Document:

ex-operatingagmt.htm

Exhibit 10.2

 

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

PICO Northstar, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. § 15B ET SEQ., AS AMENDED (THE “FEDERAL ACT”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT.  IN ADDITION, THE ISSUANCE OF THIS SECURITY HAS NOT BEEN QUALIFIED UNDER THE DELAWARE CORPORATE SECURITIES LAW OR ANY OTHER STATE SECURITIES LAWS (COLLECTIVELY, THE “STATE ACTS”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF THE STATE ACTS.  IT IS UNLAWFUL TO CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN TO, OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY PERSON OR ENTITY WITHOUT THE OPINION OF COUNSEL FOR THE COMPANY THAT THE PROPOSED SALE OR OTHER TRANSFER OF THIS SECURITY DOES NOT AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS FROM REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL SECURITIES LAWS.  THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED UNDER THE TERMS OF THIS AGREEMENT.

 

WEST\222259425.7

  

  

  

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

PICO Northstar, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) is made and entered into as of September 21, 2010 (the “Effective Date”) by and among (i) PICO Northstar Management LLC, a Delaware limited liability company (“PICO”) and Northstar Agri Industries, LLC, a Delaware limited liability company (“Northstar”) (collectively, the “Members”) for the purposes of forming a limited liability company pursuant to the Act to be known as PICO Northstar, LLC (the “Company”).  Certain capitalized terms used in this Agreement are defined in Section 17 below.

 

RECITALS

 

WHEREAS, pursuant to that certain Contribution Agreement of even date herewith by and among Northstar, PICO and the Company, a copy of which is attached hereto as Exhibit A (the “Contribution Agreement”), Northstar shall contribute to the Company assets which comprise a canola oil crushing and processing business as more fully described in the Contribution Agreement; and

 

WHEREAS, PICO and Northstar desire to enter into this Agreement to govern the operation of the Company;

 

NOW THEREFORE, the parties hereto agree as follows:

 

AGREEMENT

 

Section 1.          Name and Principal Executive Office; Representations.

 

1.1 Name.  The name of the Company is PICO Northstar, LLC.  The principal executive office of the Company is located in Fargo, North Dakota unless changed by the Manager, in its sole and absolute discretion, with written notice given to the Members of such change.

 

1.2 Certificate of Formation.  The Manager has filed a Certificate of Formation (the “Certificate”) in the form and manner required by Delaware law.  The Manager shall provide a copy of the Certificate and any amendment thereof to any Member that requests a copy from the Manager in writing.

 

1.3 Fictitious Business Name Statement.  The Manager is authorized to file and publish a Fictitious Business Name Statement for the Company in any jurisdiction it deems appropriate.

 

  

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1.4 Representations and Warranties.  Each of the Members hereby makes the following representations, warranties and covenants with respect to this investment:

 

1.4.1 The Member understands:  (i) That the interests in the Company evidenced by this Agreement have not been registered under the Securities Act of 1933, 15 U.S.C. § 15b et seq., or the securities laws of Delaware or any other state (collectively, the “Securities Acts”) because the Company is issuing interests in the Company in reliance upon the exemptions from the registrations requirements of the Securities Acts providing for issuance of securities not involving a public offering; (ii) that the Manager and the Company is relying upon the representations made by the Member herein in determining that such an exemption is available, and would not be forming the Company in the absence of such representations; (iii) that exemption from registration under the Securities Acts would not be available if any interest in the Company was acquired by a Member with a view to distribution -- the Member agrees that the Company is under no obligation to register the interests in the Company or to assist the Member in complying with any exemption from registration under the Securities Acts if such Member should at a later date wish to dispose of such Member’s interest in the Company; and (iv) that no public market exists with respect to the interests and no representation has been made that such a public market will exist at a future date.

 

1.4.2 The Member hereby represents that such Member is acquiring its interest in the Company for such Member’s own account, for investment and not with a view, or for resale in connection with, any distribution thereof.  No other person or entity has any interest in or right with respect to the interest issued to the Member, nor has the Member agreed to give any person or entity any such interest or right in the future.

 

1.4.3 The Member hereby represents that the Member has not received any advertisement or general solicitation with respect to the sale of interests in the Company.

 

1.4.4 The Member represents that by reason of such Member’s business and financial experience or the business or financial experience of such Member’s financial advisors (who are not affiliated with the Company), it has the capacity to protect such Member’s own interest in connection with the acquisition of the interest in the Company.  Each Member further acknowledges that such Member is familiar with the financial condition and prospects of the Company’s business, and the current activities of the Company.  Each Member believes that the interests are securities of the kind such Member wishes to purchase and hold for investment, and that the nature and amount of the interests are consistent with such Member’s investment program.

 

1.4.5 Before acquiring any interest in the Company, the Member has investigated the Company and its business and the Company has made available to the Member all information necessary for the Member to make an informed decision to acquire an interest in the Company.  Without limitation of the foregoing, the Member has (i) read and understood this Agreement, and (ii) has had the opportunity to retain one or more professional advisers to evaluate the Company.  The Member considers itself to be a person or entity possessing experience and sophistication as an investor adequate for the evaluation of the merits and risks of the Member’s investment in the Company.

 

 

  

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1.4.6 The Member understands the meaning and consequences of the representations, warranties and covenants made by it herein and that the Manager and the Company has relied upon such representations, warranties and covenants.  Each Member hereby indemnifies, defends, protects and holds wholly free and harmless the Company from and against any and all losses, damages, expenses or liabilities arising out of the breach and/or inaccuracy or any such representation, warranty and/or covenant.  All representations, warranties and covenants contained herein and the indemnification contained in this Section 1.4.6 shall survive the execution of this Agreement, the formation of the Company, and the liquidation of the Company.

 

Section 2.            Purposes and Nature of Business.

 

2.1 In General.  The purposes of the Company and the business to be carried on by it, subject to the limitations contained elsewhere in this Agreement, are:

	
(a)

	
 To acquire the Assets pursuant to the Contribution Agreement;

	
(b)

	
 To manage, operate, finance, refinance, encumber, sell, exchange, or dispose of (in whole or in part) the Business or any of its assets; and

	
(c)

	
 To carry on any other activities necessary to, in connection with or incidental to the accomplishment of the foregoing purposes of the Company, as determined by the Manager.

 

Section 3.            Term.

 

The Company shall commence on the Effective Date and shall continue in perpetuity, unless terminated earlier in accordance with the dissolution and termination provisions of this Agreement, or by law.

 

Section 4.            Capital Contributions and Accounts.

 

4.1 Initial Capital Contributions the Members.

 

4.1.1 PICO.  PICO shall contribute to the Company a cash capital contribution up to the amount of Sixty Million Dollars ($60,000,000), which includes amounts previously paid for the advancement of expenses and costs; such amount shall be determined on the Contribution Date, as that term is defined in the Contribution Agreement, and is currently estimated to be Fifty Nine Million Three Hundred and Four Thousand Dollars ($59,304,000).  The capital account of PICO shall be increased by up to Sixty Million Dollars ($60,000,000) to reflect such contribution.

 

4.1.2 Northstar.  Pursuant to the Contribution Agreement, Northstar shall contribute the Assets.  The parties hereto agree that the fair market value of the Assets, net of any liabilities assumed by the Company pursuant to the Contribution Agreement and this Section 4.1.2, is Eight Million Four Hundred Forty Six Thousand Dollars ($8,446,000) and the

capital account of Northstar shall be increased by Eight Million Four Hundred Forty Six Thousand Dollars ($8,446,000) to reflect such contribution.

 

 

  

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4.1.3 Conditions to Contributions.  The obligations of PICO and Northstar set forth in Section 4.1.1 and Section 4.1.2, respectively, are conditioned upon the execution of a loan agreement, promissory note and related documentation which provides a senior debt facility to the Company in an amount not less than One Hundred Million ($100,000,000), which will have occurred on or before March 31, 2011, unless the parties mutually agree to terminate the Contribution Agreement prior to such date.  Furthermore, the obligation of PICO set forth in Section 4.1.1 is conditioned upon Northstar delivering a Confidentiality and Non-compete Agreement, in the form as set forth in Appendix A of the Operating Agreement, executed by each member of the Northstar Board of Governors.

 

4.2 Subsequent Capital Contributions.  No Member shall be required to make any additional Capital Contributions to the Company.  The Members may make additional Capital Contributions in cash or in property, from time to time, as they unanimously agree, provided that, in the event that the Company pursues a new project in the oilseed industry, the Members shall be offered the opportunity to participate.

 

4.3 Capital Accounts of Members.  An individual capital account shall be determined and maintained for each Member in accordance with Regulations Section 1.704-1(b)(2)(iv), which provides that a Member’s capital account shall be increased by (i) the amount of cash contributed to the Company by such Member, (ii) the Fair Market Value of Property contributed by such Member to the Company (net of liabilities secured by such contributed Property that the Company is considered to assume or take subject to under Code Section 752), and (iii) any Company Net Income or Gain (or item thereof) allocated to such Member (including income and gain exempt from tax).  A Member’s capital account shall be decreased by (i) the amount of cash distributed by the Company to such Member, (ii) the Fair Market Value of Property distributed to such Member by the Company (net of liabilities secured by such distributed Property that such Member is considered to assume or take subject to under Code Section 752), (iii) such Member’s allocable share of Company expenditures described in Code Section 705(a)(2)(B), and (iv) any Company Net Loss (or item thereof) allocated to such Member.  The Members’ capital accounts shall also be adjusted to reflect upward or downward basis adjustments, as the case may be, described in Code Section 48(q) in the manner set forth in Regulations Section 1.704-1(b)(2)(iv)(j).  Such Net Income, Gain, and Net Loss shall be determined in accordance with the federal income tax return filed by the Company, the allocations provided for in Section 6 of this Agreement, and by reference to the definitions contained in Section 17, provided that, in any circumstances in which Property is reflected on the books of the Company (as maintained in accordance with Regulations Section 1.704-1(b)(2)(iv)) at a book value that differs from the adjusted tax basis of such Property, Net Income, Gain, and Net Loss (or item thereof) shall be determined by reference to the book value of such Property.  Such allocation of book items shall be made in accordance with Regulations Section 1.704-1(b)(2)(iv)(g).  In the event a Member transfers all or any portion of his Company interest, the transferee shall succeed to the individual capital contributions, capital account and capital account balance of the transferor to the extent such individual capital contributions, capital account and capital account balance relate to the transferred interest.  Neither contributions to the capital of the Company nor the Members’ capital account balances shall bear interest.

 

4.4 Withdrawal of Capital.  Without the consent of the Manager, or as otherwise provided for in this Agreement, no Member shall have any right to withdraw or make a demand for withdrawal or return of any capital.

 

4.5 Interest on Capital Accounts.  No interest shall be paid on any capital contributions.

 

 

  

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4.6 Deficit Capital Accounts.  No Member shall have any obligation to restore a deficit capital account balance.

 

4.7 Optional Adjustments to Capital Accounts.  Upon (i) a contribution of cash or property (which shall be valued at its Fair Market Value) to the Company by a new or existing Member for a Company interest, or (ii) a distribution by the Company to a retiring or continuing Member for a Company interest, the Company may, in the discretion of the Manager, increase or decrease the capital accounts of the Members to reflect a revaluation of Company Property on the books of the Company, in accordance with the provisions of Regulations Section 1.704-(b)(2)(iv)(f).  If the Manager intends to raise additional capital, it shall first provide the existing Members the opportunity to contribute capital in an amount necessary to maintain the Members’ proportionate ownership interest in the Company.

 

4.8 Loans.  The Manager may determine that additional working capital is needed by the Company and may invite the Members to loan money to the Company in proportion to their Percentage Interests (“Member Loans”).  It is not mandatory that a Member loan any sum of money to the Company and if one or more of the Members do not make a loan, the shortfall may be picked up by the other Members wishing to do so.  There will be no adjustment of ownership as result of making or not making a loan to the Company.  A loan shall be evidenced by a promissory note from the Company to the lending Member and shall bear interest at the rate deemed appropriate by the Manager and the lending Member.

 

Section 5.            Distributions.

 

5.1 Distributions of Cash Available for Distribution and Cash From Refinancing, Sale or Other Disposition.  Cash Available for Distribution, Cash From Refinancing and Cash From Sale or Other Disposition as defined in Section 17, when distributed from time-to-time, shall be distributed to the Members, as follows:

 

5.1.1 First, to the payment of debts and liabilities of the Company then due, including any Member loan pursuant to Section 4.8 and any Taxes or related fees and penalties.

 

5.1.2 Thereafter, to PICO and Northstar, in accordance with their Percentage Interests.

 

5.2 Distribution Upon Termination of the Company.  Upon the final termination of the Company, the Manager shall take account of all of the Company’s assets and liabilities.  The assets may be liquidated as promptly as is consistent with obtaining a reasonable value therefor, and the proceeds therefrom together with assets distributed in kind, to the extent thereof, shall be applied and distributed in the following order:

5.2.1 To the payment of debts and liabilities of the Company which are then due (other than any loans or advances that may have been made by any of the Members to the Company) and the expenses of liquidation.

 

5.2.2 To the setting up of any reserves which the Manager may deem reasonably necessary for any contingent or unforeseen liabilities or obligations or debts or liabilities not yet payable by the Company which have arisen out of or in connection with the Company.  Such reserves may be held for disbursement by the Manager or delivered to an independent escrow holder, designated by the Manager, to be held by such escrow holder for the purpose of disbursing such reserves in payment of any of the aforementioned contingencies, debts or liabilities, and, at the expiration of such period as the Manager shall deem advisable, to distribute the balance thereafter remaining in the manner hereinafter provided.

 

5.2.3 To the repayment of any unpaid loans or advances which are then due and which have been made by any of the Members to the Company, including any accrued but unpaid interest thereon, in proportion to the loan amounts, up to the full amounts thereof, and then any other loans or advances, including any accrued but unpaid interest thereon, in proportion to the loan amounts, up to the full amounts thereof.

 

5.2.4 To the Members, in proportion to their positive capital account balances as of the date of such distribution, after giving effect to all capital account adjustments for all periods, including the Company taxable year during which such distribution occurs (other than those made pursuant to this Section 5.2.4), in an amount equal to the sum of the Members’ capital accounts.  The distribution described in this Section 5.2.4 shall occur by the end of the taxable year of Company dissolution, or, if later, within ninety (90) days after the date of such dissolution.

 

 

  

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5.3 Valuation and Distribution of Non-Cash Distributions.  To the extent that non-cash assets shall be distributed in kind pursuant to this Section 5.3, the Fair Market Value of such assets shall first be determined, pursuant to Section 16.14, and the distribution of such assets shall be made in accordance with such valuation after first allocating to the capital accounts of the Members the amount of Gain or Net Loss which would have been allocated to said capital accounts if the non-cash asset had been sold at such Fair Market Value rather than distributed in kind.  Any non-cash assets (including, but not limited to, promissory notes) received by the Company in connection with a sale or other disposition may be distributed in kind to the Members or to a collection account with the proceeds to be distributed in accordance with the terms of this Section 5.3 as received.  Any such distribution of non-cash assets shall be at the discretion of the Manager.  The Manager in its absolute discretion may determine the relative proportions of cash and non-cash assets distributed to each Member.  Any non-cash assets distributed shall be subject to any then existing agreements or restrictions relating thereto.

 

5.4 Discretion in Making Distributions.  The Company shall distribute, subject to the discretion of the Manager, cash and/or assets in kind from time-to-time, without regard to whether or not funds represent income for the purpose of determining tax liability, or net profit for the purpose of Company accounting.  Such distributions shall be made in the discretion of the Manager in accordance with good and sound business practices.

5.5 Limitation on Other Distributions.  No distribution shall be made unless such distribution is permitted under the Act.  No Member shall be entitled to receive distributions other than as specifically provided by this Agreement.  Further, no distribution shall be made unless such distribution is permitted under the Act.

 

5.6 Tax Liability Distributions.  Irrespective of whether a Member is entitled to a distribution pursuant to Section 5.1 above, distributions shall be made to the Members by January 15 of each year for the sole purpose of enabling each Member to pay its income tax liability resulting from Net Income allocated to such Member from the Company for the preceding calendar year (“Tax Distributions”).  Tax Distributions shall be made in proportion to, and to the extent of, each Member’s “Net Tax Liability.”  “Net Tax Liability” for each Member shall be computed by first multiplying such Member’s allocations of Net Income from the Company for the calendar year by the highest then applicable combined federal and state income tax rate for individuals, net of the effect of deduction of any such taxes, with such rate to be provided to the Manager by the Company's outside accountants.  No Members shall be entitled to a Tax Distribution is such Member is in material default under any of the terms and conditions of this Agreement.  All Tax Distributions to any Member shall offset the next subsequent distribution(s) to which such Member(s) may become entitled under Section 5.1.  Upon dissolution of the Company, the cumulative distributions of the Members shall be computed to ensure that, notwithstanding any Tax Distributions under this Section 5.6, such cumulative distributions have been made in accordance with Section 5.1.  In the event any Member has, as a result of this Section 5.6, received more distributions than it was entitled to receive under Section 5.1, such Member shall repay such excess to the Company prior to the liquidating distributions under Section 5.2 above.

 

Section 6.            Allocations Of Net Income, Net Loss And Gain. Allocations of Net Income, Net Loss and Gain of the Company shall be governed by Exhibit B.

 

Section 7.            Tax Elections.  Tax elections of the Company shall be governed by Exhibit B.

 

Section 8.            Admission Of Additional Members.  No additional Members shall be admitted to the Company without the prior written consent of the Manager.

 

 

  

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Section 9.            Management.

 

9.1 In General.  All decisions with respect to the business and affairs of the Company shall be made by the Manager.  The Manager shall manage the business and affairs of the Company and the Business in good faith and in the reasonable exercise of business judgment.  PICO Northstar Management LLC shall be the Manager of the Company and shall serve as the Manager of the Company until it resigns, dissolves or undergoes a Bankruptcy.

 

9.2 Resignation of Manager.  Any Manager may resign as a Manager at any time upon written Notice to the Company, without prejudice to the rights, if any, of the Company under any contract to which the Manager is a party.  If such Manager is also a Member of the Company, such resignation shall not affect the Manager’s rights as a Member.

9.3 Specific Authority.  In addition to the powers given by law, the Manager is hereby authorized without further consent or approval of the Members:

 

9.3.1 To cause the Company to manage and operate the Business;

 

9.3.2 To hold, manage, operate, finance, refinance, encumber, sell, exchange, make charitable gifts of, or otherwise dispose of (in whole or in part) any of the Assets, or any other property of the Company, on behalf of the Company;

 

9.3.3 To borrow money and incur indebtedness from third parties (whether affiliated or unaffiliated with the Manager) for the purposes of the Company, and to cause to be executed and delivered therefore in the Company name promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidence of debt and securities thereof;

 

9.3.4 To negotiate, enter into and execute contracts of every nature with respect to or on behalf of the Company;

 

9.3.5 To appoint such officers of the Company as the Manager, in its discretion, deems appropriate and to remove any such officers;

 

9.3.6 To employ at the expense of the Company such agents, employees, managers, accountants, attorneys, consultants, and other persons necessary or appropriate to carry out the business and affairs of the Company, whether or not any such persons so employed are Affiliates of the Manager, and to pay such compensation to such persons as is competitive with the compensation paid to unaffiliated persons in the area for similar services;

 

9.3.7 To pay, extend, renew, modify, adjust, submit to arbitration, prosecute, defend, or settle, upon such terms as it may deem sufficient, any obligation, suit, liability, cause of action, or claim, including tax audits, either in favor of or against the Company;

 

9.3.8 To pay any and all reasonable fees and make any and all reasonable expenditures that it, in its sole discretion, deems necessary or appropriate in connection with the organization of the Company, the management of the affairs of the Company, and the carrying out of its obligations and responsibilities under this Agreement;

 

9.3.9 Pursuant to and subject to the terms of Section 12, to admit an assignee of a Membership Interest as a Substituted Member;

 

9.3.10 To admit additional Members;

 

9.3.11 To establish and maintain accounts with financial institutions, including federal or state banks, brokerage firms, trust companies, savings and loan institutions, or money market funds, in such amounts as the Manager may deem necessary;

 

9.3.12 To purchase and maintain, at Company expense, liability and other insurance to protect the Manager and the Company’s assets from third party claims; provided that, in its judgment, such insurance is appropriate, available and reasonably priced;

 

  

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9.3.13 To cause to be paid any and all taxes, charges, and assessments that may be levied, assessed, or imposed upon any of the assets of the Company, unless the same are contested by the Manager;

 

9.3.14 To determine the amount and timing of distributions to the Members in accordance with Section 5 hereof and to elect to forego distributions and to invest or reinvest Company assets in the furtherance of the purposes of the Company;

 

9.3.15 To cause the Company to borrow money from and loan money to the Members, or borrow monies from third parties for and on behalf of the Company upon such terms and conditions as the Manager may deem advisable and proper; and

 

9.3.16 To make, execute, assign, acknowledge, file, and deliver any and all documents or instruments and amendments thereto, and to take any and all other actions, that the Manager may deem appropriate to carry out the purposes and business of the Company as set forth herein, on such terms and conditions as it deems proper.

 

9.4 Time Devoted to Business.  The Manager shall devote such time to the business affairs of the Company as the Manager shall deem to be reasonably required for its welfare and success.

 

9.5 Power to Employ and Contract With Affiliated Entities.  The Manager shall have the right to employ or contract with a Member or entities in which any Member has an interest without the prior consent of the Members.

 

9.6 Company Expenses.

 

9.6.1 Reimbursable Expenses.  All Company expenses shall be billed directly to and paid by the Company.  The Manager may be reimbursed for the following Company expenses:

 

(a) The actual cost to the Manager and its Affiliates of goods and materials used for or by the Company and obtained from unaffiliated parties; and

 

(b) Expenses incurred in connection with rendering administrative services necessary to the prudent operation of the Company, provided that such reimbursement is at the lower of (i) the actual cost to the Manager providing such services, or (ii) the amount the Company would be required to pay to independent parties for comparable administrative services in the same geographical location.

 

9.6.2 Non-Reimbursable Expenses.  The Manager shall not be reimbursed by the Company for expenses which are unrelated to the business of the Company.

 

9.7 Competing Ventures.  Any of the Members or the Manager may freely engage in or possess an interest in other business ventures of every nature and description, independently or with others, including but not limited to, the ownership of assets of the same type and nature as the assets of the Company, and neither the Company nor any of the Members shall have any right by virtue of this Agreement in and to such independent ventures or to the income or profits derived therefrom.  The Members acknowledge that Northstar is obligated to deliver to the Company the Confidentiality and Non-compete Agreements executed by each member of the Northstar Board of Governors pursuant to Section 4.1.3 of this Agreement; nothing in this Section 9.7 is intended to mitigate the obligations of the members of Northstar pursuant to such Confidentiality and Non-compete Agreements.

 

 

  

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9.8 Officers.  The Company may, in the discretion of the Manager, have officers, but is not required to do so.  Any number of offices may be held by the same person.  An officer need not be a Member.  Each officer appointed shall have the duties as prescribed from time-to-time by the Manager.  The officers of the Company shall be chosen by the Manager, in its discretion, and each shall hold his office until he or she shall resign or shall be removed by the Manager, in its discretion.  The initial officers of the Company shall be:

	
Name

	
Position

	
John R. Hart

	
Chief Executive Officer

	
Maxim C. W. Webb

	
Chief Financial Officer and Treasurer

	
Neil C. Juhnke

	
Chief Operating Officer and President

	
James F. Mosier

	
Secretary

 

 

Section 10.            Liability And Indemnification.  The Manager shall not be liable, responsible or accountable, in damages or otherwise, to the Members or to the Company for any act or omission performed or omitted by the Manager in good faith on behalf of the Company, and in a manner reasonably believed by such Manager to be within the scope of the authority conferred upon such Manager by this Agreement and in the best interests of the Company.  The Company shall indemnify and hold harmless the Manager and its principals, employees and agents, from and against any claim, loss, liability or damage (including attorneys’ fees incurred by any of them in connection with the defense of any action based on any such alleged act or omission, which attorneys’ fees may be paid, as incurred, from Company funds) incurred by reason of an act performed, or omitted to be performed, by any of them in good faith on behalf of the Company and in a manner reasonably believed by the Manager to be within the scope of the authority conferred upon the Manager by this Agreement and in the best interests of the Company, provided that such indemnification is not prohibited by law or the act or omission does not amount to gross negligence or willful misconduct.  All judgments against the Company or the Manager, whereby the Manager is entitled to indemnification as herein provided, shall first be satisfied from Company assets.  The Manager shall specifically be indemnified and held harmless from any and all actions taken in good faith and in reasonable reliance on advice of the Company’s attorney(s) or accountant(s), and any costs relating to litigation incident to obligations secured by the assets of the Company or to any tax authorities shall be borne by the Company.

 

Section 11.            Voting Rights; Meetings.

 

11.1 Voting.  The Members shall have the right, by a Majority vote of the Members, to approve or disapprove (but may not initiate) only the following matters affecting the basic structure of the Company, and no other rights except as specifically set forth elsewhere in this Agreement or required by law:

 

(a) Appointment of a new Manager;

 

(b) Termination and dissolution of the Company prior to the expiration of its term, with the consent of the Manager; and

 

(c) Amendment of this Agreement, with the consent of the Manager (as provided for in Section 13).

 

(d) Notwithstanding the provisions in this Agreement to the contrary, no amendment or modification of this Agreement that would result in a disproportionate impact or affect on the financial rights or voting rights of one (1) Member visa vie the financial or voting rights of the other Member shall be binding unless the Member, whose interest is disproportionately affected, consents in writing to the same.

 

11.2 Member Meetings.  The Members shall meet on an approximately annual basis.  In addition, any Member may call a meeting of the Members.  The Manager shall provide the Members with a Notice specifying the date, time and place of such meeting.  All Members, represented in person or via telephone, shall constitute a quorum at any meeting of Members.  In the event that any Member is not in attendance within one (1) hour following the time for which the meeting was called, the meeting shall be adjourned to the day that is five (5) Business Days following the day on which the meeting was to be held.  The adjourned meeting (the “First Adjourned Meeting”) shall be held at the time on such day and place at which the meeting was to be held and shall have the same agenda as the original meeting.  In the event that any Member is not in attendance within one (1) hour following the time for which the First Adjourned Meeting was to be held, the meeting shall be adjourned to the day that is five (5) Business Days following the day on which the First Adjourned Meeting was to be held.  Such adjourned meeting (the “Second Adjourned Meeting”) shall be held at the time on such day and at the place at which the First Adjourned Meeting was to be held and shall have the same agenda as the original meeting.  Each Member shall be notified by facsimile Notice at its business address of the date, time and place of each adjourned meeting.

 

 

  

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Section 12.            Additional Members; Transfer Of Interests Of Members.

 

12.1 Additional Members.  No Members shall be admitted to the Company without the prior written consent of the Manager, which consent may be granted or withheld in the absolute discretion of the Manager.

 

12.2 Assignment by Members.

 

12.2.1 Unauthorized Assignments Void.  The Membership Interest of a Member may be assigned only as permitted by the provisions of this Section 12 and, except as so permitted, no Member shall assign, sell, dispose of, pledge, give or otherwise transfer (hereinafter referred to collectively as “assign”) such Member’s Membership Interest or any part thereof or any interest therein or rights thereof, whether voluntarily, by operation of law, at judicial sale or otherwise, to any person or entity.  Any attempted assignment prohibited by the provisions of this Section 12 shall be null and void and of no force or effect.

 

12.2.2 Assignment with Consent.  No Member shall assign, whether through a lifetime transfer or on death, all or any portion of such Member’s Membership Interest to any Person without the prior written consent of the Manager.

 

12.2.3 Right of First Refusal.  In the event a transfer of all or a portion of a Membership Interest, other than as authorized under Section 12.2.2, is attempted by sale, exchange, gift, bequest, devise, divorce, marital settlement, court proceeding, Bankruptcy, operation of law or otherwise, the Company may, in the discretion of the Manager, purchase such interest at the price determined under Section 12.2.4.  Such purchase price shall be paid in two (2) equal installments, with the first installment to be paid concurrently with the purchase of the Membership Interest and the second installment to be paid twelve (12) months thereafter.

 

12.2.4 Valuation.  In order to determine the amount to be paid for Membership Interest under Section 12.2.3, the fair market value of the Company’s assets shall be determined in accordance with Section 16.14.  The Company’s accountant shall then determine the transferor Member’s capital account balance which would exist if the Company’s assets were sold in a taxable disposition for a price equal to such fair market value.  The purchase price shall be the capital account balance so determined.

 

12.3 Substituted Member.  No Assignee of any Member’s interest shall be entitled to become a Substituted Member unless the Manager shall, in its absolute discretion, consent thereto in writing, and unless the Assignee shall consent in writing, in a form satisfactory to the Manager, to be bound by the terms of this Agreement in the place and stead of the assigning Member.  Unless and until an Assignee has become a Substituted Member, such Assignee shall be deemed to be an Assignee only of the right to share in the distributions and allocations of the Company, and shall have no other rights (including, without limitation, voting rights) hereunder.

 

12.4 Payment of Expenses.  Neither the Company, nor any Member, shall be bound by an otherwise valid assignment, and no Assignee of any Member’s Membership Interest shall be entitled to become a Substituted Member, unless the Company is reimbursed for all reasonable expenses, including legal fees, associated with such assignment and substitution.

 

12.5 Substitution Instrument.  Subject to full compliance with the terms and provisions of this Agreement, any instrument reflecting the assignment of the Company interest of a Member and the admission of the transferee as a Substituted Member of the Company need only be executed and acknowledged by a Manager, the transferor and the transferee.

 

12.6 No Dissolution Upon Assignment.  An assignment of a Membership Interest by a Member shall neither dissolve nor terminate the Company.

 

12.7 Withdrawal of Member; Bankruptcy.  No Member shall be entitled to withdraw or retire from the Company nor to demand the right to the return of capital until dissolution of the Company; provided, however, a Member shall cease to be a Member upon the Bankruptcy of the Member.  Upon Bankruptcy, such Member shall be an Assignee only unless its Membership Interest is purchased under Section 12.2.3.

 

12.8 Tag Along Rights.

 

12.8.1 PICO hereby agrees not to sell for value 51% or more of its Membership Interest without permitting Northstar to participate as a seller in such transaction (the “Tag Along Rights”) such that Northstar shall be entitled to sell, on the same terms as PICO, the Membership Interest equal to the total Membership Interest which the purchaser is willing to acquire in such transaction multiplied by a fraction, the numerator of which is the Membership Interest owned by Northstar desiring to sell in such transaction and the denominator of which is the total Membership Interest held by all Members desiring to sell in such transaction.

 

12.8.2 Before accomplishing or entering into a binding contract for any sale for value of any Membership Interest that would be covered by the Tag Along Rights, PICO agrees to give Northstar written notice (the “Tag Along Notice”) of any such proposed sale (the “Sale Proposal”) within ten (10) days of PICO’s receipt of the Sale Proposal.  Northstar agrees to notify PICO in writing within 10 day as to whether or not the Tag Along Member wishes to exercise Tag Along Rights and participate in the proposed transfer.  Failure by Northstar to respond within such period shall be deemed to be a declination of Northstar’s Tag Along Rights with respect to such proposed transfer.  Upon declination by Northstar of Tag Along Rights for any proposed transfer, PICO may sell the Membership Interest covered by the Tag Along Notice; provided, however, that (i) such Sale Proposal is consummated within 120 days of the Tag Along Notice is given pursuant to this Section 12.8.2 and (ii) the terms of the actual transaction are in all material respects as set forth in the Tag Along Notice.  Failure to meet either of the foregoing conditions shall again subject the Membership Interest to the Tag Along Rights, whereupon PICO shall be required to give Northstar a new written notice with respect to the proposed transfer, and Northstar shall again have the right to exercise Tag Along Rights in respect of such proposed transfer.

 

 

  

10

  

Section 13.            Amendment And Power Of Attorney.

 

13.1 Amendment by Members.  This Agreement may be amended, modified and changed with the vote of a Majority of the Members and the written consent of the Manager, subject to Section 11.1.

 

13.2 Amendment by Manager.  Subject to Section 13.1, this Agreement may be amended from time-to-time by the Manager without the consent of any of the other Members (i) to add to the representations, duties or obligations of the Manager or surrender any right or power granted to the Manager herein; (ii) to cure any ambiguity, or correct or supplement any provision herein which may be inconsistent with any other provision herein or to correct any printing, stenographic or clerical errors or omissions in order that this Agreement shall accurately reflect the agreement among the Members hereto; (iii) to delete or add any provision of this Agreement lawfully required to be so deleted or added by any governmental commission or agency, provided such addition or deletion is deemed by such commission or agency to be for the benefit or protection of the Members; or (iv) to provide the necessary information regarding any new Manager or any Substituted or Additional Members.

 

13.3 Power of Attorney.

 

13.3.1 Each Member, by its execution hereof, jointly and severally, makes, constitutes and appoints the Manager, or any person which becomes a successor to the Manager, as its true and lawful agent and attorney-in-fact, with full power of substitution, in its name, place and stead to make, execute, sign, acknowledge, swear to, record and file, on its behalf (i) the original Certificate of Formation and all amendments thereto required or permitted by law or the provisions of this Agreement; (ii) all certificates and other instruments deemed advisable by the Manager to permit the Company to become or to continue as a Membership or Company wherein the Members have limited liability in any jurisdiction where the Company may be doing business; (iii) all instruments that effect a change or modification of the Company in accordance with this Agreement, including without limitation the substitution of Assignees as Substituted Members pursuant to Section 12; (iv) all conveyances and other instruments deemed advisable by the Manager to effect the dissolution and termination of the Company; (v) all fictitious or assumed name certificates required or permitted to be filed on behalf of the Company; and (vi) all other instruments which may be required or permitted by law to be filed on behalf of the Company.

 

13.3.2 The foregoing power of attorney:

 

(a) is coupled with an interest and shall be irrevocable and survive the death or incapacity of each Member;

(b) may be exercised either by signing separately as attorney-in-fact for each Member or, after listing all of the Members executing an instrument, by a single signature of the person acting as attorney-in-fact for all of them; and

 

(c) shall survive the delivery of an assignment by a Member of the whole or any portion of its interest; except that, where the Assignee of the whole of such Member’s interest has been approved by the Manager for admission to the Company as a Substituted Member, the power-of-attorney of the assignor shall survive the delivery of such assignment for the sole purpose of enabling the Manager to execute, acknowledge and file any instrument necessary to effect such substitution.

 

13.4 Additional Instruments.  Each Member shall execute and deliver to the Manager within five (5) days after receipt of the Manager’s request therefor such further designations, powers of attorney and other instruments as the Manager deems necessary to effectuate the purposes of this Section 13.

 

Section 14.            Records, Reports And Bank Accounts.

 

14.1 Records.  The Company shall maintain the following records at its principal executive office:

 

(a) A current list of the full name and last known business or residence address of each Member and Manager set forth in alphabetical order together with the capital contributions and Percentage Interest of each Member.

 

(b) A copy of the Certificate and all amendments thereto, together with executed copies of any powers of attorney pursuant to which the Certificate or any such amendment has been executed.

 

(c) Copies of the Company’s federal, state, and local income tax or information returns and reports, if any, for the six (6) most recent taxable years.

 

(d) Copies of the original Limited Liability Company Agreement and all amendments thereto.

 

(e) The Company’s books and records for at least the current and past three (3) fiscal years.

 

 

  

11

  

 

14.1.2 Upon the request of any Member, the Manager shall promptly deliver to the Member, at the expense of the Company, a copy of any of the information required to be maintained by the Company under subdivisions (a), (b), (c) or (d) of Section 14.1 of this Agreement.

 

14.1.3 Any Member shall have the right upon reasonable request:

 

(a) To inspect and copy any of the records required to be maintained by the Company under Section 14.1 of this Agreement.

(b) To obtain from the Manager, promptly after becoming available, a copy of the Company’s federal, state and local income tax or information returns for each year.

 

14.2 Amendments.  The Manager shall promptly furnish to any other Member a copy of any amendment to the Agreement executed by the Manager pursuant to a power of attorney from the other Member.

 

14.3 Tax Information.  The Manager shall send to each of the Members within ninety (90) days after the end of each taxable year such information as is necessary to complete federal and state income tax or information returns, and a copy of the Company’s federal, state, and local income tax or information returns for the year.

 

Section 15.            Dissolution And Termination Of The Company.

 

Except as otherwise provided in this Agreement, no Member shall have the right to cause dissolution of the Company before the expiration of its term.

 

15.1 Events of Dissolution.  The Company shall be dissolved upon the first to occur of the following events:

 

15.1.1 The sale of all or substantially all of the assets of the Company;

 

15.1.2 The election by the Majority vote of Members, with the consent of the Manager; or

 

15.1.3 The entry of a decree of judicial dissolution under the Act.

 

15.2 Procedure on Death, Bankruptcy, Dissolution or Incompetency of a Member.  In the event any Member shall die, suffer Bankruptcy (as defined in Section 17), be dissolved or become incompetent with the result that such Member cannot continue to exercise dominion over its Membership Interest, the Company shall not be dissolved.  In any such event, the personal representative, executor, administrator, trustee, guardian, conservator or other successor in interest of the Member who has been affected by such event, shall be treated as an Assignee of the Company interest of said affected Member, and upon the winding up and closing of an estate for which the successor has been acting, it may transfer and assign the Member’s Membership Interest, subject to Section 12 hereof, to the person or persons entitled thereto, who shall likewise be deemed Assignee(s) of said Membership Interest as to the Membership Interest or undivided portions thereof distributed to such Assignee(s), unless and until admitted as a Substituted Member or Members as provided in this Agreement.

 

15.3 Liquidation.  Upon dissolution of the Company, the Members shall promptly liquidate and wind up the Company in an orderly fashion and distribute the net proceeds of liquidation on dissolution and termination pursuant to Section 5.2 hereof.  A Member may be the liquidator by Majority vote of Members.  In selling the Company’s assets, the liquidator shall take all reasonable steps to locate potential purchasers in order to accomplish the sale at the highest attainable price.  Nothing herein shall prevent any Member(s) from, directly or indirectly, purchasing the Company’s assets from the liquidator, provided that the offer of such Member(s) is equal to or higher than the highest attainable price from a person who is not an Affiliate of the Company.  The expenses of the liquidator shall be deemed expenses of the Company.

 

15.4 Time for Liquidation.  A reasonable time shall be allowed for the orderly liquidation of the assets of the Company and the discharge of liabilities to creditors so as to enable the Members to minimize the normal losses attendant upon a liquidation.

 

15.5 No Liability for Return of Capital.  No Member shall be personally liable for the return of all or any part of the contribution of any other Member to the Company.  Any such return shall be made solely from the Company assets.

 

  

12

  

 

Section 16.            General Provisions.

 

16.1 Survival of Rights.  This Agreement shall be binding upon and inure to the benefit of the Members and their respective heirs, legatees, legal representatives, successors and assigns, subject to the restrictions in Section 12.2.

 

16.2 Construction.  The language in all parts of this Agreement shall be construed according to its fair meaning and not strictly for or against any of the Members hereto.

 

16.3 Section Headings.  The captions of the sections of this Agreement are for convenience only.

 

16.4 Agreement in Counterparts.  This Agreement, or any amendment hereto, may be executed in multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute one (1) Agreement by each of the Members, notwithstanding that all of the Members are not signatories to the original or the same counterpart, to be effective as of the day and year first above written.

 

16.5 Governing Law.  This Agreement shall be construed according to the laws of the State of Delaware.

 

16.6 Time.  Time is of the essence with respect to this Agreement.

 

16.7 Additional Documents.  Each Member shall perform any further acts and execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement, including, but not limited to, providing acknowledgment before a Notary Public of any signature heretofore or hereafter made by a Member.

 

16.8 Validity.  Should any portion of this Agreement be declared invalid and unenforceable, then such portion shall be deemed to be severable from this Agreement and shall not affect the remainder hereof.

 

16.9 Pronouns.  All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require.

 

16.10 Descriptions.  Anything referred to in this Agreement is expressly incorporated herein by reference as if set forth in full, whether or not attached hereto.

 

16.11 Attorneys’ Fees.  In the event of any litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorney’s fees, and costs incurred in connection therewith or in the enforcement or collection of any judgment or award rendered therein.  The “prevailing party” means the party determined by the court to have most nearly prevailed (even if such party did not prevail in all matters), not necessarily the one in whose favor a judgment is rendered.  Further, in the event of any default by a party under this Agreement, such defaulting party shall pay all the expenses and attorneys’ fees incurred by the other party in connection with such default, whether or not any litigation is commenced.

 

16.12 Partition.  The Members agree that the assets of the Company are not and will not be suitable for partition.  Accordingly, each of the Members hereby irrevocably waives any and all rights that he or she may have, currently or in the future, to maintain any action for partition of any of the assets of the Company.

 

16.13 Representative Capacity; Trusts.  During any period that any Membership Interest is held as assets of a living trust revocable by the trustees of such trust, such Membership Interest shall be treated as owned by the deemed owner of such trust for income tax purposes, and any acts of the trustee of said revocable living trust shall be deemed the acts of the deemed owner of such trust for income tax purposes.  The death of the deemed owner of a trust holding a Membership Interest shall be the death of a Member for the purposes of Section 15, and the trustee of such a trust shall be the successor for the purposes of Section 15.

 

16.14 Valuation of Non-Cash Assets.  For purposes of this Agreement, the procedure for valuing any non-cash assets shall, unless otherwise provided herein, be as follows:

 

16.14.1 Assets Other Than Marketable Securities.  If the Members cannot otherwise agree on the value of an asset, the Manager shall select a qualified appraiser who has customarily been engaged in appraising assets similar to the asset in question for a period of not less than five (5) years.  Such valuation shall include a ten percent (10%) discount for costs of sale.  The valuation of the appraiser so selected shall be binding on all Members.

 

16.14.2 Marketable Securities.  Any securities held by the Company which are traded on an established market shall be valued according to the market price.

 

 

  

13

  

Section 17.            Definitions.

 

Capitalized terms used herein and not otherwise defined shall have the following indicated meanings:

 

17.1 “Act” means the Delaware Limited Liability Company Act, Section 18-101, et seq., of Title 6, Chapter 18 of the Delaware Laws, as amended from time-to-time.

17.2 “Affiliate” means (i) any entity directly or indirectly controlling, controlled by or under common control with another entity, (ii) any person or entity owning or controlling ten percent (10%) or more of the outstanding voting interests of an entity, or (iii) any officer, director or Member of an entity.

 

17.3 “Agreement” means this Limited Liability Company Agreement.

 

17.4 “Assignee” means a person who has acquired all or part of the Units of a Member but has not been admitted as a Substituted Member.  An “Assignee” shall be entitled to the distributions and allocations accompanying the Company interest, but shall not be have any voting rights or entitled to any other rights of a Member hereunder.

 

17.5 “Assets” shall mean those assets acquired by the Company pursuant to the Contribution Agreement.

 

17.6 “Bankruptcy” with respect to any Member shall be deemed to have occurred when the Member:

 

(a) Makes an assignment for the benefit of creditors;

 

(b) Files a voluntary petition in bankruptcy;

 

(c) Is adjudged a bankrupt or insolvent, or has entered against the Member an order for relief, in any bankruptcy or insolvency proceeding;

 

(d) Files a petition or answer seeking for the Member any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation;

 

(e) Files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of this nature;

 

(f) Seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Member or of all or any substantial part of the Member’s properties; or

 

(g) 120 days after the commencement of any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without the Member’s consent or acquiescence of a trustee, receiver or liquidator of the Member or of all or any substantial part of the Member’s properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated.

 

17.7 “Business” shall have the meaning set forth in the Contribution Agreement.

 

 

  

14

  

17.8 “Business Days” means any day other than Saturday, Sunday or any legal holiday observed in the state of formation of the Company.

 

17.9 “Cash Available for Distribution” means Cash Flow less amounts set aside for restoration or creation of reserves determined by the Manager, in its sole and absolute discretion, to be necessary and desirable, including but not limited to reserves for debt service for a reasonable period of time, taxes, insurance, increases in working capital and contingencies.

 

17.10 “Cash Flow” means cash funds provided from operations of the Company, without deduction for depreciation or amortization expenses, but after deducting funds used to pay all other expenses, debt payments, capital improvements and replacements.

 

17.11 “Cash From Refinancing” means the gross proceeds received by the Company upon the refinancing of the Company assets (less all costs of such refinancing, including the payment of all obligations refinanced in connection therewith), less amounts set aside for restoration or creation of reserves determined by the Manager, in its sole and absolute discretion, to be necessary and desirable, including but not limited to, reserves for debt service for a reasonable period of time, taxes, insurance, increases in working capital and contingencies.  This term shall not include Cash Flow.

 

17.12 “Cash From Sale or Other Disposition” means the net proceeds received by the Company upon the sale or other disposition of less than all or substantially all of the Company assets, less amounts set aside for restoration or creation of reserves determined by the Manager, in its sole and absolute discretion, to be necessary and desirable, including but not limited to, reserves for debt service for a reasonable period of time, taxes, insurance, increases in working capital and contingencies.  This term shall not include Cash Flow.

 

17.13 “Code” means the Internal Revenue Code of 1986, as amended.

 

17.14 “Company” refers to the limited liability company created under this Agreement.

 

17.15 “Contribution Agreement” shall have the meaning set forth in the Recitals to this Agreement.

 

17.16 “Default Interest Rate” means the lesser of: (i) the maximum rate allowed by law, or (ii) the Reference Rate plus five percent (5%) per annum.  The Default Interest Rate shall change from time-to-time with changes in the Reference Rate.

 

17.17  “Fair Market Value” shall mean that term as defined in Regulations Section 1.704-1(b)(2)(iv)(h).

 

17.18 “Majority” shall mean the vote of the Members holding more than 50% of the Percentage Interests all Members then having the right to vote.

 

17.19 “Manager” shall have the meaning set forth in Section 9.1.

 

17.20 “Member” means each Person designated on and executing the signature page of this Agreement as a Member.

 

17.21 “Members” refers collectively to the Manager and to the Members, and reference to a “Member” means any one of the Members.

 

17.22 “Membership Interest” refers to the economic and voting interests of a Member in the Company, as described in this Agreement.

 

17.23 “Net Income,” “Net Loss,” and “Gain” mean, respectively, the following amounts as designated on the Company’s informational tax return filed for federal income tax purposes, as determined by the tax attorney(s) or accountant(s) employed by the Company:  (i) ordinary income, (ii) ordinary loss, plus net long-term capital loss, net short-term capital loss, and Section 1231 loss; and (iii) net long-term capital gain, net short-term capital gain, and other net gain under Section 1231.  In the event that property is reflected on the books of the Company (as maintained in accordance with Regulations Section 1.704-1(b)(2)(iv)) at a book value that differs from the adjusted tax basis of such Property, Net Income, Gain and Net Loss (or item thereof) shall be determined by reference to the book value of such Property.  Such allocation of book values shall be made in accordance with Regulations Section 1.704-1(b)(2)(iv)(g).

 

 

  

15

  

17.24 “Notice” means any notice or other communication which satisfies the following requirements:

 

(a) The Notice must be in writing.

 

(b) The Notice must be delivered personally, by prepaid first class mail, via facsimile or by telegraph to the last known address furnished by the addressee.

 

(c) In the case of any Member, said address shall be as reflected in this Agreement unless the Member has given the Company Notice of a different address.  If any Notice addressed to a Member at the address of a Member appearing on the books of the Company is returned to the Company by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the Notice to the Member at that address, all future Notices shall be deemed to have been duly given without further mailing if they are available for the Member at the principal executive office of the Company for a period of one year from the date of the giving of the Notice to all other Members.

 

(d) In the case of the Company, said address shall be the principal place of business of the Company.

 

(e) The Notice shall be deemed given upon the earlier of personal delivery, date of mailing, date of faxing or date of telegraphing, as the case may be.

 

The Notice shall contain such information as is specifically required by the provision of this Agreement under which such Notice is given.

 

17.25 “Percentage Interest” shall be the percentage for each Member set forth on the signature pages hereof.

 

17.26 “Persons” means any individual, Company, corporation, trust, limited liability Company or other entity.

 

17.27  “Regulations” means U.S. Treasury Regulations.

 

17.28 “Reference Rate” means the reference rate of Bank of America NT&SA in effect from time-to-time during the period in question.  The Reference Rate shall change with changes in the reference rate of Bank of America.

 

17.29 “Substituted Member” means an Assignee who has obtained the written consent of the Manager pursuant to Section 12.3 hereof to become a Member.  A “Substituted Member” shall have all the distribution, allocation, voting and other rights and obligations of a Member hereunder.

 

  

16

  

IN WITNESS WHEREOF, the Members have executed this Agreement effective as of the date first above written.

 

	
Member

	
Percentage Interest

	
PICO Northstar Management LLC

a Delaware limited liability company

 

/s/ John R. Hart

By:  John R. Hart

Its: Chief Executive Officer and President

 

 

	
87.53%

	
Northstar Agri Industries, LLC

a Delaware limited liability company

 

/s/ Neil C. Juhnke

By: Neil C. Juhnke

Its: President

 

	
12.47%

[SIGNATURE PAGE FOR PICO NORTHSTAR LLC OPERATING AGREEMENT]

  

  

  

EXHIBIT A

Contribution Agreement

  

  

  

EXHIBIT B

Tax Allocations and Elections

(Note: Capitalized terms not otherwise defined in this Exhibit A shall have the meaning set forth in the Agreement.)

 

1.1 Allocations.  Net Income, Gain and Net Loss of the Company shall be allocated to the Members as provided below:

 

(a) In General.  Except as otherwise provided in this Section 1.1, Net Income, Gain and Net Loss of the Company for any relevant period shall be allocated to the Members to cause, to the extent possible, their “Modified Capital Account” balances to equal their respective “Target Balances.”  The term “Modified Capital Account” shall mean, for each Member, such Member’s capital account balance increased by such Member’s share of “partnership minimum gain” and of “partner minimum gain” (as determined pursuant to Regulations Sections 1.704-2(g) and 1.704-2(i)(5), respectively).  The term “Target Balance” shall mean, for each Member at any point in time, either (i) a positive amount equal to the net amount, if any, the Member would be entitled to receive or (ii) a negative amount equal to the net amount the Member would be required to pay or contribute to the Company or to any third party, assuming, in each case, that (A) the Company sold all of its assets for an aggregate purchase price equal to their aggregate carrying value (assuming for this purpose only that the carrying value of any asset that secures a liability that is treated as “nonrecourse” for purposes of Regulations Section 1.1001-2 is no less than the amount of such liability that is allocated to such asset in accordance with Regulations Section 1.704-2(d)(2)); (B) all liabilities of the Company were paid in accordance with their terms from the amounts specified in clause (A) of this sentence; (C) any Member that was obligated to contribute any amount to the Company pursuant to this Agreement or otherwise (including the amount a Member would be obligated to pay to any third party pursuant to the terms of any liability or pursuant to any guaranty, indemnity or similar ancillary agreement or arrangement entered into in connection with any liability of the Company) contributed such amount to the Company; (D) all liabilities of the Company that were not completely repaid pursuant to clause (B) of this sentence were paid in accordance with their terms from the amounts specified in clause (C) of this sentence; and (E) the balance, if any, of any amounts held by the Company was distributed in accordance with Section 5.1 of the Agreement.

 

(b) Income Tax Allocations.  For purposes of Sections 702 and 704 of the Code, or the corresponding sections of any future federal tax law, or any similar tax law of any state or other jurisdiction, the Company’s profits, gains and losses for federal income tax purposes, and each item of income, gain, loss or deduction entering into the computation thereof, shall be allocated among the Members in the same proportions as the corresponding “book” items are allocated pursuant to this Section 1.1, except as otherwise provided in Section 1.1(e) below.

 

(c) Minimum Gain Chargeback.  Notwithstanding any other provision in this Agreement, if there is a net decrease in Company minimum gain (as defined in Regulations Section 1.704 2(b)(2)), during any taxable year, items of Company income and gain shall be allocated in accordance with the provisions of Regulations Section 1.704 2(f).  This Section 1.1(c) is intended to comply with Regulations Section 1.704 2(e)(3).  Any special allocation of items of income or gain pursuant to this Section 1.1(c) shall be taken into account in computing subsequent allocations of Net Income or Gain pursuant to this Exhibit A, so that the net amount of any item so allocated and the Net Income, Gain and Net Loss and other items allocated to each Member pursuant to this Exhibit A, shall, to the extent possible, be equal to the net amount that would have been allocated pursuant to the provisions of this Exhibit A if such decrease in minimum gain had not occurred.

 

(d) Qualified Income Offset.  Any Member who unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704 1(b)(2)(ii)(d)(4), (5) or (6), so as to cause or increase a deficit balance in such Member’s capital account (in excess of any limited dollar amount of such deficit balance that such Member is obligated or deemed obligated to restore within the meaning of Regulations Section 1.704 1(b)(2)(ii)(c) and 1.704 2(g), shall be allocated items of gross income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible.  Any such allocation of items of income or gain pursuant to this Section 1.1(d) shall be taken into account in computing subsequent allocations of Net Income or Gain pursuant to this Exhibit A, so that the net amount of any item so allocated and the Net Income, Gain, Loss and Net Loss and all other items allocated to each Member pursuant to this Exhibit A shall, to the extent possible, be equal to the net amount that would have been allocated pursuant to the provisions of this Exhibit A if such unexpected adjustment, allocation or distribution had not occurred

 

(e) Allocations Regarding Contributed Property.  Each item of taxable income, gain, loss or deduction attributable to any property contributed to the Company (“Contributed Property”) shall be allocated first to the Member that contributed the Contributed Property to the Company (the “Property Member”) in the amount required to take into account the Property Member’s share of the difference between the carrying value of the Contributed Property and its Adjusted Basis at the time of contribution.  In making allocations pursuant to the preceding sentence, the Managing Member is authorized to apply any method or convention required or permitted by Section 704(c) of the Code and the Regulations thereunder, selected mutually by the Members.  The Company shall apply similar principles with respect to property which has an adjusted tax basis different from its carrying value due to the operation of Regulation Section 1.704-1(b)(2)(iv)(f).

 

(f) Interpretation of Allocations.  The Members intend (i) that the allocation provisions contained in this Exhibit A and elsewhere in this Agreement be interpreted so that the final capital account balances of the Members pursuant to Section 5.2.4 of the Agreement are equal to the liquidating distributions that would be made if such distributions were made according to Section 5.1, and (ii) that the allocation provisions contained in this Exhibit A and elsewhere in this Agreement be applied and amended by the Manager, if and to the extent necessary to produce such result even if any such application or amendment requires (A) first, special allocations of gross income and/or gross deductions for the current fiscal year (or, if necessary, any other period), and (B) second, if necessary, the amendment of prior tax returns for the Company.  This Section 1.1(f) shall control notwithstanding any reallocation of income, loss or items thereof by the Internal Revenue Service or any other taxing authority.

 

(g) Special Allocation of Loss.  Notwithstanding the provisions of this Section 1.1, any Net Loss of the Company shall first be allocated to PICO, until its capital account is reduced to zero (0) and then to Northstar until its capital account is reduced to zero (0); thereafter, any Net Loss shall be allocated in accordance with the provisions of Sections 1.1 (a) through (f).

 

1.2 Accounting With Reference to Issuance or Transfer of Company Interest.  Upon the admission of any additional Member of the Company or upon the transfer of any Company interest (as permitted herein) to an Assignee or to any person being admitted as a Substituted Member, the Net Income, Gain, and Net Loss, and each item thereof, for the year in which any such admission or transfer occurs, attributable to the new interest or the interest transferred, shall be allocated to the newly admitted Member or between the transferor and transferee (Assignee or Substituted Member) as the case may be, as follows:  all Net Income, Gain, and Net Loss, and each item thereof, which are to be allocated for the fiscal year in which the admission or transfer occurs shall be prorated as of the date upon which the admission or transfer is recognized by the Manager as having occurred, so that for the purpose of making such proration, the items for such year shall be deemed to have been earned or incurred in equal daily increments, without regard to the date such items are actually earned or incurred during the periods before and after the date upon which the admission or transfer occurs.

 

1.3 Fiscal Year.  The fiscal year of the Company shall be the calendar year.

 

1.4 Basis Adjustment.  In the case of a distribution of Company property or a transfer of a Company interest, the Manager may cause the Company to file an election under Section 754 of the Code to adjust the basis of the Company’s property.  As a result of this election, the Manager shall have the right to require, as a condition to the granting of consent to any transfer, the reimbursement of expenditures made by the Company for any legal and accounting fees incurred to make any such basis adjustment.  The Manager shall have the right, in its sole and absolute discretion, to decline to make such an election; and further, the making or failure to make any election under Section 754 of the Code in connection with any particular transfer of an interest in the Company shall not affect the right of the Manager to make, or refuse to make, such an election with respect to any subsequent transfer of an interest in the Company.

 

1.5 Elections.  The Company shall have the right, in the sole and absolute discretion of the Manager, to make or refuse to make any other elections or determinations required or permitted for federal or state income tax or other tax purposes.  The Manager may rely upon the advice of the Company’s accountants or tax attorneys with respect to the making of any such election.

 

1.6 Tax Matters Partner.  PICO is hereby designated the “Tax Matters Partner” for purposes of Sections 6221-6233 of the Code.  Under such provisions of the Code, in the event of an audit of the Company, the Tax Matters Partner (“TMP”) has, without limitation, the following powers:

 

1.6.1 To deal with Internal Revenue Service (“IRS”) agents;

 

1.6.2 To consent to an extension of the statute of limitations as to Company items for all Members;

 

1.6.3 To the extent permitted by Code Sections 6221-6233, to settle with the IRS on its own behalf and on behalf of each Member; and

 

1.6.4 To litigate, on behalf of the Company against a proposed deficiency assessment of the IRS, in either the United States Tax Court, United States District Court or the United States Claims Court.  The TMP shall have the right in its absolute discretion to make or refuse to make any election, or to take or refuse to take any action, permitted to be made or taken pursuant to the provisions of Sections 6221-6233 of the Code.  The TMP may rely upon the advice of the Company’s accountants or tax attorneys with respect to any election, action or determination relating to a Company audit and any proceedings arising therefrom.  The TMP shall be reimbursed for any expenditures reasonably made or expenses reasonably incurred by it on behalf of the Company in connection with such audit or proceeding.

 

 

  

  

  

TABLE OF CONTENTS

Page

	
Section 1.

	
Name and Principal Executive Office; Representations

	
1

	
1.1

	
Name

	
1

	
1.2

	
Certificate of Formation

	
1

	
1.3

	
Fictitious Business Name Statement

	
1

	
1.4

	
Representations and Warranties

	
2

	  	  	  
	
Section 2.

	
Purposes and Nature of Business

	
3

	
2.1

	
In General

	
3

	  	  	  
	
Section 3.

	
Term

	
3

	  	  	  
	
Section 4.

	
Capital Contributions and Accounts

	
3

	
4.1

	
Initial Capital Contributions the Members

	
3

	  	
4.1.1 PICO

	
3

	  	
4.1.2 Northstar

	
3

	  	
4.1.3 Conditions to Contributions

	
4

	
4.2

	
Subsequent Capital Contributions

	
4

	
4.3

	
Capital Accounts of Members

	
4

	
4.4

	
Withdrawal of Capital

	
4

	
4.5

	
Interest on Capital Accounts

	
4

	
4.6

	
Deficit Capital Accounts

	
5

	
4.7

	
Optional Adjustments to Capital Accounts

	
5

	
4.8

	
Loans

	
5

	  	  	  
	
Section 5.

	
Distributions

	
5

	
5.1

	
Distributions of Cash Available for Distribution and Cash From Refinancing, Sale or Other Disposition

	
5

	
5.2

	
Distribution Upon Termination of the Company

	
5

	
5.3

	
Valuation and Distribution of Non-Cash Distributions

	
6

	
5.4

	
Discretion in Making Distributions

	
6

	
5.5

	
Limitation on Other Distributions

	
6

	
5.6

	
Tax Liability Distributions

	
6

	  	  	  
	
Section 6.

	
Allocations Of Net Income, Net Loss And Gain

	
6

	  	  	  
	
Section 7.

	
Tax Elections

	
6

	  	  	  
	
Section 8.

	
Admission Of Additional Members

	
6

	  	  	  
	
Setion 9.

	
Management

	
7

	
9.1

	
In General

	
7

	
9.2

	
Resignation of Manager

	
7

	
9.3

	
Specific Authority

	
7

	
9.4

	
Time Devoted to Business

	
8

	
9.5

	
Power to Employ and Contract With Affiliated Entities

	
8

	
9.6

	
Company Expenses

	
8

	  	
9.6.1 Reimbursable Expenses

	
8

	  	
9.6.2 Non-Reimbursable Expenses

	
8

	
9.7

	
Competing Ventures

	
8

	
9.8

	
Officers

	
9

	  	  	  
	
Section 10.

	
Liability And Indemnification

	
9

	  	  	  
	
Section 11.

	
Voting Rights; Meetings

	
9

	
11.1

	
Voting

	
9

	
11.2

	
Member Meetings

	
9

	  	  	  
	
Section 12.

	
Additional Members; Transfer Of Interests Of Members

	
10

	
12.1

	
Additional Members

	

10

	
12.2

	
Assignment by Members

	

10

	  	
12.2.1 Unauthorized Assignments Void

	

10

	  	
12.2.2 Assignment with Consent

	

10

	  	
12.2.3 Right of First Refusal

	

10

	  	
12.2.4 Valuation

	

10

	
12.3

	
Substituted Member

	

10

	
12.4

	
Payment of Expenses

	

10

	
12.5

	
Substitution Instrument

	

10

	
12.6

	
No Dissolution Upon Assignment

	

10

	
12.7

	
Withdrawal of Member; Bankruptcy

	

10

	
12.8

	
Tag Along Rights

	

10

	  	  	  
	
Section 13.

	
Amendment And Power Of Attorney

	
11

	
13.1

	
Amendment by Members

	
11

	
13.2

	
Amendment by Manager

	
11

	
13.3

	
Power of Attorney

	
11

	
13.4

	
Additional Instruments

	
11

	  	  	  
	
Section 14.

	
Records, Reports And Bank Accounts

	
11

	
14.1

	
Records

	
11

	
14.2

	
Amendments

	
12

	
14.3

	
Tax Information

	
12

	  	  	  
	
Section 15.

	
Dissolution And Termination Of The Company

	
12

	
15.1

	
Events of Dissolution

	

12

	
15.2

	
Procedure on Death, Bankruptcy, Dissolution or Incompetency of a Member

	

12

	
15.3

	
Liquidation

	

12

	
15.4

	
Time for Liquidation

	

12

	
15.5

	
No Liability for Return of Capital

	

12

	  	  	  
	
Section 16.

	
General Provisions

	
13

	
16.1

	
Survival of Rights

	

13

	
16.2

	
Construction

	

13

	
16.3

	
Section Headings

	

13

	
16.4

	
Agreement in Counterparts

	

13

	
16.5

	
Governing Law

	

13

	
16.6

	
Time

	

13

	
16.7

	
Additional Documents

	

13

	
16.8

	
Validity

	

13

	
16.9

	
Pronouns

	

13

	
16.10

	
Descriptions

	

13

	
16.11

	
Attorneys’ Fees

	

13

	
16.12

	
Partition

	

13

	
16.13

	
Representative Capacity; Trusts

	

13

	
16.14

	
Valuation of Non-Cash Assets

	

13

	  	
16.14.1 Assets Other Than Marketable Securities

	

13

	  	
16.14.2 Marketable Securities

	

13

	  	  	  
	
Section 17.

	
Definitions

	
14exh41.htm

  

  

  

 

____________________________

 

 

 

INDENTURE

 

 

 

Dated as of September 24, 2010,

 

 

by and between

 

 

CONSUMER PORTFOLIO SERVICES, INC., as obligor

 

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

a national banking association, as trustee

 

 

 

____________________________

 

$30,000,000.00

 

 

Renewable Unsecured Subordinated Notes

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE 1

Section 1.1                         Definitions. 1

Section 1.2                         Other Definitions. 6

Section 1.3                         Incorporation by Reference of Trust Indenture Act. 6

Section 1.4                         Rules of Construction. 7

ARTICLE II THE SECURITIES 7

Section 2.1                         Security Terms; Amount; Accounts; Interest; Maturity. 7

Section 2.2                         Written Confirmation; Rejection; Rescission. 11

Section 2.3                         Registrar and Paying Agent. 11

Section 2.4                         Paying Agent to Hold Money in Trust. 12

Section 2.5                         List of Holders. 12

Section 2.6                         Transfer and Exchange. 12

Section 2.7                         Payment of Principal and Interest; Principal and Interest Rights Preserved. 13

Section 2.8                         Outstanding Securities. 14

Section 2.9                         Treasury Securities. 14

Section 2.10                         Defaulted Interest. 15

Section 2.11                         Temporary Notes. 15

Section 2.12                         Execution, Authentication And Delivery. 15

Section 2.13                         Book-Entry Registration. 16

Section 2.14                         Initial and Periodic Statements. 17

Section 2.15                         Appointment of Agents. 17

Section 2.16                         CUSIP/ISIN Numbers. 17

ARTICLE III REDEMPTION AND REPURCHASE 18

Section 3.1                         Redemption of Securities at the Company’s Election. 18

Section 3.2                         Repurchase of Securities at the Holder’s Request. 18

ARTICLE IV COVENANTS 20

Section 4.1                         Payment of Securities. 20

Section 4.2                         Maintenance of Office or Agency. 20

Section 4.3                         SEC Reports and Other Reports. 21

Section 4.4                         Compliance Certificate. 22

Section 4.5                         Stay, Extension and Usury Laws. 22

Section 4.6                         Liquidation. 23

Section 4.7                         Financial Covenants 23

Section 4.8                         Restrictions on Dividends and Certain Transactions with Affiliates 23

Section 4.9                         Securitization Transactions and Additional Indebtedness. 23

ARTICLE V SUCCESSORS 24

Section 5.1                         When the Company May Merge, etc. 24

Section 5.2                         Successor Entity Substituted. 24

ARTICLE VI DEFAULTS AND REMEDIES 24

Section 6.1                         Events of Default. 24

Section 6.2                         Acceleration. 25

Section 6.3                         Other Remedies. 26

Section 6.4                         Waiver of Past Defaults. 26

Section 6.5                         Control by Majority. 26

Section 6.6                         Limitation on Suits. 26

Section 6.7                         Rights of Holders to Receive Payment. 27

Section 6.8                         Collection Suit by Trustee. 27

Section 6.9                         Trustee May File Proofs of Claim. 27

Section 6.10                         Priorities. 28

Section 6.11                         Undertaking for Costs. 28

ARTICLE VII TRUSTEE 29

Section 7.1                         Duties of Trustee. 29

Section 7.2                         Rights of Trustee. 30

Section 7.3                         Individual Rights of Trustee. 31

Section 7.4                         Trustee’s Disclaimer. 31

Section 7.5                         Notice of Defaults. 31

Section 7.6                         Reports by Trustee to Holders. 31

Section 7.7                         Compensation and Indemnity. 32

Section 7.8                         Replacement of Trustee. 33

Section 7.9                         Successor Trustee by Merger, etc. 34

Section 7.10                         Eligibility; Disqualification. 34

Section 7.11                         Preferential Collection of Claims Against Company. 34

ARTICLE VIII DISCHARGE OF INDENTURE 34

Section 8.1                         Termination of Company’s Obligations. 34

Section 8.2                         Application of Trust Money. 35

Section 8.3                         Repayment to Company. 36

Section 8.4                         Reinstatement. 36

ARTICLE IX AMENDMENTS 36

Section 9.1                         Without Consent of Holders. 36

Section 9.2                         With Consent of Holders. 37

Section 9.3                         Compliance with Trust Indenture Act. 38

Section 9.4                         Effect of Consents. 38

Section 9.5                         Notation on or Exchange of Securities. 38

Section 9.6                         Trustee to Sign Amendments, etc. 39

ARTICLE X SUBORDINATION 39

Section 10.1                         Agreement to Subordinate. 39

Section 10.2                         Liquidation; Dissolution; Bankruptcy. 39

Section 10.3                         Default of Senior Debt. 40

Section 10.4                         When Distribution Must Be Paid Over. 41

Section 10.5                         Notice by Company. 42

Section 10.6                         Subrogation. 42

Section 10.7                         Relative Rights. 42

Section 10.8                         Subordination May Not Be Impaired by the Company

or Holders of Senior Debt. 42

Section 10.9                         Distribution or Notice to Representative. 44

Section 10.10                         Rights of Trustee and Paying Agent. 44

Section 10.11                         Authorization to Effect Subordination. 44

Section 10.12                         Article Applicable to Paying Agent. 44

Section 10.13                         Miscellaneous. 45

ARTICLE XI MISCELLANEOUS 45

Section 11.1                         Trust Indenture Act Controls. 45

Section 11.2                         Notices. 45

Section 11.3                         Communication by Holders with Other Holders. 46

Section 11.4                         Certificate and Opinion as to Conditions Precedent. 47

Section 11.5                         Statements Required in Certificate or Opinion. 47

Section 11.6                         Rules by Trustee and Agents. 47

Section 11.7                         Legal Holidays. 47

Section 11.8                         No Recourse Against Others. 48

Section 11.9                         Duplicate Originals. 48

Section 11.10                         Governing Law. 48

Section 11.11                         No Adverse Interpretation of Other Agreements. 48

Section 11.12                         Successors. 48

Section 11.13                         Severability. 48

Section 11.14                         Counterpart Originals. 48

Section 11.15                         Table of Contents, Headings, etc. 48

Section 11.16                          USA Patriot Act. 48

Section 11.17                             Force Majeure.....................................................................48

 

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 September 24, 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 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 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 May 25, 2005 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 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 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 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

 

“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.

 

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 $30 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 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.

 

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, 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.

 

(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 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

 

(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. 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.

 

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.

 

(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 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.

 

 

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.

 

(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 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.

 

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; 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, 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.

 

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:

 

(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 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 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 (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 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.

 

(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.

 

(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.

 

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 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:

 

(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.

 

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;

 

(ii)           the Company delivers to the Trustee an Officers’ Certificate and 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 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 specified in Section 2.1(a) hereof;

 

(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.

 

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.

 

(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 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 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, (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.

 

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 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.

 

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 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

 

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.

 

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 or trust 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.

 

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.

 

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]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:       /s/ Mark Creatura                                               

Name:  Mark Creatura                                                              

Title:    Sr. Vice President                                                  

 

 

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

as Trustee

By:       /s/ Martin Reed                                              

Name:  Martin Reed                                                              

Title:    Vice President                                                  

 

 

 

 

 

 

  

  

  

Form of Note

[attached]

 

 

  

  

  

FORM OF SECURITIES

 

THIS RENEWABLE UNSECURED SUBORDINATED NOTE (THE “NOTE”) OF CONSUMER PORTFOLIO SERVICES, INC (THE “COMPANY”) IS SUBJECT TO THE TERMS OF THE INDENTURE, WHICH AMONG OTHER PROVISIONS, CONTAINS REQUIREMENTS FOR THE HOLDER TO TRANSFER THIS NOTE, INCLUDING THE PRIOR CONSENT OF THE COMPANY TO ANY SUCH TRANSFER. THE INDENTURE HAS BEEN FILED AS EXHIBIT 4.1 TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT SEPTEMBER 23 2010, PURSUANT TO WHICH THIS NOTE HAS BEEN ISSUED BY THE COMPANY.

THE COMPANY MAY REDEEM THIS NOTE, IN WHOLE OR IN PART, IN ACCORDANCE WITH THE TERMS OF THE INDENTURE.

[OID LEGEND, IF APPLICABLE]

 

CONSUMER PORTFOLIO SERVICES, INC.

 

Incorporated Under the Laws of California

 

RENEWABLE UNSECURED SUBORDINATED NOTES

 

Registered No.:______________________                                                                                                           Registered Principal Amount: $___________

Issue Date:__________________________                                                                                                           Interest Rate:___________________________

Term:________________________________                                                                                                Interest Payment Schedule:_______________

Maturity Date:_______________________                                                                                                           Payment Date (for interest):_____________

 

Consumer Portfolio Services, Inc., a corporation created under the laws of the State of California (the “Company,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________________________________, or registered assigns, the principal sum of ____________ Dollars ($________) on the Maturity Date and to pay accrued and unpaid interest hereon from the Issue Date set forth above, or from the most recent Payment Date to which interest has been paid or duly provided for, beginning on the first Payment Date after the Issue Date (the “Initial Payment Date”) and on each subsequent Payment Date thereafter at the Interest Rate set forth above, until the principal hereof is paid or made available for payment; provided, however, that if the Payment Date is within five (5) Business Days of the Issue Date, then the first payment will be made in the following month and will include the interest earned since the Issue Date. Interest shall accrue on the principal amount for the period from the later of the Issue Date of this Note or the last Payment Date upon which an interest payment was made until and including the day before the following Payment Date. Initially capitalized terms used but not defined herein shall have the respective meanings given such terms in the Indenture.

 

The principal hereof is subject to optional redemption by the Company and optional repurchase at the request of the Holder, as provided in the Indenture, and if not so redeemed or repurchased, shall be due and payable in full on the Maturity Date, which also shall constitute a Payment Date. The principal and interest so payable and punctually paid or duly provided for on any Payment Date, as provided in the Indenture, will be paid to the Person in whose name this Note is registered (the “Holder”) at the close of business on the Regular Record Date for such Payment Date. Payment of the principal of and interest on this Note will be made at the office of the Paying Agent, or in such other office as may be selected in accordance with the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, provided, however, that at the option of the Company payment of interest may be made in United States dollars by wire or by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register.

 

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

No recourse shall be had for the payment of the principal or interest of this Note against any Company incorporator, stockholder, officer, director, employee or agent by virtue of any statute or by enforcement of any assessment or otherwise; and any and all liability of incorporators, stockholders, directors, officers, employees and agents of the Company being released hereby.

 

IN WITNESS WHEREOF, the Company has caused this Renewable Unsecured Subordinated Note to be signed in its name by the manual or facsimile signature of its President and attested to by the manual or facsimile signature of its Secretary.

 

Dated:_____________________

CONSUMER PORTFOLIO SERVICES, INC.

By____________________________________

Name:

Title:

Attest:

 _____________________________________, Secretary

CERTIFICATE OF AUTHENTICATION

 

This Note is one of the Renewable Unsecured Subordinated Notes, referred to in the within-mentioned Indenture.

 

Dated:_________

Wells Fargo Bank National Association, as Trustee

By

Authorized Signature

  

  

  

REVERSE SIDE OF NOTE

 

This Note is one of a duly authorized issue of Renewable Unsecured Subordinated Notes of the Company designated as its Renewable Unsecured Subordinated Notes (the “Notes”) in the maximum aggregate principal amount of up to $50,000,000, issued and to be issued under an Indenture, dated as of ________________, 2010 (the “Indenture”), between the Company and Wells Fargo Bank National Association, as Trustee (the “Trustee,” which term includes any successor Trustee under the Indenture). Reference is hereby made to the Indenture and all indentures supplemental thereto for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Company, the Trustee and the Holders, and for a statement of the terms upon which the Notes are, and are to be, authenticated and delivered. Capitalized and certain other terms used herein and not otherwise defined have the meanings set forth in the Indenture.

 

The Notes are general unsecured obligations of the Company. The payment of the principal of and interest on this Note is expressly subordinated, as provided in the Indenture, to the payment of all Senior Debt and, by the acceptance of this Note, the Holder hereof agrees, expressly for the benefit of the present and future holders of Senior Debt, to be bound by the provisions of the Indenture relating to such subordination and authorizes and appoints as such Holder’s attorney-in-fact the Trustee to take such action on such Holder’s behalf as may be necessary or appropriate to effectuate such subordination.

 

The Company may, at its option, at any time redeem this Note either in whole or from time to time in part prior to the Maturity Date by providing at least thirty (30) days written notice to the Holder.

 

If this Note shall be redeemed by call for redemption and payment be duly provided therefor as specified in the Indenture, interest shall cease to accrue on this Note.

 

This Note may be transferred and exchanged only as provided in the Indenture. This Note may not be assigned, transferred or otherwise alienated without the prior written consent of the Company and shall be subject to the Company’s right to demand and receive an opinion of Holder’s legal counsel (which counsel shall be reasonably acceptable to the Company) that the transfer does not violate any applicable securities laws. The Company may also require a signature guarantee.

 

Approximately fifteen (15) but not less than ten (10) days prior to the Maturity Date, the Company will send the Holder a Notice of Maturity to notify the Holder of the Maturity Date. If in the Notice of Maturity the Company does not notify the Holder of its intention to repay this Note, and unless within fifteen (15) days after the Maturity Date, the Holder has not demanded repayment of this Note, this Note shall be automatically renewed for an additional term equal to the term of the maturing Note and shall be deemed to have been renewed by the Holder and the Company as of the Maturity Date, such that a new Note shall be deemed to have been issued as of such Maturity Date. This Note will continue to renew as described herein absent some action permitted under the Indenture and this Note by either the Holder or the Company. Interest on the renewed Note shall accrue from the Issue Date thereof, which is the first day of such renewed term. This renewed Note will be deemed to have identical terms and provisions as the maturing Note, including provisions relating to payment, except that the interest rate payable during the term of the renewed Note shall be the interest rate which is being offered by the Company on other Notes with the same term as of the Issue Date of such renewal. If other Notes with the same term are not then being offered 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, or the Note’s existing rate if no such rate is specified. If the Company gives notice to the Holder of the Company’s intention to repay the Note at maturity, the Company shall pay the Holder the principal amount and accrued and unpaid interest thereon on the Maturity Date, and, provided such payment is timely made, no interest will accrue after the Maturity Date. Otherwise, if the Holder requests repayment within fifteen (15) days after 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 (5) days following the date the Company receives such notice from Holder; provided that any interest paid to the Holder accruing after the Maturity Date shall be deducted from such payment

 

If an Event of Default shall occur and be continuing, the outstanding principal of this Note may be declared due and payable in the manner and with the effect provided in the Indenture. The Company shall pay all costs of collection, whether or not judicial proceedings are instituted, in the manner provided in the Indenture. The Indenture provides that such declaration and its consequences may, in certain events, be waived by the Holders of a majority in principal amount of the Notes outstanding.

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding. The Indenture also contains provisions permitting the Holders of specified percentages of aggregate principal amount of the Notes at the time outstanding, on behalf of the Holders of all of the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

No reference herein to the Indenture and no provision of this Note or of the Indenture or amendment or modification hereof or thereof shall alter or impair the obligation of the Company to pay the principal of and interest on this Note at the times, place and rate and in the coin or currency herein prescribed.

 

In the event of a consolidation or merger of the Company into, or of the transfer of its assets substantially as an entirety to, a successor entity in accordance with the Indenture, such successor entity shall assume payment of the Notes and the performance of every covenant of the Indenture on the part of the Company, and in the event of any such transfer, the Company (or the successor entity in the event of a subsequent consolidation, merger or transfer) shall be discharged from all obligations and covenants in respect of the Notes and the Indenture and may be dissolved and liquidated, all as more fully set forth in the Indenture.

 

The Notes are originally issuable in such denominations as may be designated from time to time by the Company, but in no event in an original denomination less than $1,000.  Subject to the provisions of the Indenture (including without limitation Section 2.6 thereof), the transfer of this Note is registerable in the Securities Register, upon surrender of this Note for registration of transfer at the office or agency of the Registrar duly endorsed by or accompanied by a written instrument of transfer in the form printed on this Note or in another form satisfactory to the Company and the Registrar duly executed by the Holder hereof or such Holder’s attorney, duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Registrar may assess service charges for any such registration or transfer or exchange, and the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the conflict of law provisions thereof.

 

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder desires to transfer this Note)

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

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------------------------------------------------------------------------------ (Please print name and address of transferee)

this Note, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________, as Attorney-in-Fact, to transfer the within Note on the books kept for registration thereof, with full power of substitution.

Dated:___________

Signature:_________________________________

(Signature must conform in all respects to name of holder as specified on the face of the Note)

Social Security or Other Identifying Number of Transferee: ______________________________

Signature Guaranteed:

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