-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T4f5NixE1EL+slGcFNwgQzcsVuHX4KsxXPn5JX2Wc/nlZ5QgySZ5x1YE6BFLF+6j OvAQOElCpziMHz4PCYqTVw== 0000929859-98-000010.txt : 19980220 0000929859-98-000010.hdr.sgml : 19980220 ACCESSION NUMBER: 0000929859-98-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980218 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980219 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOURCE CAPITAL CORP CENTRAL INDEX KEY: 0000746776 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 910853890 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-12199 FILM NUMBER: 98545113 BUSINESS ADDRESS: STREET 1: 1825 NORTH HUTCHINSON ROAD CITY: SPOKANE STATE: WA ZIP: 99212 BUSINESS PHONE: 5099280908 FORMER COMPANY: FORMER CONFORMED NAME: SELECTORS INC DATE OF NAME CHANGE: 19911121 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 11, 1998 ----------------- SOURCE CAPITAL CORPORATION -------------------------- Exact name of registrant as specified in its charter) Washington 0-12199 91-0853890 ----------------- ----------- ------------------- (State or other (Commission (IRS Employer jurisdiction of File Number Identification No.) of incorporation) 1825 N. Hutchinson Road, Spokane, Washington 99212 -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (509) 928-0908 -------------- Not Applicable --------------------------------- (Former name or former address, if changed since last report) ITEM 5. Other Events. On February 11, 1998, Source Capital Corporation (the "Company") completed a private placement of $6,000,000 in principal amount of its 7-1/2% Convertible Subordinated Debentures due March 1, 2008 (the "Debentures"). The offering of the Debentures was not registered under the Securities Act of 1933 (the "Act") and the Debentures were sold in reliance upon exemptions available under the Act. Subsequent to the earlier of September 30, 1998 or the effective date of a registration statement to be filed with the Securities and Exchange Commission for the registration of the no par value common stock (the "Common Stock") to be issued upon the conversion of the Debentures, the Debentures are convertible into shares of Common Stock, unless previously redeemed, at a conversion price of $8.01 per share, subject to adjustment in certain events. The Debentures are redeemable, in whole or in part, at any time on or after March 1, 2001, at the redemption prices set forth in the Indenture, dated as of February 11, 1998 (the "Indenture"), between the Company and Bankers Trust Company, as Trustee (the "Trustee"), plus accrued interest. The Debentures are required to be repurchased at the option of the holder upon the occurrence of a "Designated Event" (as defined in the Indenture) at 100% of their principal amount plus accrued interest. The Debentures are unsecured and subordinate in right of payment to all Senior Debt (as defined in the Indenture). Pursuant to a Registration Rights Agreement, dated as of February 11, 1998, between the Company and Pacific Crest Securities, Inc., the placement agent for the Debenture private placement, the Company is obligated to use its best efforts to file with the Securities and Exchange Commission before July 31, 1998, and to use its best efforts to cause to become effective on or prior to September 30, 1998, a shelf registration statement covering resales of the shares of common stock issuable upon conversion of the Debentures and to maintain the effectiveness of such registration statement until February 11, 2000, subject to adjustment in certain circumstances. The Company plans to use a portion of the estimated $5,470,000 net proceeds from the Debentures (after deduction of placement fees and estimated expenses) to fund additional equity investments in its leasing and accounts receivable factoring subsidiaries, which is expected to allow those subsidiaries to increase their leasing and lending portfolios. A portion of the net proceeds will also be used by the Company to fund additional commercial loans made by it and for general corporate purposes. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) The following exhibits are filed as Exhibits hereto: Exhibit Number Description ------- ---------------------------------------------------------- 4.1 Indenture, dated as of February 11, 1998, between the Registrant and Bankers Trust Company, as Trustee, relating to the Registrant's 7-1/2% Convertible Subordinated Debentures due 2008. 10.3 Registration Rights Agreement, dated as of February 11, 1998, between the Registrant and Pacific Crest Securities, Inc. 99.1 Press Release of the Registrant, dated February 12, 1998. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOURCE CAPITAL CORPORATION (Registrant) Dated: February 18, 1998 By: /s/ LESTER L. CLARK ----------------- ------------------------------- Lester L. Clark, Vice President, Treasurer and Secretary EX-4.1 2 EXHIBIT 4.1 INDENTURE DATED AS OF FEBRUARY 11, 1998 BETWEEN SOURCE CAPITAL CORPORATION AND BANKERS TRUST COMPANY TRUSTEE ------------------- 7 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2008 --------------------- TABLE OF CONTENTS ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions SECTION 1.02. Incorporation by Reference of Trust Indenture Act SECTION 1.03. Rules of Construction ARTICLE II THE SECURITIES SECTION 2.01. Form of Securities and Dating SECTION 2.02. Execution and Authentication SECTION 2.03. Registrar, Paying Agent and Conversion Agent SECTION 2.04. Paying Agent To Hold Money in Trust SECTION 2.05. Securityholder Lists. SECTION 2.06. Transfer and Exchange SECTION 2.07. Replacement Securities SECTION 2.08. Outstanding Securities SECTION 2.09. Treasury Securities SECTION 2.10. Temporary Securities SECTION 2.11. Cancellation SECTION 2.12. Defaulted Interest ARTICLE III REDEMPTION SECTION 3.01. Notices to Trustee SECTION 3.02. Selection of Securities To Be Redeemed SECTION 3.03. Notice of Redemption SECTION 3.04. Effect of Notice of Redemption SECTION 3.05. Deposit of Redemption Price SECTION 3.06. Securities Redeemed in Part ARTICLE IV COVENANTS SECTION 4.01. Payment of Securities SECTION 4.02. SEC Reports SECTION 4.03. Compliance Certificate SECTION 4.04. Stay, Extension and Usury Laws SECTION 4.05. Liquidation SECTION 4.06. Reservation of Shares of Common Stock for Issuance Upon Conversion SECTION 4.07. Rule 144A Information Requirement ARTICLE V SUCCESSORS SECTION 5.01. When Company May Merge, etc. SECTION 5.02. Successor Corporation Substituted ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Events of Default SECTION 6.02. Acceleration SECTION 6.03. Other Remedies SECTION 6.04. Waiver of Past Defaults SECTION 6.05. Control by Majority SECTION 6.06. Limitation on Suits SECTION 6.07. Rights of Holders To Receive Payment SECTION 6.08. Collection Suit by Trustee SECTION 6.09. Trustee May File Proofs of Claim SECTION 6.10. Priorities SECTION 6.11. Undertaking for Costs ARTICLE VII TRUSTEE SECTION 7.01. Duties of Trustee SECTION 7.02. Rights of Trustee SECTION 7.03. Individual Rights of Trustee SECTION 7.04. Trustee's Disclaimer SECTION 7.05. Notice of Defaults SECTION 7.06. Reports by Trustee to Holders SECTION 7.07. Compensation and Indemnity SECTION 7.08. Replacement of Trustee SECTION 7.09. Successor Trustee by Merger, etc. SECTION 7.10. Eligibility; Disqualification SECTION 7.11. Preferential Collection of Claims Against Company ARTICLE VIII DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations SECTION 8.02. Application of Trust Money SECTION 8.03. Repayment to Company SECTION 8.04. Reinstatement ARTICLE IX AMENDMENTS SECTION 9.01. Without Consent of Holders SECTION 9.02. With Consent of Holders SECTION 9.03. Compliance with Trust Indenture Act SECTION 9.04. Revocation and Effect of Consents SECTION 9.05. Notation on or Exchange of Securities SECTION 9.06. Trustee Protected ARTICLE X CONVERSION SECTION 10.01. Conversion Privilege SECTION 10.02. Conversion Procedure SECTION 10.03. Fractional Shares SECTION 10.04. Taxes on Conversion SECTION 10.05. Company To Provide Stock SECTION 10.06. Adjustment for Dividends and Distributions of Common Stock SECTION 10.07. Adjustment for Rights Issue SECTION 10.08. Adjustment for Other Distributions SECTION 10.09. Adjustment for Subdivision of Common Stock SECTION 10.10. Adjustment for Reclassification of Common Stock SECTION 10.11. [Intentionally Omitted] SECTION 10.12. When Adjustment May Be Deferred SECTION 10.13. When No Adjustment Required SECTION 10.14. Notice of Adjustment SECTION 10.15. Voluntary Reduction SECTION 10.16. Notice of Certain Transactions SECTION 10.17. Reorganization of Company SECTION 10.18. Company Determination Final SECTION 10.19. Trustee's Disclaimer ARTICLE XI SUBORDINATION OF SECURITIES SECTION 11.01. Securities Subordinate to Senior Debt SECTION 11.02. No Payments When Senior Debt in Default; Payment Over of Proceeds upon Dissolution, Etc. SECTION 11.03. Trustee to Effectuate Subordination SECTION 11.04. Trustee Not Charged With Knowledge of Prohibition SECTION 11.05. Rights of Trustee as Holder of Senior Debt SECTION 11.06. Article Applicable to Paying Agent ARTICLE XII RIGHT TO REQUIRE REPURCHASE SECTION 12.01. Right To Require Repurchase SECTION 12.02. Notice; Method of Exercising Repurchase Right SECTION 12.03. Certain Definitions SECTION 12.04. Compliance with Rule 13e-4 ARTICLE XIII MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls SECTION 13.02. Notices and Common Stockholder Information SECTION 13.03. Communication by Holders with Other Holders SECTION 13.04. Certificate and Opinion as to Conditions Precedent SECTION 13.05. Statements Required in Certificate or Opinion SECTION 13.06. Rules by Trustee and Agents SECTION 13.07. Legal Holidays SECTION 13.08. No Recourse Against Others SECTION 13.09. Counterparts SECTION 13.10. Governing Law SECTION 13.11. No Adverse Interpretation of Other Agreements SECTION 13.12. Successors SECTION 13.13. Severability SECTION 13.14. Table of Contents, Headings, Etc. SIGNATURE 42,43 Exhibit A A-1 Exhibit B-I B-I-1 Exhibit B-II B-II-1 CROSS-REFERENCE TABLE* Trust Indenture Act section Indenture Section --------------- --------------------------------------------- 310(a)(1) 7.10 (a)(2) (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A. (b) .7.08; 7.10; 13.02 (c) N.A. 311(a) 7.11 x (b) 7.11 (c) N.A. 312(a) 2.05 (b) 13.03 (c) 13.03 313(a) 7.06 (b)(1) N.A. (b)(2) 7.06 (c)(3) 7.06; 13.02 (d) 7.06 314(a) 4.02; 13.02 (b) N.A. (c)(1) 13.04 (c)(2) 13.04 (c)(3) N.A. (d) N.A. (e) 13.05 (f) N.A. 315(a) 7.01(b) (b) 7.05; 13.02 (c) 7.01(a) (d) 7.01(c) (e) 6.11 316(a)(last sentence) 2.09 (a)(1)(A) 6.05 (a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04 318(a) 13.01 N.A. means not applicable. ------------------- * This Cross-Reference Table is not part of the Indenture. INDENTURE dated as of February 11, 1997, between SOURCE CAPITAL CORPORATION, a corporation duly organized and existing under the laws of the State of Washington (the "Company"), having its principal office at 1825 North Hutchinson Road, Spokane, Washington 99212, and BANKERS TRUST COMPANY, a banking corporation duly organized and validly existing under the laws of the State of New York, as Trustee (the "Trustee"), having its principal office at 4 Albany Street, New York, New York 10006. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 7 1/2% Convertible Subordinated Debentures due 2008 (the "Securities"): ARTICLE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: "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 "controlled by" and "under common control with"), when 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, Conversion Agent or co-Registrar. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any authorized committee of the Board. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of corporate stock. "CHANGE IN CONTROL" means as provided in Section 12.03. "COMMON STOCK" means Common Stock of the Company as it exists on the date of this Indenture or as it may be constituted from time to time. "COMPANY" means the party named as such above until a successor replaces it in accordance with Article V and thereafter means the successor. "CONVERSION AGENT" means the party named in Section 2.03. "CONVERSION DATE" means the date on which the Holder satisfies all the requirements of paragraph 9 of the Securities. "CORPORATE TRUST OFFICE" shall mean the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group or at any other time at such other address as the Trustee may designate from time to time by notice to the Company and Securityholders. "CURRENT MARKET PRICE" means (a) for purposes of Section 10.03 the last reported sales price of the Common Stock (as reported by NASDAQ Stock Market s SmallCap Market System) on the last trading day prior to the Conversion Date and (b) for purposes of Sections 10.07, 10.08 and 12.03, the average of the last reported sales prices of the Common Stock (as reported by NASDAQ) for 15 consecutive trading days commencing 25 trading days before the date in question. "DEBT" means "DEFAULT" means any event which is, or after notice or passage of time would be, an Event of Default. "DEFINITIVE SECURITY" means as provided in Section 2.01. "DESIGNATED EVENT" means as provided in Section 12.03. "DESIGNATED SENIOR DEBT" means the principal of (and premium, if any), and interest on and other amounts now or hereafter due on any and all indebtedness now or hereafter incurred under (a) the Loan and Security Agreement between the Company and Seafirst Bank dated May 1, 1997 and/or (b) the Loan Agreement between the Company and Washington Mutual Bank d/b/a Western Bank dated January 15, 1998, as the same may be amended from time to time, including all renewals, extensions and refundings thereof. "EVENT OF DEFAULT" means as provided in Section 6.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "HOLDER" or "SECURITYHOLDER" means a person in whose name a Security is registered on the securities Register. "INDENTURE" means this Indenture as amended from time to time. "LEGAL HOLIDAY" means as provided in Section 13.07. "NASDAQ" means the National Association of Securities Dealers Automated Quotation System. "OFFICER" means Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice- President of the Company. "OPINION OF COUNSEL" means a written opinion from legal counsel which may be an employee of or counsel to the Company or the Trustee. "PAYING AGENT" means the party named in Section 2.03. "PERSON" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PRINCIPAL" of a debt security means the principal of the security plus the premium, if any, on the security. "REDEMPTION DATE" means the date on which Securities are redeemed by the Company pursuant to Article III. "REDEMPTION PRICE" means the amount paid by the Company to redeem a Security, as determined in paragraph 6 of the Securities. "REGISTRAR" means the party named in Section 2.03. "REPURCHASE DATE" means as provided in Section 12.01. "RESTRICTED SECURITY" means any Security that bears or is required to bear the legend set forth in Section 2.06(b). "SEC" means the Securities and Exchange Commission. "SECURITIES" means the securities described above issued under this Indenture in the form of Exhibit A hereto. "SECURITIES REGISTER" means as provided in Section 2.03. "SENIOR DEBT" means the principal of (and premium, if any) and interest on and other amounts due on any indebtedness, whether outstanding on the date of execution of this Indenture or thereafter created, incurred, assumed or guaranteed by the Company for money borrowed from others (including, for this purpose, all obligations incurred under capitalized leases or purchase money mortgages) or in connection with the acquisition by it or a Subsidiary of any other business or entity, and, in each case, all renewals, extensions and refundings thereof, other than (a) any such indebtedness as to which, in the instrument creating or evidencing the same, it is provided that such indebtedness is not superior in right of payment to the Securities, (b) indebtedness of the Company to any Affiliate and (c) the Securities. Senior Debt shall include, but shall not be limited to, Designated Senior Debt. "SIGNIFICANT SUBSIDIARY" means a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act of 1933, as amended, and the Exchange Act (as such Regulation is in effect on the date hereof) except that any subsidiary the common stock of which is listed on a national securities exchange or authorized for quotation on NASDAQ (at present or at any future relevant time) (a "Public Subsidiary"), and any subsidiary of a Public Subsidiary, shall be deemed not to be a Significant Subsidiary. "SUBSIDIARY" of any specified person means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other subsidiaries, or by the Company and one or more other subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-77bbbb) as amended and in effect on the date of this Indenture or, if this Indenture is qualified under the TIA, from and after the date of such qualification, the TIA as in effect at the date of such qualification. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor. "TRUST OFFICER" means, with respect to the Trustee, any officer assigned to the Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged. U.S. Government obligations shall not be callable at the issuer's option. SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the TIA either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE II THE SECURITIES SECTION 2.01. FORM OF SECURITIES AND DATING. The Securities will be issued in definitive form, substantially in the form of Exhibit A (each, a "Definitive Security"). The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication. 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, expressly agree to such terms and provisions and to be bound thereby. Payment of principal of and any interest on any Definitive Security shall be made to the holder thereof as of the record date for such payment as specified in the form of Definitive Security. SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall be executed on behalf of the Company by an officer, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature 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 any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a written order of the Company signed by two Officers for the authentication and delivery of such Securities; and the Trustee in accordance with such written order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. 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 a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same right as an Agent to deal with the Company or an Affiliate. SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The Company shall maintain in such locations as it shall determine (a) an office or agency where securities may be presented for registration of transfer or for exchange ("Registrar"), (b) an office or agency where Securities may be presented for payment ("Paying Agent"), and (c) an office or agency where securities may be presented for conversion("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Securities Register"). The Company may appoint one or more co-Registrars, one or more additional paying agent sand one or more additional conversion agents. The term "Paying Agent" includes any additional paying agent; the term "Conversion Agent" includes any additional conversion agent. The Company may change any Paying Agent, Registrar, Conversion Agent or co-Registrar without prior notice. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company or any of its subsidiaries may act as Conversion Agent, Paying Agent, Registrar or co-Registrar. The Company initially appoints the Trustee as Conversion Agent, Paying Agent, Registrar and authenticating agent. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. 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 Securityholders 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 of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent 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 or a subsidiary) shall have no further liability for the money. If the Company or a subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Securityholders all money held by it as Paying Agent. SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each interest payment date and at such other times as the Trustee may request in writing alist in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. TRANSFER AND EXCHANGE. (a) When Definitive Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Definitive Securities or to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or exchange (i) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney, duly authorized in writing, (ii) shall be accompanied by an opinion of counsel acceptable to the Company and to the Registrar or co- Registrar to the effect that such transfer is in compliance with the Securities Act (in substantially the form of Exhibit B-II hereto), and (iii) in the case of Definitive Securities which are Restricted Securities only, shall be accompanied by the following additional information and documents, as applicable: (A) if such Definitive Security is being acquired for the account of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Exhibit B-I hereto); or (B) if such Definitive Security is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rules 144 or 145 or Regulation S under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect (in substantially the form of Exhibit B-I hereto); or (C) if such Definitive Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (in substantially the form of Exhibit B-I hereto). To permit the registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but 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 exchanges or transfers pursuant to Sections 2.10, 3.06, 9.05 or 10.02). The Registrar or co-Registrar shall not be required to register the transfer of or exchange any Definitive Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. (b) Except as permitted by the following paragraph, each certificate evidencing the Definitive Securities (and all securities issued in exchange therefor or substitution thereof (shares of Common Stock issued upon conversion of any Restricted Security shall bear a comparable legend)) shall bear a legend in substantially the following form: THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (4) PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION. THE HOLDER OF THIS SECURITY AGREES TO DELIVER SUCH CERTIFICATES, OPINIONS AND OTHER INFORMATION AS THE COMPANY OR THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER BY IT OF THIS SECURITY AND ANY COMMON STOCK ISSUED UPON ITS CONVERSION COMPLIES WITH THE FOREGOING. Upon any sale or other transfer of a Restricted Security satisfying the conditions set forth in clause (3) or (4)above, or with respect to any Restricted Security that may be sold pursuant to Rule 144(k) promulgated under the Securities Act, the Registrar or co- Registrar shall permit the Holder thereof to exchange such Restricted Security for Definitive Securities that do not bear the legend set forth above and rescind any restriction on the transfer of such Security; PROVIDED, HOWEVER, with respect to any request for an exchange of a Restricted Security for a Definitive Security which does not bear a legend, which request is made in reliance upon Rule 144(k), the Holder thereof shall certify in writing to the Registrar or co- Registrar that such request is so being made in reliance on Rule 144(k). (c) The Company shall not be required (i) to issue, register the transfer of Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption under Section 3.02 and ending at the close of business on the day of selection, or (ii) to register the transfer of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 2.07. REPLACEMENT SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Security and (b) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses(including the fees and expenses of the Trustee) connected therewith. Every new security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen securities. SECTION 2.08. OUTSTANDING SECURITIES. The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation hereunder, and those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If Securities are considered paid under Section 4.01, they cease to be outstanding and interest on them ceases to accrue. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. SECTION 2.09. 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 an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which any Corporate Trust Officer knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY SECURITIES. Until the Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of the Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate the Definitive Securities in exchange for temporary Securities. SECTION 2.11. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange, payment or conversion. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement, conversion or cancellation and shall dispose of cancelled Securities. The Company may not issue new Securities to replace Securities that it has paid or that have been delivered to the Trustee for cancellation or that any Securityholder has converted pursuant to Article X. SECTION 2.12. DEFAULTED INTEREST. If the Company fails to make a payment of interest on the Securities, it shall pay such defaulted interest plus any interest payable on the defaulted interest in any lawful manner. It may pay such defaulted interest, plus any such interest payable on it, to the persons who are Securityholders on a subsequent special record date. The Company shall fix any such record date and payment date. At least 15 days before any such record date, the Company shall mail to Securityholders a notice that states the record date, payment date, and amount of such interest to be paid. ARTICLE III REDEMPTION SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to the optional redemption provisions of paragraph 6 of the Securities, it shall notify the Trustee of the Redemption Date and the principal amount of Securities to be redeemed. The Company shall give each notice provided for in this Section to the Trustee at least 40 days but not more than 60 days before the Redemption Date(unless a shorter notice period shall be satisfactory to the Trustee). SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed by lot or by a method that complies with the requirements of any exchange on which the Securities are listed and that the Trustee considers fair and appropriate. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or integral multiples of $1,000. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption to each Holder whose Securities are to be redeemed at the address of such Holder shown in the Security Register. The notice shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or securities in principal amount equal to the unredeemed portion will be issued; (d) the conversion price; (e) the name and address of the Paying Agent and Conversion Agent; (f) that Securities called for redemption may be converted at any time before the close of business on the business day before the Redemption Date; (g) that Holders who want to convert Securities must satisfy the requirements in paragraph 9 of the Securities; (h) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (i) that interest on Securities called for redemption ceases to accrue on and after the Redemption Date; and (j) that Holders who convert after the date of the redemption notice but before the Redemption Date will be entitled to receive accrued interest on their converted Securities through the Redemption Date. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once a notice of redemption mailed, Securities called for redemption become due and payable on the Redemption Date at the price set forth in the Security. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. On or before the Redemption Date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a Definitive Security that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Definitive Security equal in principal amount to the unredeemed portion of the Definitive Security surrendered. ARTICLE IV COVENANTS SECTION 4.01. PAYMENT OF SECURITIES. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. Principal and interest shall be considered paid on the date due if the Paying Agent (other than the Company or a subsidiary) holds on that date money designated for and sufficient to pay all principal and interest then due; PROVIDED, HOWEVER, that money held by the Paying Agent for the benefit of holders of Senior Debt pursuant to the provisions of Article XI hereof shall not be considered paid within the meaning of this Section 4.01. To the extent lawful, the Company shall pay interest semiannually(including post-petition interest in any proceeding under any bankruptcy, insolvency or other similar law) on (a) overdue principal, at the rate borne by the Securities and (b) overdue installments of interest (including interest contemplated by clause (a) and without regard to any applicable grace period)at the same rate. SECTION 4.02. SEC REPORTS. The Company shall deliver to the Trustee within 15 days after it files them with the SEC copies 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) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA S 314(a). The Company shall timely comply with its reporting and filing obligations under applicable federal securities laws. SECTION 4.03. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries 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 his 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 Events of Default shall have occurred, describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his 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. The first certificate pursuant to this Section shall be for the fiscal year ending on December 31, 1998. The Company will, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default. SECTION 4.04. 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 it may lawfully do so) hereby expressly waives all benefit or 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 4.05. LIQUIDATION. The Company shall not adopt any plan of liquidation which provides for, contemplates, or the effectuation of which is preceded by, (a) the sale, lease, conveyance or other disposition of all or substantially all the assets of the Company otherwise than substantially as an entirety in accordance with Article V and (b) the distribution of all or substantially all the proceeds of such sale, lease, conveyance or other disposition and of the remaining assets of the Company to holders of Common Stock of the Company, unless the Company shall in connection with the adoption of such plan make provision for, or agree that prior to making any liquidating distributions it will make provision for, the satisfaction of the Company's obligations hereunder and under the Securities as to the payment of principal and interest. SECTION 4.06. RESERVATION OF SHARES OF COMMON STOCK FOR ISSUANCE UPON CONVERSION. The Company will at all times cause there to be authorized and reserved for issuance upon conversion of the Securities such number of shares of Common Stock as would be issuable upon conversion of all the Securities then outstanding. SECTION 4.07. RULE 144A INFORMATION REQUIREMENT. For so long as any of the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, make available to any Holder of Securities which continue to be restricted securities in connection with any sale thereof and any prospective purchaser of Securities from such Holder, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act. ARTICLE V SUCCESSORS SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless: (a) the corporation formed by such consolidation or into which the Company is merged or the person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 10.17; (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR CORPORATION 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 5.01, the successor corporation 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 person has been named as the Company herein; PROVIDED, HOWEVER, that the predecessor Company in the case of a sale, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Securities. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the Default continues for a period of 30 days; (b) the Company defaults in the payment of the principal or premium, if any, of any Security when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company defaults in the payment of the repurchase price in respect of any Security on the Repurchase Date therefor in accordance with the provisions of Article XII, whether or not such payment is prohibited by the provisions of Article XI; (d) the Company defaults in the performance of, or breaches, any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and such default or breach continues for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the then outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (e) the Company defaults under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in $1,000,000 or more of such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or acceleration having been rescinded or annulled, within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the then outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (f) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, conservator, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it or shall file an answer admitting the material allegations against it in any such proceeding, or shall make a general assignment for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing, or becomes unable or fails generally to pay its debts as they become due; or an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or thereafter in effect or seeking the appointment of a trustee, receiver, conservator, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 consecutive days. In the case of any Event of Default pursuant to the provisions of this Section 6.01 occurring by reason of any wilful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium which the Company would have had to pay if the Company then had elected to redeem the Securities pursuant to paragraph 6 of the Securities, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law, anything in this Indenture or in the Securities contained to the contrary notwithstanding. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (f) of Section 6.01) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Securities by notice to the Company and the Trustee, may declare the unpaid principal of and accrued interest on all the Securities to be due and payable. Upon such declaration the principal and interest shall be due and payable immediately. If an Event of Default specified in clause (f) of Section 6.01 occurs, such an amount 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. The Holders of a majority in principal amount of the then outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may 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 Securityholder 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 6.04. WAIVER OF PAST DEFAULTS. Subject to Section 9.02, the Holders of a majority in principal amount of the then outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the principal (other than principal due by reason of acceleration)of or interest on any Security or a Default which materially and adversely affects the rights of any Holders under Article X. SECTION 6.05. 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. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Securityholders, or would involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A SECURITYHOLDER may pursue a remedy with respect to this Indenture or the Securities only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Securities make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer 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 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 Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, 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.Notwithstanding any other provision of this Indenture, the right of any Holder of a Security (a) to bring suit for the enforcement of the right to convert the Security and (b) to require the Company to repurchase the Security pursuant to Article XII, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee may 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 interest and such further amount as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder 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 Securityholder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: FIRST, to the Trustee for amounts due under Section 7.07; SECOND, to holders of Senior Debt to the extent required by Article XI; THIRD, to Securityholders for amounts due and unpaid on the Securities for principal, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, and interest, respectively; and FOURTH, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders other than as provided for in Section 2.12. 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 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 6.07, or a suit by Holders of more than 10% in principal amount of the then outstanding Securities. ARTICLE VII TRUSTEE SECTION 7.01. 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 man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture; PROVIDED HOWEVER, that the Trustee is not required to confirm the correctness of any mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 6.05. (d) 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) 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 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (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. (c) The Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence of any agent, attorney, custodian or nominee appointed 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 its rights or powers. SECTION 7.03. 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 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 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities or any private placement memorandum, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in the Indenture, any statement in any private placement memorandum or any statement in the Securities other than its authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Securityholders, at the name and address which appears in the Securities Register a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Security (including any failure to make any mandatory redemption payment required hereunder), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. This Section 7.06 shall not be operative as part of this Indenture unless and until this Indenture is qualified under the TIA, if ever, and, until such qualification, this Indenture shall be construed as if this Section 7.06 were not contained herein. Within 60 days after the reporting date (which shall be March 1 of each year), the Trustee shall mail to each Securityholder, at the name and address which appears in the Securities Register a brief report dated as of such reporting date that complies with TIA S 313(a). The Trustee also shall comply with TIA S 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA S 313(c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall notify the Trustee when the Securities are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. 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 upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses may include the reasonable compensation and out-of-pocket expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its officers, directors, agents and employees against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the 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. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. 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. When the Trustee incurs expenses or renders services after an Event of default specified in Section 6.01(f) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or other similar law. SECTION 7.08. REPLACEMENT OF TRUSTEE. 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. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any bankruptcy, insolvency or other similar law; (c) a receiver, trustee, liquidator or similar official takes charge of the Trustee or its property; or (d) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the 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 Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. Notwithstanding the replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee with respect to expenses and liabilities incurred by it prior to such replacement. SECTION 7.09. 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. This Indenture shall always have a Trustee who satisfies the requirements of TIA S 310(a)(1). The Trustee shall always have a combined capital and surplus of $50,000,000 as set forth in its most recent published annual report of condition. The Trustee will at all times comply with, and when this Indenture is qualified under the TIA will be subject to, TIA S 310(b), including the optional provision permitted by the second sentence of TIA S 310(b)(9). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA S 311(a), excluding any creditor relationship listed in TIA S 311(b). A Trustee who has resigned or been removed shall be subject to TIA S 311(a) to the extent indicated therein. In the event that the Trustee is also serving as the Conversion Agent, Paying Agent or Registrar, the rights, protections, immunities and indemnities granted to the Trustee hereunder shall be afforded to the Conversion Agent, Paying Agent and Registrar. ARTICLE VIII DISCHARGE OF INDENTURE SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. This Indenture shall cease to be of further effect (except that the Company's obligations under Section 7.07 and 8.03 shall survive) when all outstanding Securities theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. In addition, the Company may terminate all of its obligations under this Indenture (except the Company's obligations under Sections 7.07 and 8.03) if: (a) the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption; and (b) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient 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. The Company may make the deposit only during the one- year period and only if Article XI permits it. However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,4.01, 7.07, 8.03, 8.04 and in Article X, shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.07 and 8.03 shall survive. 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 on or before such payment date in such amounts as will provide the necessary money. After a deposit made pursuant to this Section 8.01, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. SECTION 8.02. APPLICATION OF TRUST MONEY. The Trustee shall hold in trust money or U.S. Government obligations deposited with it pursuant to Section 8.01. 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. Money and securities so held in trust are not subject to Article XI. SECTION 8.03. REPAYMENT TO COMPANY. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after the date upon which such payment shall have become due; PROVIDED, HOWEVER, that the Company shall have first caused notice of such payment to the Company to be mailed to each Securityholder entitled thereto no less than 30 days prior to such payment. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. SECTION 8.04. REINSTATEMENT. If (a) the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.02 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (b) the Holders of at least majority in principal amount of the then outstanding Securities so request by written notice to the Trustee, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02; PROVIDED, HOWEVER, that if the Company makes any payment of principal or interest of any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE IX AMENDMENTS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may amend this Indenture or the Securities without the consent of any Securityholder: (a) to cure any ambiguity, defect or inconsistency; or (b) to comply with Sections 5.01 and 10.17; or (c) to provide for uncertificated Securities in addition to certificated Securities; or SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Section 6.07, 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. Subject to Sections 6.04 and 6.07, the Holders of a majority in principal amount of the then outstanding Securities may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment or waiver under this Section may not: (a) reduce the amount of Securities whose Holders must consent to an amendment or waiver; (b) reduce the rate of or change the time for payment of interest on any Security; (c) reduce the principal of or change the fixed maturity of any Security or alter the redemption provisions with respect thereto; (d) make any Security payable in money other than that stated in the Security; (e) make any change in Section 6.04, 6.07 or 9.02 which adversely affects the rights of the Securityholders; (f) make any change that adversely affects the right to convert any Security; (g) make any change in Article XI that adversely affects the rights of any Securityholder; or (h) waive a default in the payment of the principal (except principal due by reason of acceleration) of, or interest on, any Security or any Default which materially and adversely affects the rights of any Securityholders under Article X. After an amendment or waiver under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing the amendment or waiver. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. 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 9.04. REVOCATION AND EFFECT OF CONSENTS. 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. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officer's Certificate certifying that the Holders of the requisite principal amount of securities have consented to the amendment or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the principal amount of securities required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90- day period. After an amendment or waiver becomes effective it shall bind every Securityholder, unless it is of the type described in any of clauses (a)through (h) of Section 9.02. In such case, the amendment or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security that evidences the same debt as the consenting Holder's Security. SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. The Trustee may place an appropriate notation about an amendment or waiver on any Security thereafter authenticated. The Company in exchange for all Securities may issue and the Trustee shall authenticate new Securities that reflect the amendment or waiver. SECTION 9.06. TRUSTEE PROTECTED. The Trustee shall sign all supplemental indentures, except that the Trustee need not sign any supplemental indenture that adversely affects its rights. ARTICLE X CONVERSION SECTION 10.01. CONVERSION PRIVILEGE. A Holder of a Security may convert it into Common Stock at any time during the period stated in paragraph 9 of the Securities. The number of shares issuable upon conversion of a Security is determined as follows: divide the principal amount to be converted by the conversion price in effect on the Conversion Date. Round the result to the nearest 1/100th of a share. The initial conversion price is stated in paragraph 9 of the Securities. The conversion price is subject to adjustment. A Holder may convert a portion of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of it. SECTION 10.02. CONVERSION PROCEDURE. To convert a Security, a Holder must satisfy the requirements in paragraph 9 of the Securities. As soon as practical, the Company shall deliver through the Conversion Agent a certificate for the number of full shares of Common Stock issuable upon the conversion together with payment in lieu of any fractional share. The person in whose name the certificate is registered shall be treated as a stockholder of record on and after the Conversion Date. No payment or adjustment will be made on conversion of any Security for interest accrued thereon or dividends on any Common Stock issued and the Holder will lose any right to payment of interest on the Securities surrendered for conversion; PROVIDED, HOWEVER, that upon a call for redemption by the Company, accrued and unpaid interest to the Redemption Date shall be payable with respect to Securities that are converted after a redemption notice has been mailed pursuant to Section 3.03 and on or prior to the Redemption Date. Securities surrendered for conversion during the period from the regular record date for an interest payment to the corresponding interest payment date (except Securities called for redemption as described in the preceding sentence) must be accompanied by payment of an amount equal to the interest thereon which the Holder is to receive on such interest payment date. If a Holder converts more than one Security at the same time, the number of full shares issuable upon the conversion shall be based on the total principal amount of the Securities surrendered. Upon a surrender of a Definitive Security that is converted in part, the Company shall issue and the Trustee shall authenticate for the Holder a new Definitive Security equal in principal amount to the unconverted portion of the Security surrendered. If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding day that is not a Legal Holiday. SECTION 10.03. FRACTIONAL SHARES. The Company will not issue a fractional share of Common Stock upon conversion of a Security. Instead the Company will deliver payment in lieu thereof for the current market value of the fractional share. The current market value of a fraction of a share is determined as follows: multiply the Current Market Price of a full share by the fraction. Round the result to the nearest cent. SECTION 10.04. TAXES ON CONVERSION. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. SECTION 10.05. COMPANY TO PROVIDE STOCK. The Company has reserved and shall continue to reserve out of its authorized but unissued Common Stock or its Common Stock held in treasury enough shares of Common Stock to permit the conversion of the Securities in full. All shares of Common Stock which may be issued upon conversion of the Securities shall be fully paid and non assessable. The Company will comply with all securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities and will use its best efforts to list such shares on each national securities exchange on which the Common Stock is listed. SECTION 10.06. ADJUSTMENT FOR DIVIDENDS AND DISTRIBUTIONS OF COMMON STOCK. In case the Company shall pay or make a dividend or other distribution on any class of Capital Stock of the Company in Common Stock, the conversion price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares of Common Stock and the total number of shares of Common Stock constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this Section 10.06, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. SECTION 10.07. ADJUSTMENT FOR RIGHTS ISSUE. In case the Company shall issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price per share of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the conversion price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this Section 10.07, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. SECTION 10.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS. In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any rights or warrants referred to in Section 10.07, any dividend or distribution paid in cash out of the earned surplus of the Company and any dividend or distribution referred to in Section 10.06), the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and contained in a Board Resolution filed with the Trustee) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. SECTION 10.09. ADJUSTMENT FOR SUBDIVISION OF COMMON Stock. In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. SECTION 10.10. ADJUSTMENT FOR RECLASSIFICATION OF COMMON STOCK. The reclassification of Common Stock into securities including other than Common Stock shall be deemed to involve (a) a distribution of such Securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of Section 10.08) and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective" or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of Section 10.09. SECTION 10.11. [Intentionally Omitted] SECTION 10.12. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the conversion price need be made for a transaction referred to in Sections 10.06,10.07, 10.08, 10.09 or 10.10 unless the adjustment would require an increase or decrease of at least 1% in the conversion price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. SECTION 10.13. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for a transaction referred to in Sections 10.06, 10.07, 10.08, 10.09 or 10.10 if all Securityholders are entitled to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for rights to purchase Common Stock or issuance of Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Securities become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. SECTION 10.14. NOTICE OF ADJUSTMENT. Whenever the conversion price is adjusted, the Company shall promptly mail to Securityholders and the Trustee notice of the adjustment. The Company shall file with the Trustee a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. SECTION 10.15. VOLUNTARY REDUCTION. The Company from time to time may reduce the conversion price by any amount for any period of time if the period is at least 20 days or such longer period as may be required by law and if the reduction is irrevocable during the period, provided, that in no event may the conversion price be less than the par value of a share of Common Stock. Whenever the conversion price is reduced, the Company shall mail to Securityholders and the Trustee a notice of the reduction and comply with Rule 13e-4 promulgated by the SEC under the Exchange Act, if such rule is applicable, and any other applicable rules and regulations of the SEC. The notice shall state the reduced conversion price and the period it will be in effect. A reduction of the conversion price does not change or adjust the conversion price otherwise in effect for purposes of Sections 10.06, 10.07,10.08, 10.09 and 10.10. SECTION 10.16. NOTICE OF CERTAIN TRANSACTIONS. If: (a) the Company takes any action that would require an adjustment in the conversion price pursuant to Sections 10.06, 10.07, 10.08, 10.09 or 10.10 and if the Company does not let Securityholders participate pursuant to Section 10.13; (b) the Company takes any action that would require a supplemental indenture pursuant to Section 10.17; or (c) there is a liquidation or dissolution of the Company, the Company shall mail to Securityholders and the Trustee a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail such notice at least 15 days before such date. Failure to mail such notice or any defect in it shall not affect the validity of the transaction. SECTION 10.17. REORGANIZATION OF COMPANY. If the Company is a party to a transaction subject to Section 5.01, or a merger which reclassifies or changes its outstanding Common Stock, upon consummation of such transaction the Securities shall automatically become convertible into the kind and amount of securities, cash or other assets which the Holder of a Security would have owned immediately after the consolidation, merger, transfer or lease if the Holder had converted the Security at the conversion price in effect immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the person obligated to issue securities or deliver cash or other assets upon conversion of the Securities shall enter into a supplemental indenture so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article. The successor Company shall mail to Securityholders a notice describing the supplemental indenture. If securities deliverable upon conversion of the securities, as provided above, are themselves convertible into the securities of an Affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental indenture which shall so provide. If this Section applies, Section 10.06 does not apply. SECTION 10.18. COMPANY DETERMINATION FINAL. Any determination that the Company or the Board of Directors must make pursuant to Section 10.03, 10.08,or 10.13 is conclusive. SECTION 10.19. TRUSTEE'S DISCLAIMER. The Trustee has no duty to determine when an adjustment under this Article should be made, how it should be made or what it should be. The Trustee has no duty to determine whether any provisions of a supplemental indenture under Section 10.17 are correct. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of the Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article. Each Conversion Agent other than the Company shall have the same protection under this Section as the Trustee ARTICLE XI SUBORDINATION OF SECURITIES SECTION 11.01. SECURITIES SUBORDINATE TO SENIOR DEBT. The Company, for itself, its successors and assigns, covenants and agrees, and each Holder of the Securities, by his acceptance thereof likewise covenants and agrees that all Securities issued hereunder shall be subordinated and subject, to the extent and in the manner herein set forth, in right of payment to the prior payment in full of all Senior Debt. SECTION 11.02. NO PAYMENTS WHEN SENIOR DEBT IN DEFAULT; PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event the Company shall default in the payment on any Senior Debt when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by setoff or otherwise) shall be made or agreed to be made on account of the principal of or interest on the Securities, or in respect of any redemption, retirement, purchase or other acquisition (except through the conversion thereof) of any of the Securities. Upon the happening of an event of default with respect to any Senior Debt, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof(under circumstances when the terms of the preceding paragraph are not applicable), unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by setoff or otherwise) shall be made or agreed to be made on account of the principal of or interest on the Securities, or in respect of any redemption, retirement, purchase or other acquisition (except through the conversion thereof) of any of the Securities. In the event of: (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company or its property, or any of the Company's subsidiaries that are guarantors under Designated Senior Debt, (b) any proceeding for the liquidation, dissolution or other winding-up of the Company or its property, (c) any assignment by the Company for the benefit of creditors, or (d) any other marshalling of the assets of the Company, all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution (direct or indirect), whether in cash, property or securities, by setoff or otherwise, shall be made to any Holder on account of any Securities, and to that end any payment or distribution, whether in cash, property or securities (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) which would otherwise (but for the subordination provisions contained in this Article) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Senior Debt, as their respective interests may appear, until all Senior Debt (including any interest thereon accruing after the commencement of any such proceedings)shall have been paid in full. If the Securities are declared due and payable before their stated maturity because of the occurrence of an Event of Default (under circumstances where the preceding paragraph is not applicable), no payment (direct or indirect) shall be made in respect of any Securities unless and until all Senior Debt has been paid in full or such declaration and its consequence shall have been rescinded and all such defaults shall have been remedied or waived. If any payment or distribution (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Senior Debt at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or the Holders in contravention of any of the terms of this Article and before all the Senior Debt has been paid in full, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of such Senior Debt at the time outstanding as their respective interests may appear for application to the payment of Senior Debt until all Senior Debt (including any interest thereon accruing after the commencement of any such proceeding referred to in paragraph (a), (b), (c) or(d) above) shall have been paid in full. If the Trustee or any such Holder fails to endorse or assign any such payment or distribution as required by this Section, the Trustee and the Holder of each Security by his acceptance thereof authorizes each holder of Senior Debt, any representative or representatives of holders of Senior Debt and the trustee or trustees under any indenture pursuant to which any instrument evidencing such Senior Debt may have been issued to so endorse or assign the same. No holder of Senior Debt shall be prejudiced in the right to enforce subordination of the Securities by any act or failure to act on the part of the Company. Subject to the payment in full of all Senior Debt, the Holders shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which ranks on a parity with the Securities and is entitled to like rights of subrogation) to the rights of the holders of Senior Debt to receive payments or distributions applicable to the Senior Debt until the Securities shall be paid in full, and no such payments or distributions shall, as between the Company, its creditors other than the holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Securities. The provisions of this Article are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Senior Debt, on the other hand, and nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Debt and the Holders of the Securities, the obligation of the Company to pay the Holders the principal of and interest on the Securities as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Trustee or the Holders from exercising all rights, powers and remedies otherwise permitted by applicable law or under this Indenture, upon a default or Event of Default hereunder, all subject to the rights of the holders of the Senior Debt to receive cash, property or securities otherwise payable or deliverable to the Trustee or the Holders. Upon any payment or distribution pursuant to this Section, the Trustee shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in this Section, are pending, and the Trustee, subject as between the Trustee and the Holders to the provisions of Section 7.01, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making such payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the persons entitled to participate in such payment or 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 Section. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Section, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this Section, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. SECTION 11.03. TRUSTEE TO EFFECTUATE SUBORDINATION. The Holder of each security by his acceptance thereof authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 11.04. TRUSTEE NOT CHARGED WITH KNOWLEDGE OF PROHIBITION. Notwithstanding the provisions of this Article or any other provision of this Indenture, but subject as between the Trustee and the Holders to the provisions of Section 7.01, the Trustee shall not be charged with knowledge of the existence of any Senior Debt, or of any default in the payment of any Senior Debt, or of any facts which would prohibit the making of any payment of moneys to or by the Trustee, unless and until three business days after the Trustee shall have received written notice thereof from the Company or any holder of Senior Debt or the representative or representatives of such holder; nor shall the Trustee be charged with knowledge of the curing of any such default or of the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. The provisions of this Section shall not limit any rights of holders of Senior Debt under this Article XI to recover from the Holders of Securities any payment made to any such Holder. SECTION 11.05. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT. The Trustee shall be entitled to all the rights set forth in this Article with respect to any Senior Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in Section 7.11, or elsewhere in this Indenture, shall deprive the Trustee of any of its rights as such holder. SECTION 11.06. ARTICLE APPLICABLE TO PAYING AGENT. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) 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 in addition to or in place of the Trustee; PROVIDED, however, that Sections 11.04 and 11.05 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent. ARTICLE XII RIGHT TO REQUIRE REPURCHASE SECTION 12.01. RIGHT TO REQUIRE REPURCHASE. In the event that there shall occur a Designated Event with respect to the Company, then each Securityholder shall have the right, at such Securityholder's option, but subject to the provisions of Article XI and this Article XII to require the Company to purchase, and upon exercise of such right the Company shall purchase, all or any part of such Securityholder's Securities in principal amount of $1,000 or an integral multiple thereof on the date (the "Repurchase Date") that is 45 days after the date of the Company Notice, at 100% of the principal amount, together with accrued interest to the Repurchase Date. SECTION 12.02. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT. (a) On or before the 30th day after the occurrence of a Designated Event, the Company, or at the request of the Company, the Trustee, shall give notice of the occurrence of the Designated Event and of the repurchase right set forth herein arising as a result thereof (the "Company Notice") by first-class mail, postage pre-paid, to each Holder at such Holder's address appearing in the Securities Register. The Company shall also deliver a copy of such Company Notice to the Trustee and cause a copy of such Company Notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. Each Company Notice shall state: (i) the Repurchase Date, (ii) the date by which the repurchase right must be exercised, (iii) the price at which the repurchase is to be made, if the repurchase right is exercised, and (iv) a description of the procedure which a Securityholder must follow to exercise a repurchase right. No failure of the Company to give the foregoing notice shall limit any Securityholder's right to exercise a repurchase right. (b) To exercise a repurchase right, a Securityholder shall deliver to the Company (or an agent designated by the Company for such purpose in the Company Notice), on or before the 30th day after the date of the Company Notice, (i) written notice of the Securityholder's exercise of such right, which notice shall set forth the name of the Securityholder, the principal amount of the Security or Securities (or portion of a Security) to be repurchased, and a statement that an election to exercise the repurchase right is being made thereby, and (ii) the Security or Securities with respect to which the repurchase right is being exercised, duly endorsed for transfer to the Company. Such written notice shall be irrevocable. If the Repurchase Date falls between any record date for the payment of interest on the Securities and the next succeeding interest payment date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest thereon which the registered Holder thereof is to receive on such interest payment date. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid the price payable with respect to the Security or Securities as to which the repurchase right has been exercised in cash to the Securityholder on the Repurchase Date. In the event that a repurchase right is exercised with respect to less than the entire principal amount of a surrendered Security, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate for issuance in the name of the Securityholder a replacement Security or Securities in the aggregate principal amount of the unrepurchased portion of such surrendered Security. SECTION 12.03. CERTAIN DEFINITIONS. For purposes of Sections 12.01 and 12.02: (a) A "Designated Event" shall be deemed to have occurred on the date of consummation of the purchase, merger or other acquisition transaction as referred to in the definition of a Change in Control. (b) As used herein, a "Change in Control" of the Company shall be deemed to have occurred when (i) all or substantially all of the Company's assets are sold as an entirety to any person or related group of persons; (ii) there shall be consummated any consolidation or merger of the Company (A) in which the Company is not the continuing or surviving corporation (other than a consolidation or merger with a wholly owned subsidiary of the Company in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same consideration) or (B) pursuant to which the Common Stock would be converted into cash, securities or other property, in each case, other than a consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger, or (iii) any person, or any persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (other than the Company, any subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic dividend reinvestment plan or any substantially similar plan of the Company or any subsidiary or any person holding securities of the Company for or pursuant to the terms of any such employee benefit plan), together with any Affiliates thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50% of the total voting power of all classes of Capital Stock of the Company entitled to vote generally in the election of directors of the Company. (c) Notwithstanding paragraph (b) above, a Change in Control shall not be deemed to have occurred if (i) the Current Market Price of the Common Stock is at least equal to 105% of the conversion price of the Securities in effect immediately preceding the time of such Change in Control, or (ii) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change in Control to the holders of Common Stock consists of shares of common stock that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on NASDAQ, and as a result of such transaction the Securities become convertible solely into such common stock, or (iii) the consideration in the transaction giving rise to such Change in Control to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on NASDAQ, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the daily closing prices of such securities during the ten consecutive trading days commencing with the sixth trading day following consummation of such transaction) is at least 105% of the conversion price of the Securities in effect on the date immediately preceding the closing date of such transaction. SECTION 12.04. COMPLIANCE WITH RULE 13e-4. In connection with any repurchase of Securities pursuant to this Article XII, the Company will comply with Rule 13e-4 promulgated by the SEC under the Exchange Act, if such Rule is applicable, and any other applicable rules and regulations of the SEC. ARTICLE XIII MISCELLANEOUS SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by operation of Section 318(c) of the TIA, the imposed duties, upon qualification of this Indenture under the TIA, shall control. SECTION 13.02. NOTICES AND COMMON STOCKHOLDER INFORMATION. Any notice or communication from the Company or the Trustee to the other is duly given if in writing and delivered in person or mailed by first-class mail to the following addresses: If to the Company, at: Source Capital Corporation 1825 North Hutchinson Road Spokane, Washington 99212 Attention: President If to the Trustee, at: Bankers Trust Company Four Albany Street (4th Floor) New York, New York 10006 Attention: Corporate Trust and Agency Group The Company or the Trustee by notice to the other may designate an additional or different address for subsequent notices or communications. Any notice or communication to a Securityholder shall be mailed by first-class mail to his address shown on the Securities Register. Failure to mail a notice or communication to a Securityholder or any defect in such notice or communication shall not affect its sufficiency with respect to other Securityholders. The Company shall mail to each Securityholder a copy of its annual and periodic reports to shareholders, proxy statements and such other information as it is required to furnish to holders of its Common Stock under the provisions of the Exchange Act. Such reports, proxy statements or other written information shall be mailed to the Securityholders at the time it is mailed to the holders of its Common Stock. 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. If the Company mails a notice or communication to Securityholders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA S 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA S 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with. SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Every Officer's Certificate or Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each person signing such Certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officer's Certificate or Opinion of Counsel 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 as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 13.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open. 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 13.08. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. SECTION 13.09. COUNTERPARTS. This Indenture may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 13.10. GOVERNING LAW. The internal laws of the State of New York shall govern this Indenture and the Securities, without regard to the conflicts of laws provisions thereof. SECTION 13.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.12. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 13.13. 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 13.14. 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 hereof. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers or attorneys-in-fact, as the case may be, thereunto duly authorized, as of the day and year first above written. SOURCE CAPITAL CORPORATION, By: /s/ D. M. JONES ---------------------------- Name: D. Michael Jones Title: President [Seal] Attest /s/ LESTER L. CLARK -------------------------------- Title: Secretary BANKERS TRUST COMPANY, as Trustee, By: /s/ KEVIN WEEKS ------------------------ Name: Kevin Weeks Title: Assistant Vice President EXHIBIT A (FORM OF DEFINITIVE SECURITY) (Face of Security) THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (4) PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR (AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION. THE HOLDER OF THIS SECURITY AGREES TO DELIVER SUCH CERTIFICATES AND OTHER INFORMATION AS THE COMPANY AND THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER BY IT OF THIS SECURITY AND ANY COMMON STOCK ISSUED UPON ITS CONVERSION COMPLIES WITH THE FOREGOING. No. $ ---------------- ------------------ SOURCE CAPITAL CORPORATION 7 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2008 promises to pay to --------------------------------------------------------------------- --------------------------------------------------------------------- or registered assigns, the principal sum of -------------------------- Dollars ($_________) on March 1, 2008. Interest Payment Dates: March 1 and September 1 Record Dates: February 15 and August 15 Reference is hereby made to the further provisions of this 7-1/2% Convertible Subordinated Debenture set forth on the back of this security which further provisions shall for all purposes have the same effect as if set forth at this place. Authenticated: Dated: BANKERS TRUST COMPANY SOURCE CAPITAL CORPORATION as Trustee By By ----------------------------- ----------------------------- Authorized Signature President OR Attest as Authenticating Agent -------------------------------- (Assistant) Secretary By (SEAL) ----------------------------- Authorized Signature Source Capital Corporation 7 1/2% Convertible Subordinated Debenture due 2008 1. INTEREST. Source Capital Corporation, a Washington corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on March 1, and September 1 of each year commencing September 1, 1998. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 11, 1998. Interest will be computed on the basis of a 360-day year of 12 30-day months. 2. REGISTRATION RIGHTS. As provided in the Registration Rights Agreement dated as of February 11, 1998 (the Closing Date") (the "Registration Rights Agreement"), between the Company and Pacific Crest Securities, Inc. (the "Placement Agent"), the Company is obligated to use its best efforts to file on or before July 1, 1998, and to use its best efforts to cause to be declared effective as soon as practicable after filing, but in no event later than September 30, 1998, a shelf registration statement to be available for resales of the Common Stock of the Company issuable upon conversion of the Securities and to use its best efforts to keep such shelf registration statement continuously effective for a period of two years from the Closing Date, subject to adjustment as set forth in the Registration Rights Agreement. This description of the Registration Rights Agreement is only a summary and is qualified in its entirety by reference to the detailed provisions in the Registration Rights Agreement. 3. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest and any interest payable on the defaulted interest) to the persons who are registered Holders of Securities at the close of business on the record date for the next interest payment date even though Securities are canceled after the record date on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 4. PAVING AGENT REGISTRAR AND CONVERSION AGENT The Trustee will act as Conversion Agent, Paying Agent and Registrar. The Company may change any Paying Agent, Registrar, Conversion Agent or co-registrar without prior notice. The Company or any of its subsidiaries may act in any such capacity. 5. INDENTURE. The Company issued the Securities under an Indenture dated as of February 11, 1998 (the "Indenture") between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa- 77bbbb) as in effect on the date of the Indenture. The Securities are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Securityholders are referred to the Indenture and such Act for a statement of such terms. The Securities are unsecured general obligations of the Company limited to $6,000,000 in aggregate principal amount. Capitalized terms used herein and not elsewhere defined shall have the meaning set forth in the Indenture. 6. OPTIONAL REDEMPTION. The Securities may be redeemed in whole or from time to time in part, at the option of the Company, at any time on or after March 1, 2001, at redemption prices equal to the percentages of the principal amount thereof set forth below in each case together with accrued interest to the redemption date. If the redemption date occurs during the 12-month period beginning March 1 of the years indicated below: Year Percentage ------------------- ---------- 2001 105.0% 2002 102.5% 2003 and thereafter 100.0% 7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. In the event of a redemption of less than all of the Securities, the Securities will be chosen for redemption by the Trustee by lot or by a method that complies with the requirements of any exchange on which the Securities are traded and that the Trustee finds to be fair and appropriate. On and after the Redemption Date interest ceases to accrue on Securities or portions of them called for redemption. If this Security is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the person in whose name this Security is registered at the close of business on such record date. 8. RIGHT TO REQUIRE REPURCHASE. In the event that there shall occur a Designated Event with respect to the Company, then each Securityholder shall have the right, at such Securityholder's option, but subject to the provisions of Article XI of the Indenture, to require the Company to purchase, and upon the exercise of such right the Company shall purchase, all or any part of such Securityholder's Securities in a principal amount of $1,000 or an integral multiple thereof on the date (the "Repurchase Date") that is 45 days after the date of the Company Notice, at 100% of the principal amount, together with accrued interest to the Repurchase Date. To exercise a repurchase right, a Securityholder shall deliver to the Company (or an agent designated by the, Company for such purpose in the Company Notice), on or before the 30th day after the date of the Company Notice, (i) written notice of the Securityholder's exercise of such right, which notice shall set forth the name of the Securityholder, the principal amount of the Security or Securities (or portion of a security) to be repurchased, and a statement that an election to exercise the repurchase right is being made thereby, and (ii) the Security or Securities with respect to which the repurchase right is exercised, duly endorsed for transfer to the Company. Such written notice shall be irrevocable. If the Repurchase Date falls between any record date for the payment of interest on the Securities and the next succeeding interest payment date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest thereon which the registered Holder thereof is to receive on such interest payment date. 9. CONVERSION. A Holder of a Security may convert it into Common Stock of the Company at any time after the earlier of the close of business on September 30, 1998, or the effective date of the registration statements to be filed with the Securities and Exchange Commission pursuant to the Registration Rights Agreement. If the Security is called for redemption, the Holder may convert it at any time prior to the close of business on the business day prior to the Redemption Date (unless the Company shall default in payment due upon redemption thereof). The initial conversion price of $8.01 per share of Common Stock is subject to adjustment in certain events. To determine the number of shares issuable upon conversion of a Security, divide the principal amount to be converted by the conversion price in effect on the Conversion Date. No payment or adjustment will be made on conversion of any Security for interest accrued thereon or dividends on any Common Stock issued and the Holder will lose any right to payment of interest on the Securities surrendered for conversion; PROVIDED, HOWEVER, that upon a call for redemption by the Company, accrued and unpaid interest to the Redemption Date shall be payable with respect to Securities that are converted after a Redemption Notice has been mailed and on or prior to the Redemption Date. Securities surrendered for conversion during the period from the regular record date for an interest payment to the corresponding interest payment date (except Securities called for redemption as described in the preceding sentence) must be accompanied by payment of an amount equal to the interest thereon which the Holder is to receive on such interest payment date. The Company will deliver payment in lieu of any fractional share. To convert a Security, a Holder must (1) complete and sign the conversion notice on the back of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, and (4) pay any transfer or similar tax if required. A Holder may convert a portion of a Security if the portion is $1,000 or an integral multiple Of $1,000. The conversion price is subject to adjustment as set forth in the Indenture in certain events. No adjustment in the conversion price will be required unless such adjustment would require a change of at least 1% in the price then in effect; but any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. The Company from time to time may voluntarily reduce the conversion price for a period of time, provided that the conversion price is not less than the par value of a share of Common Stock. If the Company is a party to a consolidation or merger or a transfer or lease of all or substantially all of its assets, the Securities automatically become convertible into the kind and amount of securities, cash or other assets which the Holder of a Security would have owned immediately after such transaction if the Holder had converted the Security immediately before the effective date of the transaction. 10. SUBORDINATION. The indebtedness evidenced by the Securities is, to the extent and in the manner set forth in the Indenture, expressly subordinated and subject in right of payment to the prior payment in full of all Senior Debt, as defined in the Indenture, and this Security is issued subject to such provisions of the Indenture, and each Holder of this Security, by accepting the same, agrees to and shall be bound by such provisions and authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in the Indenture and appoints the Trustee his attorney-in-fact for any and all such purposes. 11. DENOMINATIONS. TRANSFER. EXCHANGE. The Securities are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities to be redeemed. 12. PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as its owner for all purposes. 13. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities, and any existing default may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency, to provide for assumption of the Company's obligations to Securityholders or to make any change that does not adversely affect the rights of any Securityholder. 14. DEFAULTS AND REMEDIES. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. 15. TRUSTEE-DEALINGS WITH THE COMPANY. Bankers Trust Company, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 16. NO RECOURSE AGAINST OTHERS. A director officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. ABBREVIATIONS. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UIGIMIA Uniform Gifts to Minors Act). ASSIGNMENT FORM CONVERSION NOTICE To Assign this Security, fill To convert this Security into in the form below: Common Stock of the Company, check the box: I or we assign and transfer this Security to: [ ] ----------------------------- To convert only part of this Security, state the amount: ----------------------------- $ ----------------------------- ---------------------------- ----------------------------- If you want the stock certificate made out in (Print or type assignee's another person's name, fill in name, address and zip code): the form below: ----------------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- (Insert assignee's Soc. Sec. (Print or type other person's or Tax I.D. No.) name, address and zip code) ----------------------------- ----------------------------- (Insert other person's Soc. and irrevocably appoint Sec. or Tax I.D. no.) ----------------------------- ----------------------------- agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: ------------------------ Your Signature: ----------------------------- (Sign exactly as your name appears on the other side of this Security. Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.) OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Article XII of the Indenture, check the box: [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Article XII of the Indenture, state the amount: $ ------------------- Date: Your Signature: ----------------- ----------------------------- (Sign exactly as your name appears on the other side of this Security. Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.) EXHIBIT B-I CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES Re: 7 1/2% Convertible Subordinated Debentures due 2008 of Source Capital Corporation This Certificate relates to $ ------------------------------- principal amount of Securities held in definitive form by ------- (the "Transferor"). -------------------------------------- The Transferor has requested the Trustee by written order to exchange or register the transfer of a Definitive Security or Securities to a Definitive Security or Securities. In connection with such request, the Transferor does hereby acknowledge that the Securities and the shares of Common Stock issuable upon conversion thereof have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any other applicable securities law and, accordingly, none of the Securities or shares of Common Stock issuable upon conversion thereof may be offered, sold, transferred, pledged, hypothecated or otherwise disposed of except (A)(i) to a person that the Transferor reasonably believes is a qualified institutional buyer ("Qualified Institutional Buyer") purchasing for its own account or the account of a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A ("Rule 144A") under the Securities Act, (ii) in an offshore transaction complying with Rule 903 or 904 of Regulation S under the Securities Act, (iii) pursuant to the exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), (iv) pursuant to any other exemption from the registration requirements of the Securities Act, or (v) pursuant to an effective registration statement under the Securities Act and (B) in accordance with any other applicable securities law. In addition, in respect of each such Security, the Transferor does hereby certify as follows:* -- Such Security is being acquired for its own account, without transfer. -- Such Security is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A or in accordance with Rule 145 or Regulation S under the Securities Act. -- Such Security is being transferred in accordance with Rule 144 under the Securities Act, or pursuant to an effective registration statement under the Securities Act. -- Such Security is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Securities act, other than Rule 144A, 144 or 145 or Regulation S under the Securities Act. An opinion of counsel to the effect that such transfer does not require registration under the Securities Act accompanies this certificate. --------------------------------- (INSERT NAME OF TRANSFEROR) By: ----------------------------- Date: -------------------------- * Check applicable box. EXHIBIT B-II [FORM OF OPINION OF COUNSEL] [Letterhead of Counsel] [Date] SOURCE CAPITAL CORPORATION 1825 North Hutchinson Road Spokane, Washington 99212 Attention: President BANKERS TRUST COMPANY 4 Albany Street (4th Floor) New York, New York 10006 [ ] ------------------------------------- as Trustee and Registrar [ ] ------------------------------------- [ ] ------------------------------------- Re: $ Principal Amount of 7 1/2% -------------- Convertible Subordinated Debentures due 2008 of Source Capital Corporation Gentlemen: [Name of transferor] has requested that we deliver this opinion to you in connection with the transfer (the "Transfer") to [name of transferee] (the "Transferee") of the above-referenced debentures (the "Debentures") of Source Capital Corporation. In connection with this opinion, we have relied upon a certificate of an officer of the Transferee, a copy of which is annexed hereto, and have made such other investigation as we deem necessary or appropriate to enable us to render the opinion set fort below. On the basis of the foregoing and in reliance thereon, and assuming that the certificates issued to the Transferee in connection with the Transfer each contain a legend stating that the Debentures have not been registered under the Securities Act of 1933, as amended (the "Act"), and may not be sold or transferred in the absence of registration or an exemption therefrom under said Act, we are of the opinion that the Transfer does not require registration under the Act. Our opinion herein is limited to United States federal law and we assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction. This opinion is furnished by us solely for your benefit, and is not to be otherwise used, circulated or relied upon without our express written consent. Very truly yours, EX-10.3 3 EXHIBIT 10.3 REGISTRATION RIGHTS AGREEMENT Dated as of February 11, 1998 Pacific Crest Securities, Inc. 111 S.W. 5th Avenue, 42nd Floor Portland, Oregon 97204 Ladies and Gentlemen: Source Capital Corporation, a Washington corporation (the "Company"), proposes to issue and sell to the Purchasers (as defined herein) upon the terms set forth in a Subscription Agreement and Investor Questionnaire between the Purchasers and the Company, its 7- 1/2% Convertible Subordinated Debentures due 2008 (the "Debentures"). As an inducement to Pacific Crest Securities, Inc. (the Placement Agent to act as the placement agent for the Debentures), the Company agrees with the Placement Agent (i) for the benefit of the Purchasers and (ii) for the benefit of the holders from time to time of the Common Stock, no par value per share (the "Common Stock"), of the Company issuable upon conversion of the Debentures (collectively, the "Conversion Shares"), including the Purchasers (each of the foregoing a "Holder" and, together, the "Holders"), as follows: SECTION 1. DEFINITIONS. (a) Capitalized terms used herein without definition shall have their respective meanings set forth in or pursuant to the Indenture or the Private Placement Memorandum, dated February 11, 1998, in respect of the Debentures. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" or "Securities Act" means the United States Securities Act of 1933, as amended. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Commission" means the United States Securities and Exchange Commission. "Conversion Shares " means the shares of Common Stock issuable upon conversion of the Debentures; "Debentures" means the Company's 7-1/2% Convertible Subordinated Debentures due 2008. "Effectiveness Period" has the meaning set forth in Section 2 hereof. "Electing Holder" has the meaning assigned thereto in Section 3(a)(3) hereof. "Exchange Act" means the United States Securities and Exchange Act of 1934, as amended. "Indenture" means the Indenture, dated as of February 11, 1998, between the Company and Bankers Trust Company, as amended and supplemented from time to time in accordance with is terms. "Issue Date" means the date of original issuance of the Debentures. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering, if any, as set forth in Section 6 hereof. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire in the form to be provided by the Company. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Conversion Shares. "Purchasers" means the initial purchasers of the Company's 7-1/2% Convertible Subordinated Debentures due 2008. "Restricted Security" means any Debenture or Conversion Share except any such Debenture or Conversion Share which (i) has been effectively registered under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto), (iii) has been sold in compliance with Regulation S under the Securities Act (or any successor thereto) and does not constitute the unsold allotment of a distributor within the meaning of Regulation S under the Securities Act, or (iv) has otherwise been transferred and a new Debenture or Conversion Share not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.06 of the Indenture. "Shelf Registration" means a registration effected pursuant to Section 2 hereof. "Shelf Registration Statement" means a shelf registration statement of the Company pursuant to the provisions of Section 2 hereof filed with the Commission which covers some or all of the Conversion Shares, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Underwriter" means any underwriter of Conversion Shares in connection with an offering thereof under a Shelf Registration Statement. SECTION 2. SHELF REGISTRATION. (a) The Company shall, before July 31, 1998, use its best efforts to file with the Commission a Shelf Registration Statement relating to the offer and sale of the Conversion Shares by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement and, thereafter, shall use its best efforts to cause such Shelf Registration Statement to be declared effective under the Act on or prior to September 30, 1998; PROVIDED, however, that no Holder shall be entitled to have the Conversion Shares held by it covered by such Shelf Registration unless such Holder is an Electing Holder. (b) The Company shall use its best efforts: (i) to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders until the second anniversary of the Issue Date or such shorter period that will terminate when all the Conversion Shares covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the "Effectiveness Period"); (ii) after the date the Shelf Registration Statement becomes effective, within 35 days after the request of any holder of Conversion Shares that is not then an Electing Holder, to take any action necessary and required by law to enable such holder to use the Prospectus forming a part thereof for resales of Conversion Shares, including, without limitation, any action necessary to identify such holder as a selling Securityholder in the Shelf Registration Statement; PROVIDED, HOWEVER, that nothing in this subparagraph shall relieve such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(2) hereof; and (iii) if at any time, the Debentures, pursuant to Article V of the Indenture, are convertible into securities other than Common Stock, the Company shall, or shall cause any successor under the Indenture to, cause such securities to be included in the Shelf Registration Statement no later than the date on which the Debentures may then be convertible into such securities. The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if the Company voluntarily takes any action that would result in Holders of Conversion Shares covered thereby not being able to offer and sell any such Conversion Shares during that period, unless (i) such action in required by applicable law, or (ii) the continued effectiveness of the Shelf Registration Statement would require the Company to disclose a material financing, acquisition or other corporate trans action, and the Board of Directors shall have determined in good faith that such disclosure is not in the best interests of the Company and its stockholders; provided that in the case of clause (i) above, the Company thereafter must promptly comply with the requirements of paragraph 3(j) below, if applicable and in the case of clauses (i) and (ii) above, the Company shall be entitled to suspend the use of any prospectus forming a part of an effective Registration Statement under this Section 2 for a reasonable period of time (a "DELAY PERIOD"), except that the aggregate number of days included in all Delay Periods during any consecutive 12 months shall not exceed the aggregate of 90 days (whether or not consecutive). SECTION 3. REGISTRATION PROCEDURES. In connection with any Shelf Registration Statement, the following provisions shall apply: (a) (1) Not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, the Company shall mail the Notice and Questionnaire to the holders of Conversion Shares. No holder shall be entitled to be named as a selling Securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the Prospectus forming a part thereof for resales of Conversion Shares at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; PROVIDED, HOWEVER, holders of Conversion Shares shall have at least 28 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company. (2) After the Effective Time of the Shelf Registration Statement, the Company shall, upon the request of any holder of Conversion Shares that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder. The Company shall not be required to take any action to name such holder as a selling Securityholder in the Shelf Registration Statement or to enable such holder to use the Prospectus forming a part thereof for resales of Conversion Shares until such holder has returned a completed and signed Notice and Questionnaire to the Company. (3) The term "Electing Holder" shall mean any holder of Conversion Shares that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(1) or 3(a)(2) hereof. (b) The Company shall furnish to the Placement Agent, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein. (c) The Company shall promptly take such action as may be necessary so that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto (and each report or other document incorporated therein by reference in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. (d) (1) The Company shall advise the Placement Agent and, in the case of clause (i), the Electing Holders, and, if requested by the Placement Agent or any such Electing Holder, confirm such advice in writing: (i) when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise the Placement Agent and the Electing Holders and, if requested by the Placement Agent or any such Electing Holder, confirm such advice in writing of: (f) The Company shall furnish to each Electing Holder included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Electing Holder so requests in writing, all reports, other documents and exhibits that are filed with or incorporated by reference in the Shelf Registration Statement. (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder of Conversion Shares included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus, if any) included in such Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder may reasonably request; and the Company consents (except during the continuance of any event described in Section 3(d)(2)(iii)) to the use of the Prospectus or any amendment or supplement thereto by each of the Electing Holders of Conversion Shares in connection with the offering and sale of the Conversion Shares covered by the Prospectus or any amendment or supplement thereto during the Shelf Registration Period. (h) Prior to any offering of Conversion Shares pursuant to any Shelf Registration Statement, the Company shall register or qualify or cooperate with the Electing Holders of Conversion Shares included therein and their respective counsel in connection with the registration or qualification of such Conversion Shares for offer and sale under the securities or, if required, blue sky laws of such jurisdictions in the United States as any such Electing Holders reasonably request in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Conversion Shares covered by such Shelf Registration Statement; PROVIDED, HOWEVER, that in no event shall the Company be obligated to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(h), (ii) file any general consent to service of process in any jurisdiction where it is not as of the date hereof then so subject or (iii) subject itself to taxation in any such jurisdiction if it is not so subject. (i) Unless any Conversion Shares shall be in book-entry only form, the Company shall cooperate with the Electing Holders of Conversion Shares to facilitate the timely preparation and delivery of certificates representing Conversion Shares to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such permitted denominations and registered in such names as Electing Holders may request in connection with the sale of Conversion Shares pursuant to such Shelf Registration Statement. (j) Upon the occurrence of any event contemplated by paragraph 3(d)(2)(iii) above, the Company shall promptly prepare a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the Conversion Shares included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company notifies the Electing Holders of the occurrence of any event contemplated by paragraph 3(c)(2)(iii) above, the Electing Holders shall suspend the use of the Prospectus until the requisite changes to the Prospectus have been made. (k) Not later than the effective date of any Shelf Registration Statement hereunder, the Company shall provide a CUSIP number for the securities registered under such Shelf Registration Statement. (l) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission, and to make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of the Shelf Registration Statement, (ii) the effective date of each post-effective amendment to the Shelf Registration Statement, and (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in the Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158). (m) [Intentionally Omitted.] (n) The Company may require each Electing Holder of Conversion Shares to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Electing Holder and the distribution of such Conversion Shares as may be required by applicable law or regulation for inclusion in such Shelf Registration Statement and the Company may exclude from such registration the Conversion Shares of any Electing Holder that fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall, if requested, promptly include or incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters reasonably agree should be included therein and to which the Company does not reasonably object and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after they are notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment. (p) The Company shall enter into such customary agreements (including underwriting agreements in customary form) to take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Conversion Shares, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures substantially identical to those set forth in Section 5 (or such other provisions and procedures acceptable to the Managing Underwriters, if any) with respect to all parties to be indemnified pursuant to Section 5. (q) The Company shall: (i) make reasonably available for inspection by the Electing Holders of Conversion Shares to be registered thereunder, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney, accountant or other agent retained by such Electing Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; (ii) cause the Company's officers, directors and employees to make reasonably available for inspection all relevant information reasonably requested by such Electing Holders or any such underwriter, attorney, accountant or agent in connection with any such Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; PROVIDED, HOWEVER, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Electing Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Electing Holders of Conversion Shares registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by the Company to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) in customary form addressed to each Electing Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Electing Holders and underwriters (it being agreed that the matters to be covered by such opinion or written statement by such counsel delivered in connection with such opinions shall include in customary form, without limitation, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, including the documents incorporated by reference therein, of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading); (v) obtain "cold comfort" letters and updates thereof from the independent public accountants of the Company (and, if necessary, any other independent public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to each such Electing Holder of Conversion Shares registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; (vi) deliver such documents and certificates as may be reasonably requested by any such Electing Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 3(i) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 3(q) shall be performed at each closing under any underwritten offering to the extent required thereunder. (r) The Company shall use its best reasonable efforts to cause the Conversion Shares to be listed for quotation on the NASDAQ stock market or other stock exchange or trading system on which the Common Stock primarily trades on or prior to the effective date of any Shelf Registration Statement hereunder. (s) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Conversion Shares or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as an Electing Holder of such Conversion Shares or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by (A) such Rules or By-Laws, including Schedule E thereto, shall so require, engaging a "qualified independent underwriter" (as defined in Schedule E) to participate in the preparation of the Shelf Registration Statement relating to such Conversion Shares and to exercise usual standards of due diligence in respect thereto, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of under writers provided in Section 5 hereof and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules of Fair Practice of the NASD. (t) The Company shall use its best efforts to take all other steps necessary to effect the registration, offering and sale of the Conversion Shares covered by the Shelf Registration Statement contemplated hereby. SECTION 4. REGISTRATION EXPENSES. The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 2 and 3 thereof. SECTION 5. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any Shelf Registration Statement, the Company shall indemnify and hold harmless the Placement Agent, each Electing Holder, each underwriter who participates in an offering of Conversion Shares, each person, if any, who controls any of such parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their respective directors, officers, employees, trustees and agents (each such person being sometimes referred to as an "indemnified party"), from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement under which such Conversion Shares are to be registered under the Securities Act, or any Prospectus contained therein or furnished by the Company to any indemnified party, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company hereby agrees to reimburse such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending or preparing to defend or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Shelf Registration Statement or Prospectus in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use therein. (b) Each Electing Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Placement Agent, each underwriter who participates in an offering of Conversion Shares and the other Electing Holders and each of their respective directors, officers (including each officer of the Company who signed the Shelf Registration Statement), employees, trustees and agents and each Person, if any, who controls the Company, the Placement Agent, any under writer or any other Electing Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Electing Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that, no such Electing Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Electing Holder from the sale of Conversion Shares pursuant to the Shelf Registration Statement. (c) In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (hereinafter called the indemnified party) shall promptly notify the person against whom such indemnity may be sought (hereinafter called the indemnifying party) in writing; however, the omission to so notify the indemnifying party shall relieve the indemnifying party from liability only to the extent prejudiced thereby. The indemnifying party, upon request of the indemnified party, shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others that the indemnifying party may designate and shall pay the fees and disbursements of such counsel related to such proceeding. In any such action or proceeding any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties and all persons, if any, who control such indemnified parties within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act. (d) If the indemnification provided for in this Section 5 is insufficient or unavailable to an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other from the offering of the Debentures or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or if the indemnified party shall have failed to the prejudice of the indemnifying party to give the notice required by Section 5(c), in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party or parties on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Electing Holder or such other indemnified party, in the other hand, and the parties, relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Placement Agent and the Electing Holders of the Conversion Shares agree that it would not be just and equitable if contribution pursuant to this Section 5 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the relevant equitable considerations. For purposes of this Section 5(d), each director, officer, employee, trustee, agent and Person, if any, who controls the Placement Agent or an Electing Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Placement Agent or such Electing Holder, and each director, officer, employee, trustee and agent of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its written consent. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) Notwithstanding any other provision of this Section 5, in no event will any (i) Electing Holder be required to undertake liability to any person under this Section 5 for any amounts in excess of the dollar amount of the proceeds to be received by such holder from the sale of such holder's Conversion Shares (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Shelf Registration Statement under which such Conversion Shares are to be registered under the Securities Act and (ii) underwriter, selling agent or other securities professional be required to undertake liability to any person hereunder for any amounts in excess of the discount, commission or other compensation payable to such underwriter, selling agent or other securities professional with respect to the Conversion Shares underwritten by it and distributed to the public. (f) The obligations of the Company under this Section 5 shall be in addition to any liability which the Company may otherwise have and shall extend, or not extend, as the case may be, to any Indemnified Person and the obligations of any Indemnified Person under this Section 5 shall be in addition to any liability which such Indemnified Person may otherwise have and shall extend, or not extend, as the case may be, to the Company. The remedies provided in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to an indemnified party at law or in equity. SECTION 6. UNDERWRITTEN OFFERING. The Electing Holders of Conversion Shares covered by the Shelf Registration Statement who desire to do so may sell such Conversion Shares in an underwritten offering in accordance with the conditions set forth below. In any such underwritten offering, the investment banker or bankers and manager or managers that will administer the offering will be selected by, and the underwriting arrangements with respect thereto will be approved by the Electing Holders of a majority of the Conversion Shares to be included in such offering; PROVIDED, HOWEVER, that (i) with respect to the investment bankers and managers, such investment bankers and managers will be selected by the Company from a list of nationally recognized firms to be provided by the Electing Holders and (ii) the Company shall not be obligated to arrange for more than two underwritten offering during the Effectiveness Period. No Electing Holder may participate in any underwritten offering contemplated hereby unless such Electing Holder (a) agrees to sell such Electing Holder's Conversion Shares in accordance with any approved underwriting arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such approved underwriting arrangements. Except as otherwise set forth herein, the Electing Holders of Conversion Shares covered by the Shelf Registration Statement selling under an underwritten offering as contemplated hereby will pay such expenses as are ordinarily and customarily paid in connection with underwritten secondary offerings. SECTION 7. MISCELLANEOUS. (a) OTHER REGISTRATION RIGHTS. From the date of this Agreement, the Company may grant registration rights that would permit any Person that is a third party the right to piggy-back on any Shelf Registration Statement; PROVIDED that if the Managing Underwriter, if any, of such offering delivers an opinion to the Electing Holders that the total amount of securities which they and the holders of such piggy-back rights intend to include in any Shelf Registration Statement is so large as to materially adversely affect the success of such offering (including the price at which such securities can be sold), then only the amount, the number or kind of securities to be offered for the account of holders of such piggy-back rights granted after the date of this agreement will be reduced to the extent necessary to reduce the total amount of securities to be included in such offering to the amount, number or kind recommended by the Managing Underwriter prior to any reduction in the amount of Conversion Shares to be included. (b) AMENDMENTS AND WAIVERS. This Agreement, including this Section 7(b), may be amended, and waivers or consents to departures from the provisions hereof may be given, only upon the written consent of the Placement Agent or by a written instrument duly executed by the Company and the holders of a majority in aggregate principal amount of the Debentures and the holders of a majority of the Conversion Shares then outstanding. Each holder of the Debentures or Conversion Shares outstanding at the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment, waiver or consent effected pursuant to this Section 7(b), whether or not any notice, writing or marking indicating such amendment, waiver or consent appears on the Debentures or the Conversion Shares or is delivered to such holder. (c) NOTICES. All notices and other communications provided for or permitted hereunder shall be given as provided in the Indenture. (d) PARTIES IN INTEREST. The parties to this Agreement intend that all holders of Debentures and the Conversion Shares shall be entitled to receive the benefits of this Agreement and that any Electing Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Conversion Shares which are included in a Shelf Registration Statement. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto and any holder from time to time of the Debentures or the Conversion Shares to the aforesaid extent. In the event that any transferee of any holder of Debentures or Conversion Shares shall acquire Debentures or Conversion Shares, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be entitled to receive the benefits of and, if an Electing Holder, be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement to the aforesaid extent. (e) COUNTERPARTS. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) HEADINGS. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. This agreement shall be governed by and construed in accordance with the laws of the State of New York. (h) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) SURVIVAL. The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Electing Holder, any director, officer or partner of such holder, any agent or underwriter, any director, officer or partner of such agent or underwriter, or any controlling person of any of the foregoing, and shall survive the transfer and registration of the Conversion Shares of such holder. Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, SOURCE CAPITAL CORPORATION, By: /s/ D.M. JONES --------------------------------- Name: D.M. Jones Title: President The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written: PACIFIC CREST SECURITIES, INC. By: /s/ A.V. GLOWASKY ---------------------------- Name: Albert V. Glowasky Title: Senior Vice President EX-99.1 4 EXHIBIT 99.1 News Release Source Capital Corporation 1825 N. Hutchinson Rd. P.O. Box 141146 Spokane, Washington 99214-1146 Contact Person: Lester L. Clark Chief Financial Officer 509-928-0908 Source Capital earns $738,960 or $.54 per share in 1997 Spokane, Wa -- February 12, 1998 -- Source Capital Corporation (NASDAQ SMALL CAP: SOCC), a commercial lender, today reported net income of $738,960 or $.54 per share for the year ended December 31, 1997, a 13% decrease from net income of $846,955 or $.59 per share in the preceding year. Net income in 1996 included a gain after income taxes from the sale of a shopping center in the amount of $376,000 or $.26 per share. Results of operations in 1997 did not contain any similar sale of a large piece of real estate, although the Company was successful in further reducing other real estate owned by $360,000, resulting in a net gain after income taxes of $29,000 or $.02 per share. Exclusive of gains on the sale of real estate, net operating income improved in 1997 by 57% over comparable results in 1996. During 1997 the Company started two new lines of business, equipment leasing and factoring, to diversify and strengthen sources of income. However, the startup phase of these businesses had a negative impact on the results of operations in 1997 in the amount of $66,000 or $.05 per share. Source Capital Leasing Company at the end of the year began to produce net income on a monthly basis and is expected to be a positive contributor to net income in 1998. Source Capital Finance Inc., the factoring subsidiary, is expected to begin recording net income on a monthly basis in the third quarter of 1998. The Company reported fourth quarter net income of $209,759 or $.15 per share as compared to $414,434 or $.29 per share in the fourth quarter of 1996. Results in the fourth quarter of 1996 contained the gain on the sale of the shopping center previously reported. Loans and leases receivable increased 52% to $39.6 million at December 31, 1997 from $26.1 million outstanding a year earlier. The Company did not incur any loan losses in 1997. Loans past due as to principal or interest more than sixty days total $824,000 at year end, approximately the same level as at the end of the previous year. Other real estate owned was $556,000 at year end, down 39% from the amount of other real estate owned at the end of 1996. The Company also reported the sale of $6 million of 7-1/2% convertible subordinated debentures to ten institutional investors that were not previously shareholders of the Company. The debentures are due in 2008 and are convertible into common stock of the Company at a conversion price of $8.01 per share. Proceeds from the debenture sale will be used to fund equity investment in the leasing and factoring subsidiary plus provide additional funding for the growth of the Company's commercial real estate loan portfolio. It is expected that over time the addition of institutional investors could improve the marketability and bid-ask price spread of the Company's common stock. Source Capital Corporation is a commercial financial services company with approximately 1400 shareholders. The Company is headquartered in Spokane, Washington with lending offices in Portland, Oregon, Seattle and Spokane, Washington. -----END PRIVACY-ENHANCED MESSAGE-----