TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.1	Definitions	1
Section 1.2	Other Definitions	6
Section 1.3	Incorporation by Reference of Trust Indenture Act	6
Section 1.4	Rules of Construction	6
ARTICLE II THE SECURITIES		7
Section 2.1	Security Terms; Amount; Accounts; Interest; Maturity	7
Section 2.2	Written Confirmation; Rejection; Rescission	10
Section 2.3	Registrar and Paying Agent	11
Section 2.4	Paying Agent to Hold Money in Trust	12
Section 2.5	List of Holders	12
Section 2.6	Transfer and Exchange	12
Section 2.7	Payment of Principal and Interest; Principal and Interest Rights Preserved	13
Section 2.8	Outstanding Securities	14
Section 2.9	Treasury Securities	14
Section 2.10	Defaulted Interest	14
Section 2.11	Temporary Notes	15
Section 2.12	Execution, Authentication And Delivery	15
Section 2.13	Book-Entry Registration	16
Section 2.14	Initial and Periodic Statements	17
Section 2.15	Appointment of Agents	17
ARTICLE III REDEMPTION AND REPURCHASE		17
Section 3.1	Redemption of Securities at the Company’s Election	17
Section 3.2	Repurchase of Securities at the Holder’s Request	18
ARTICLE IV COVENANTS		20
Section 4.1	Payment of Securities	20
Section 4.2	Maintenance of Office or Agency	20
Section 4.3	SEC Reports and Other Reports	21
Section 4.4	Compliance Certificate	21
Section 4.5	Stay, Extension and Usury Laws	22
Section 4.6	Liquidation	22
Section 4.7	Financial Covenants	23
Section 4.8	Restrictions on Dividends and Certain Transactions with Affiliates	23
Section 4.9	Securitization Transactions and Additional Indebtedness	23
ARTICLE V SUCCESSORS		23
Section 5.1	When the Company May Merge, etc.	23
Section 5.2	Successor Entity Substituted	24
ARTICLE VI DEFAULTS AND REMEDIES		24
Section 6.1	Events of Default	24
Section 6.2	Acceleration	25
Section 6.3	Other Remedies	25
Section 6.4	Waiver of Past Defaults	26
Section 6.5	Control by Majority	26
Section 6.6	Limitation on Suits	26
Section 6.7	Rights of Holders to Receive Payment	27
Section 6.8	Collection Suit by Trustee	27

 

 

Section 6.9	Trustee May File Proofs of Claim	27
Section 6.10	Priorities	28
Section 6.11	Undertaking for Costs	28
ARTICLE VII TRUSTEE		28
Section 7.1	Duties of Trustee	28
Section 7.2	Rights of Trustee	30
Section 7.3	Individual Rights of Trustee	30
Section 7.4	Trustee’s Disclaimer	31
Section 7.5	Notice of Defaults	31
Section 7.6	Reports by Trustee to Holders	31
Section 7.7	Compensation and Indemnity	31
Section 7.8	Replacement of Trustee	32
Section 7.9	Successor Trustee by Merger, etc.	33
Section 7.10	Eligibility; Disqualification	34
Section 7.11	Preferential Collection of Claims Against Company	34
ARTICLE VIII DISCHARGE OF INDENTURE		34
Section 8.1	Termination of Company’s Obligations	34
Section 8.2	Application of Trust Money	35
Section 8.3	Repayment to Company	35
Section 8.4	Reinstatement	35
ARTICLE IX AMENDMENTS		36
Section 9.1	Without Consent of Holders	36
Section 9.2	With Consent of Holders	36
Section 9.3	Compliance with Trust Indenture Act	37
Section 9.4	Effect of Consents	38
Section 9.5	Notation on or Exchange of Securities	38
Section 9.6	Trustee to Sign Amendments, etc.	38
ARTICLE X SUBORDINATION		38
Section 10.1	Agreement to Subordinate	38
Section 10.2	Liquidation; Dissolution; Bankruptcy	39
Section 10.3	Default of Senior Debt	41
Section 10.4	When Distribution Must Be Paid Over	42
Section 10.5	Notice by Company	42
Section 10.6	Subrogation	43
Section 10.7	Relative Rights	43
Section 10.8	Subordination May Not Be Impaired by the Company or Holders of Senior Debt	43
Section 10.9	Distribution or Notice to Representative	45
Section 10.10	Rights of Trustee and Paying Agent	45
Section 10.11	Authorization to Effect Subordination	45
Section 10.12	Article Applicable to Paying Agent	45
Section 10.13	Miscellaneous	46
ARTICLE XI MISCELLANEOUS		47
Section 11.1	Trust Indenture Act Controls	47
Section 11.2	Notices	47
Section 11.3	Communication by Holders with Other Holders	49
Section 11.4	Certificate and Opinion as to Conditions Precedent	49

 

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Section 11.5	Statements Required in Certificate or Opinion	49
Section 11.6	Rules by Trustee and Agents	50
Section 11.7	Legal Holidays	50
Section 11.8	No Recourse Against Others	50
Section 11.9	Duplicate Originals	50
Section 11.10	Governing Law	50
Section 11.11	No Adverse Interpretation of Other Agreements	50
Section 11.12	Successors	50
Section 11.13	Severability	50
Section 11.14	Counterpart Originals	51
Section 11.15	Table of Contents, Headings, etc.	51

 

EXHIBITS:

 

A – Form of Note

 

 

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CROSS-REFERENCE TABLE

 

*Trust Indenture Act Section		Indenture Section
310(a)(1)		7.10
(a)(2)		7.10
(a)(3)		N.A.
(a)(4)		N.A.
(a)(5)		N.A.
(b)		7.8; 7.10
(c)		N.A.
311(a)		7.11
(b)		7.11
(c)		N.A.
312(a)		2.5
(b)		11.3
(c)		11.3
313(a)		7.6
(b)(1)		N.A.
(b)(2)		7.6
(c)		7.6; 11.2
(d)		7.6
314(a)		4.3; 4.4; 11.2
(b)		N.A.
(c)(1)		11.4
(c)(2)		11.4
(c)(3)		11.4; 1.1
(d)		N.A.
(e)		11.5
(f)		N.A.
315(a)		7.1(b)
(b)		7.5; 11.2
(c)		7.1(a)
(d)		7.1(c)
(e)		6.11
316(a)(last sentence)		2.9
(a)(1)(A)		6.5
(a)(1)(B)		6.4
(a)(2)		N.A.
(b)		6.7
(c)		N.A.
317(a)(1)		6.8
(a)(2)		6.9
(b)		2.4
318(a)		11.1

 

N.A. means not applicable

* This Cross Reference Table is not part of the Indenture

 

 

THIS INDENTURE is hereby entered into as of                                   , 2006, by and between Winmark Corporation, a Minnesota corporation (the “ Company ”), as obligor, and Wells Fargo Bank, National Association, a national banking association, as trustee (the “ Trustee ”).

 

The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the renewable, unsecured, subordinated debt securities of the Company issued pursuant to the Company’s registration statement on Form S-1, declared effective by the Securities and Exchange Commission on or about                                             , 2006 (the “ Registration Statement ”):

 

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

 

Section 1.1                                    Definitions.

 

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

 

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

 

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

 

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

 

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

 

“ Company ” means Winmark Corporation, a Minnesota corporation, unless and until replaced by a successor in accordance with Article V hereof and thereafter means such successor.

 

“ Corporate Trust Office ” means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is originally dated, located at                                                                                       , Attention:                                                 .

 

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

 

 

“ Event of Default ” has the meaning set forth in Section 6.1 hereof.

 

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

 

“ Fiscal Year ” means a year ending [December 31] .

 

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

 

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

 

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

 

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

 

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

 

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

 

“ Issue Date ” means, with respect to any Security, the date on which such Security is deemed registered on the books and records of the Registrar, which shall be (i) the date the Company accepts funds for the purchase of the Security if such funds are received prior to 12:01 p.m. (Central Time) on a Business Day, or if such funds are not so received, on the next Business Day, or (ii) the date that the Security is renewed as of the Maturity Date pursuant to Section 2.1(e).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“ Pari Passu Debt ” means any Indebtedness of the Company that is payable on a pari passu basis with the Securities.

 

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

 

“ Payment Date ” means (i) with respect to any Security for which monthly interest payments are required to be made, the first day of the following calendar month or such other date as is designated by the Holder pursuant to subsection 2.1(c), (ii) with respect to any Security for which interest is required to be made quarterly, semi-annually or annually, the same day of the month as the quarterly, semi-annual or annual anniversary of the Issue Date of the Security (except in the case where the Issue Date of a Security is the 29 ^th , 30 ^th or 31 ^st day of the month and there is no like date in the anniversary month, in which case the Payment Date for such month shall be the first day of the following month) and (iii) with respect to each Security, the Maturity Date (or such date following the Maturity Date on which payment is made pursuant to subsection 2.1(d) hereof), the Repurchase Date or the Redemption Date of the Security; provided, that if any such day in the preceding clauses (i) through (iii) is not a Business Day, the Business Day immediately following such day.

 

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

 

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

 

“ Prospectus ” means the prospectus included in the Registration Statement at the time it was declared effective by the SEC, as supplemented by any prospectus supplement (including interest rate supplements) relating to the Securities that are filed with the SEC pursuant to Rule 424(b) under the Securities Act. References herein to the Prospectus shall be deemed to refer to and include the documents incorporated therein by reference.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“ Responsible Officer ” when used with respect to the Trustee, means any officer in its Corporate Trust Office, or any other assistant officer of the Trustee in its Corporate Trust Office customarily performing functions similar to those performed by the Persons who at the time shall

 

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be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject.

 

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

 

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

 

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

 

“ Senior Debt ” means any Indebtedness other than the Securities and any Pari Passu Debt (whether outstanding on the date hereof or thereafter created) incurred by the Company (including its subsidiaries) whether such Indebtedness is or is not specifically designated by the Company as being “Senior Debt” in its defining instruments. “Senior Debt” includes, without limitation, Indebtedness pursuant to that certain 364 Day Revolving Credit Agreement dated September 30, 2004, as amended, among the Company and LaSalle Bank National Association and any note or notes issued thereunder and all other “Obligations” as defined therein, in each case as any of the same may be amended, restated, extended, increased, refinanced or otherwise modified from time to time.

 

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

 

“ Servicing Agent ” means Sumner Harrington Ltd., a Minnesota corporation.

 

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

 

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

 

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

 

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

 

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

 

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Section 1.2                                    Other Definitions.

 

Term		Defined in Section
“Bankruptcy Law”		6.1
“Custodian”		6.1
“Event of Default”		6.1
“Legal Holiday”		11.7
“Paying Agent”		2.3
“Payment Blockage Period”		10.3
“Payment Notice”		10.3
“Redemption Date”		2.1(f)
“Registrar”		2.3
“Registration Statement”		Introduction
“Repurchase Date”		3.2(d)
“Repurchase Penalty”		3.2(b)
“Securities Register”		2.3

 

Section 1.3                                    Incorporation by Reference of Trust Indenture Act.

 

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

 

“ indenture securities ” means the Securities;

 

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

 

“ indenture to be qualified ” means this Indenture;

 

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

 

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

 

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

 

Section 1.4                                    Rules of Construction.

 

Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

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(c) references to GAAP, as of any date, shall mean GAAP in effect in the United States as of such date; (d) “or” is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; and (f) provisions apply to successive events and transactions.

 

ARTICLE II
THE SECURITIES

 

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

 

(a)                                   Unlimited Amount and Form of Security . The outstanding aggregate principal amount of Securities to be issued hereunder (absent an amendment to the Registration Statement) is limited to $50,000,000, provided, however, that the Company and the Trustee may, without the consent of any Holder, increase such aggregate principal amount of Securities which may be outstanding at any time. The Securities are unsecured obligations of the Company and shall be subordinate in right of payment to the Senior Debt of the Company as further described in Article X. The Securities are an obligation and liability of the Company, and not of any other Person, including, without limitation, any shareholder, director, Officer, employee, Affiliate or Agent of the Company. The Securities are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, any other governmental or private fund, any securities insurer or any other Person.

 

In the event issued in certificated form pursuant to Section 2.13(b): (i) the Securities, together with the Trustee’s certificate of authentication, shall be in substantially the form set forth as Exhibit A to this Indenture, with any appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities; (ii) any portion of the text of any Securities may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Securities; and (iii) the Securities may be subject to notations, legends or endorsements required by law, stock exchange rule, or agreements to which the Company is subject or usage.

 

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

 

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Each Security shall be in such denominations as provided by this Indenture and as may be designated from time to time by the Company, but in no event in an original denomination less than $1,000. Separate purchases may not be cumulated to satisfy the minimum denomination requirements. Each Security shall have a term of three or six months, or one, two, three, four, five or ten years, as designated by the Holder at the time of purchase, subject to the Company’s acceptance thereof.

 

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

 

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

 

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Holder will be sent payment upon the later of the Maturity Date or five days following the date the Company receives such Repayment Election from the Holder; provided that if the Company has previously paid interest to the Holder for periods after the Maturity Date, such interest shall be deducted from such payment.

 

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

 

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

 

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

 

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Notwithstanding the foregoing or anything in Section 2.1(d) to the contrary, if a Repayment Election is given or is due at a time when the Company has determined that a post-effective amendment to the Registration Statement was required but not yet effective, the Company will provide notice to the Holder (including a copy of the post-effective amendment to the Prospectus), and the Holder will be entitled to rescind his or her Repayment Election, if made, or to make a Repayment Election, if not previously made, by delivering a written rescission of the earlier Repayment Election, or a Repayment Election, as the case may be, to the Company no later than 10 days following the postmark date on the Company’s notice of such post-effective amendment.

 

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

 

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

 

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

 

Section 2.2                                    Written Confirmation; Rejection; Rescission.

 

(a)                                   Except with respect to an automatically renewed Security pursuant to Section 2.1(e), a Security shall not be validly issued to a Person until the following have occurred:  (i) such Person has remitted good and available funds for the full principal amount of such Security to the Company or a duly authorized Agent of the Company; (ii) a Written Confirmation of the acceptance of the subscription is sent by the Company or a duly authorized Agent of the Company to such Person; and (iii) an Account is established by the Registrar in the name of such Person as the Holder of such Security pursuant to Section 2.13 hereof. The Company or a duly authorized Agent of the Company, in their sole discretion, may reject any subscription from a Person for the purchase of Securities, in which event any funds received from such Person pursuant to

 

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such subscription shall be promptly returned to such Person. No interest shall be paid on any funds returned on a rejected subscription.

 

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

 

Section 2.3                                    Registrar and Paying Agent.

 

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

 

(b)                                  Pursuant to Section 2.15, the Company hereby appoints the Servicing Agent as the initial Registrar and as agent for service of notices and demands in connection with

 

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the Securities. The Servicing Agent shall act as Registrar and agent for service of notices and demands in connection with the Securities until such time as the Company gives the Trustee written notice to the contrary. Also pursuant to Section 2.15, the Company hereby appoints Wells Fargo Bank, National Association as the initial Paying Agent.

 

Section 2.4                                    Paying Agent to Hold Money in Trust.

 

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

 

Section 2.5                                    List of Holders.

 

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

 

Section 2.6                                    Transfer and Exchange.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)                                  Each of the Securities shall have stated maturities of principal as shall be indicated on such Securities or in the Written Confirmation and as set forth in the Securities Register. The principal of each Security shall be paid in full as of the Maturity Date thereof pursuant to Section 2.1(d), unless the term of such Security is renewed pursuant to Section 2.1(e) hereof or such Security becomes due and payable at an earlier

 

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

 

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

 

Section 2.8                                    Outstanding Securities.

 

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

 

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

 

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

 

Section 2.9                                    Treasury Securities.

 

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

 

Section 2.10                             Defaulted Interest.

 

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

 

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the Company) shall mail to Holder(s) a notice that states the special Payment Date and the amount of such interest to be paid.

 

Section 2.11                             Temporary Notes.

 

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

 

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

 

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

 

Section 2.12                             Execution, Authentication And Delivery.

 

(a)                                   Subject to subsection (b) below, the Securities shall be executed on behalf of the Company by an Officer and attested by its Secretary or Assistant Secretary. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

 

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

 

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

 

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has been duly authenticated and delivered hereunder and is entitled to the benefits of the Indenture.

 

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

 

Section 2.13                             Book-Entry Registration.

 

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

 

(b)                                  Book-entry Accounts evidencing ownership of the Securities shall be exchangeable for definitive or certificated forms of Securities in denominations of $1,000 and any amount in excess thereof and fully registered in the names as each Holder directs only if (i) the Company at its option advises the Trustee and the Registrar in writing of its election to terminate the book-entry system, or (ii) after the occurrence of any Event of Default, Holders of a majority of the aggregate outstanding principal amount of the

 

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Securities (as determined based upon the latest quarterly statement provided to the Trustee pursuant to Section 2.5 hereof) advise the Trustee in writing that the continuation of the book-entry system is no longer in the best interests of such Holders and the Trustee notifies all Holders of the Securities, of such event and the availability of certificated forms of securities to the Holders of Securities.

 

Section 2.14                             Initial and Periodic Statements.

 

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

 

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

 

Section 2.15                             Appointment of Agents.

 

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

 

ARTICLE III
REDEMPTION AND REPURCHASE

 

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

 

(a)                                   The Company may redeem, in whole or in part, any Security prior to the scheduled Maturity Date of the Security by providing pursuant to Section 2.1(f) a Redemption Notice to the Holder thereof listed on the records maintained by the Registrar, which notice shall include the Redemption Date and the Redemption Price to

 

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be paid to the Holder on the Redemption Date. No interest shall accrue on a Security to be redeemed under this Section 3.1 for any period of time after the Redemption Date for such Security, provided that the Company or the Paying Agent has timely tendered the Redemption Price to the Holder.

 

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

 

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

 

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

 

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

 

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

 

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(c)                                   Limitation on Repurchases . The Company will only be required to repurchase Securities for which Repurchase Requests have been received pursuant to paragraph (a) above, and, if accepted by the Company, paragraph (b) above, to the extent that the aggregate Repurchase Price for all Securities for which Repurchase Requests are then outstanding in any calendar quarter would not exceed the greater of (i) two percent of the aggregate outstanding principal balance of all Securities as of the last day of the previous calendar quarter or (ii) $1 million. For the purposes of applying such limits on the