

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.

 

  

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Section 11.5 Statements Required in Certificate or Opinion.

 

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall include:

 

(a) a statement that the Person making such certificate or opinion has read such covenant or condition;

 

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion whether such covenant or condition has been complied with; and

 

(d) a statement whether, in the opinion of such Person, such condition or covenant has been complied with.

 

Section 11.6 Rules by Trustee and Agents.

 

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

 

Section 11.7 Legal Holidays.

 

A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions in the State of New York or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

 

Section 11.8 No Recourse Against Others.

 

No director, officer, employee, agent, manager or stockholder of the Company as such, shall have any liability for any Obligations of the Company under the Securities 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 Security waives and releases all such liability.

 

Section 11.9 Duplicate Originals.

 

The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture.

 

  

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Section 11.10 Governing Law.

 

THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.

 

Section 11.11 No Adverse Interpretation of Other Agreements.

 

This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

 

Section 11.12 Successors.

 

All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

 

Section 11.13 Severability.

 

In case any provision in this Indenture or in the Securities 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 11.14 Counterpart Originals.

 

This Indenture may be executed by facsimile and in one or more counterparts, each of which shall be deemed to be an original, but all of which together constitute one and the same agreement.

 

Section 11.15 Table of Contents, Headings, etc.

 

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions thereof. 

 

Section 11.16 USA Patriot Act

 

The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions, and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee.  The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

 

  

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Section 11.17 Force Majeure

 

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.

 

 

 

 

[remainder of page blank]

 

  

INDENTURE-Page 51

  

SIGNATURES:

 

 

IN WITNESS WHEREOF, the parties hereto have caused to be duly executed as of the day and year first written above, this Indenture.

 

CONSUMER PORTFOLIO SERVICES, INC.

By:                                                      

Name:                                                                

Title:                                                      

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association,

as Trustee

By:                                                      

Name:                                                                

Title:                                                      

 

 

 

 

 

 

INDENTURE – Page 52

  

  

  

Form of Note

INDENTURE – Page

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