-----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, J5zy49eLOR/kyh4vptjFLIColOKLQ5XhpP6p4Ve7iFN3yUnk+yfUIBTBEz4ke4l/ +lcL//TJCdHnNwUABxF7Cg== 0000909518-00-000809.txt : 20001222 0000909518-00-000809.hdr.sgml : 20001222 ACCESSION NUMBER: 0000909518-00-000809 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20001221 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FINOVA GROUP INC CENTRAL INDEX KEY: 0000883701 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 860695381 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-42383 FILM NUMBER: 793454 BUSINESS ADDRESS: STREET 1: 4800 N. SCOTTSDALE RD. STREET 2: P O BOX 2209 CITY: SCOTTSDALE STATE: AZ ZIP: 85251-7623 BUSINESS PHONE: 4486364800 MAIL ADDRESS: STREET 1: 4800 N. SCOTTSDALE RD. STREET 2: P O BOX 2209 CITY: SCOTTSDALE STATE: AZ ZIP: 85251-7623 FORMER COMPANY: FORMER CONFORMED NAME: GFC FINANCIAL CORP DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEUCADIA NATIONAL CORP CENTRAL INDEX KEY: 0000096223 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 132615557 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 315 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 MAIL ADDRESS: STREET 1: 315 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10010 FORMER COMPANY: FORMER CONFORMED NAME: TALCOTT NATIONAL CORP DATE OF NAME CHANGE: 19800603 SC 13D/A 1 0001.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 THE FINOVA GROUP INC. (Name of Issuer) COMMON STOCK, $0.01 PAR VALUE 3179281 (Title of class of securities) (CUSIP number) JOSEPH A. ORLANDO LEUCADIA NATIONAL CORPORATION 315 PARK AVENUE SOUTH NEW YORK, NEW YORK 10010 (212) 460-1932 (Name, address and telephone number of person authorized to receive notices and communications) DECEMBER 20, 2000 (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act. (Continued on following pages) (Page 1 of 8 pages) ================================================================================ NY2:\994280\05\LB6W05!.DOC\76830.0246
- ---------------------------------------------------------------------- --------------------------------------------- CUSIP No. 3179281 13D - ---------------------------------------------------------------------- --------------------------------------------- - ------------------- ------------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Leucadia National Corporation S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------- ------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [_] - ------------------- ------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------- ------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: WC - ------------------- ------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_] - ------------------- ------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York - ------------------------------ ------- ------------------------------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER: 100,000,000 shares(1)(2) SHARES ------- ------------------------------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER: N/A OWNED BY ------- ------------------------------------------------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER: 100,000,000 shares(1)(2) REPORTING ------- ------------------------------------------------------------------------------------------ PERSON WITH 10 SHARED DISPOSITIVE POWER: N/A - ------------------- ------------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 100,000,000 shares(1)(2) - ------------------- ------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - ------------------- ------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 62.0%(2)(3) - ------------------- ------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: CO - ------------------- -------------------------------------------------------------------------------------------------------------
(1) Assuming conversion of 1,000,000 shares of Series B Convertible Preferred Stock of The FINOVA Group Inc ("Finova" and such stock, the "Series B Preferred") (2) Does not include (i) an aggregate of up to an additional 40,000,000 shares of Finova common stock issuable upon conversion of shares of Series C Convertible Preferred Stock (the "Series C Preferred") that the Reporting Person may acquire pursuant to a rights offering as described in Item 4 hereof, or (ii) the exercise of the warrant to purchase Finova common stock representing up to 20% of the Finova common stock outstanding, which the Reporting Person has the right to acquire as described in Item 4 hereof. (3) Based on 61,301,410 shares of Finova common stock outstanding on December 11, 2000 and the issuance of an aggregate of 100,000,000 shares of Finova common stock, assuming conversion of the 1,000,000 shares of Series B Preferred Stock, as described in Item 4 hereof. 2 This Amendment No. 1 to Schedule 13D amends and restates certain items of the Schedule 13D filed by Leucadia National Corporation ("Leucadia") with the Commission on November 17, 2000, as more fully set forth below (the "Schedule 13D"). All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Schedule 13D. Item 4. Purpose of the Transaction. Item 4 is hereby amended and restated as follows: On November 10, 2000, Leucadia and the Company entered into a letter agreement dated November 10, 2000 (the "Letter Agreement") pursuant to which, and subject to the conditions set forth therein, Leucadia agreed to invest up to $350 million in the Company. Between November 10, 2000 and December 20, 2000, representatives of the Company and of Leucadia negotiated the terms of a definitive purchase agreement (the "Purchase Agreement") and ancillary documents to effect the investment contemplated in the Letter Agreement. On December 20, 2000, Leucadia and the Company executed the Purchase Agreement. Under the terms of the Purchase Agreement, Leucadia has agreed to purchase for $250 million (i) one million shares (the "Shares") of new Series B Convertible Preferred Stock ("Series B Preferred") and (ii) a 10-year warrant to purchase up to 20% of the Company's outstanding shares (subject to anti-dilution adjustments) for an aggregate warrant exercise price of $125 million (the "Warrant"). The Warrant will be exercisable from the third anniversary of issuance until the tenth anniversary of issuance, but may become exercisable earlier upon the occurrence, following its issuance, of certain Acceleration Events (as defined in the Warrant). The holder of the Warrant will not be entitled to voting rights until it exercises the Warrant and then only to the extent of the shares of Common Stock so purchased. The Purchase Agreement is subject to the Company completing a refinancing or restructuring of its approximately $4.7 billion bank debt and its approximately $6.6 billion public bond debt, in each case, on terms acceptable to both Leucadia and the Company. As soon as practical following the purchase of the shares of Series B Preferred by Leucadia, the Company will issue up to $150 million of new Series C Convertible Preferred Stock (the "Series C Preferred" and together with the Series B Preferred, the "Convertible Preferred Stock") at a purchase price of $250 per share through a rights offering to its existing common stockholders (the "Rights Offering"). Except for their issuance date, the preferences and rights of the Series C Preferred are identical to those of the Series B Preferred. Leucadia has agreed to act as a standby purchaser of the first $100 million of that offering. As compensation for agreeing to act as standby purchaser, the Company will pay Leucadia $5 million upon distribution of the rights. 3 The Purchase Agreement includes a provision that could result in a distribution to common stockholders or holders of the Convertible Preferred Stock and the Warrant in 2006, based upon the performance of the Company's loan and lease portfolio (such distribution, the "Special Distribution"). The Convertible Preferred Stock will have an initial liquidation preference of $250 per share. Dividends on the Convertible Preferred Stock will accrue quarterly from the date of original issuance in an amount equal to the greater of (i) 14% per annum, compounded quarterly, and (ii) the amount of dividends paid in respect of a share of Common Stock during the year, calculated on the basis of the number of shares of Common Stock into which a share of Convertible Preferred Stock may be converted, regardless of whether such stock is then convertible. During the first five years from issuance, dividends on the Convertible Preferred Stock may not be paid, but shall accrue and be added to the liquidation preference for the stock. Thereafter, at the Company's option, dividends on the Convertible Preferred Stock may either be paid quarterly, or if not paid, shall continue to accrue and be added to the liquidation preference of each share of Convertible Preferred Stock. Each share of the Convertible Preferred Stock will be convertible into Common Stock based on its liquidation preference at a conversion price of $2.50 per share (subject to anti-dilution adjustments) from June 30, 2006 until the tenth anniversary of issuance. From issuance, the Series B Preferred will vote with the Common Stock on an as converted basis, receiving twice the number of votes per share of Common Stock into which it is convertible. The Purchase Agreement also provides that in conjunction with its investment, Leucadia will have the right to appoint six members to a newly constituted ten member Board of Directors. The Purchase Agreement contains customary "no-shop" and "break up fee" provisions. The Purchase Agreement is subject to the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of any other required regulatory approvals, and other customary conditions. References to, and descriptions of, the Purchase Agreement as set forth herein are qualified in their entirely by reference to the copy of the Purchase Agreement included as Exhibit 99.2 to this Schedule 13D, which is incorporated by reference herein in its entirety and which contains provisions not described herein. References to, and descriptions of, the Convertible Preferred Stock as set forth herein are qualified in their entirely by reference to the form of Certificate of Designation, which is filed as Exhibit 99.3 to this Schedule 13D, and which is incorporated by reference herein in its entirety and which contains provisions not described herein. References to, and descriptions of, the Warrant as set forth herein are qualified in their entirely by reference to the form of Warrant, which is filed as Exhibit 99.4 to this Schedule 13D, and which is 4 incorporated by reference herein in its entirety and which contains provisions not described herein. Except as set forth above, Leucadia has no present plans or intentions which would result in or relate to any other transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. Clauses (a) and (b) of Item 5 are hereby amended and restated as follows: (a)-(b) The information set forth or incorporated by reference in Items 2, 3, and 4 is hereby incorporated herein by reference. Assuming conversion of the one million shares of Series B Preferred but excluding the exercise of the Warrant and any shares of Common Stock that may be issuable upon conversion of any shares of Series C Preferred that may be acquired by Leucadia in the Rights Offering, Leucadia may be deemed to be the beneficial owner of 100,000,000 shares of the Common Stock of the Company. This would represent approximately 62.0% of the Company's Common Stock outstanding (based on 61,301,410 shares of Common Stock outstanding as of December 11, 2000 as represented to Leucadia by the Company in the Purchase Agreement and assuming the issuance of 100 million shares of Common Stock issuable upon conversion of the one million shares of Series B Preferred. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Item 6 is hereby amended and restated as follows: The information set forth or incorporated by reference in Items 3, 4 and 5 is hereby incorporated herein by reference. Copies of the Purchase Agreement, the form of certificate of designation for the Convertible Preferred Stock and the form of Warrant are included as Exhibits 99.2, 99.3, and 99.4, respectively, to this Schedule 13D. In addition, the Purchase Agreement provides that Leucadia and the Company will enter into a Registration Rights Agreement at the time the Series B Preferred and the Warrant are issued, pursuant to which the Company will grant Leucadia certain registration rights, subject to customary exceptions and limitations, in respect of the Convertible Preferred Stock owned by Leucadia and its permitted transferees, all shares of Common Stock into which such Convertible Preferred Stock is converted, and any other securities of the Company which Leucadia may acquire pursuant to the Purchase Agreement or otherwise. References to, and descriptions of, the Registration Rights Agreement as set forth herein are qualified in their entirely by reference to the form of Registration Rights Agreement, which is filed as Exhibit 99.5 to this Schedule 13D, and which is incorporated by reference herein in its entirety and which contains provisions not described herein. 5 Other than the Purchase Agreement, the certificate of designation for the Convertible Preferred Stock, the Warrant and Registration Rights Agreement, there are no contracts, arrangements, understandings or relationships with respect to any securities of the Company (i) among (a) Leucadia and, to the best of its knowledge, any of the persons identified pursuant to Item 2 above and (b) any other person. Item 7. Material to be Filed as Exhibits. 99.2. Securities Purchase Agreement, dated December 20, 2000, between the Company and Leucadia. 99.3 Form of Certificate of Designation for the Convertible Preferred Stock. 99.4 Form of Warrant. 99.5 Form of Registration Rights Agreement. 99.6 Form of Management Services Agreement between the Company and Leucadia. 6 SIGNATURE --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 21, 2000 LEUCADIA NATIONAL CORPORATION BY: /S/ JOSEPH A. ORLANDO -------------------------------- Name: JOSEPH A. ORLANDO Title: Vice President 7 EXHIBIT INDEX Exhibit No. Description 99.2. Securities Purchase Agreement, dated December 20, 2000, between the Company and Leucadia. 99.3 Form of Certificate of Designation for the Convertible Preferred Stock. 99.4 Form of Warrant. 99.5 Form of Registration Rights Agreement. 99.6 Form of Management Services Agreement between the Company and Leucadia. 8 EX-99 2 0002.txt 99.2 Exhibit 99.2 EXECUTION COPY - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT dated as of December 20, 2000 by and among THE FINOVA GROUP INC. and LEUCADIA NATIONAL CORPORATION - -------------------------------------------------------------------------------- NY2:\991489\06\L91D06!.DOC\76830.0246 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS....................................................................................................1 1.1 Definitions..........................................................................................1 1.2 Terms Defined Elsewhere in the Agreement.............................................................7 1.3 Other Definitional Provisions........................................................................8 ARTICLE II PURCHASE OF SERIES B PREFERRED STOCK AND WARRANTS..............................................................9 2.1 Authorization of Issue...............................................................................9 2.2 Purchase of Series B Preferred Stock and Warrant.....................................................9 2.3 Closing..............................................................................................9 ARTICLE III PURCHASER'S REPRESENTATIONS..................................................................................10 3.1 Corporate Existence.................................................................................10 3.2 Corporate Power; Authorization; Enforceable Obligations.............................................10 3.3 Investment Intention................................................................................10 3.4 Accredited Investor.................................................................................11 3.5 Sufficiency of Funds................................................................................11 ARTICLE IV COMPANY'S REPRESENTATIONS AND WARRANTIES......................................................................11 4.1 Authorized and Outstanding Shares of Capital Stock; Options and Other Rights to Acquire Capital Stock..............................................................................11 4.2 Authorization and Issuance of the Securities........................................................12 4.3 Securities Laws.....................................................................................12 4.4 Corporate Existence; Compliance with Law............................................................13 4.5 Subsidiaries........................................................................................13 4.6 Corporate Power; Authorization; Enforceable Obligations.............................................13 4.7 SEC Documents.......................................................................................14 4.8 Financial Statements................................................................................14 4.9 No Undisclosed Liabilities..........................................................................14 4.10 Absence of Certain Changes..........................................................................15 4.11 Ownership of Property...............................................................................16 4.12 Material Contracts..................................................................................17 4.13 Environmental Matters...............................................................................17 i TABLE OF CONTENTS (CONTINUED) 4.14 Labor Matters.......................................................................................20 4.15 Taxes...............................................................................................20 4.16 No Litigation.......................................................................................21 4.17 Brokers.............................................................................................21 4.18 [Intentionally left blank]..........................................................................22 4.19 Intellectual Property...............................................................................22 4.20 ERISA...............................................................................................22 4.21 Insurance...........................................................................................25 4.22 Related Party Transactions..........................................................................25 4.23 Opinions of Financial Advisor.......................................................................25 4.24 Takeover Statutes...................................................................................25 4.25 Amendment to the Company Rights Agreement...........................................................26 4.26 Refinancing Representations.........................................................................26 4.27 Financing Contracts; Portfolio Property.............................................................26 4.28 Full Disclosure.....................................................................................27 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.....................................................................27 5.1 Conduct of Business of Company......................................................................27 5.2 Access to Information...............................................................................29 ARTICLE VI ADDITIONAL AGREEMENTS.........................................................................................30 6.1 Commercially Reasonable Efforts.....................................................................30 6.2 Supplemental Disclosure.............................................................................30 6.3 Announcements.......................................................................................30 6.4 No Solicitation.....................................................................................31 6.5 Refinancing of Existing Company Bank Debt...........................................................32 6.6 Certificate of Designations.........................................................................32 6.7 Board Representation................................................................................32 6.8 Management Fee......................................................................................33 6.9 Reservation of Common Stock.........................................................................33 6.10 Legends.............................................................................................33 6.11 Rights Offering.....................................................................................34 ii TABLE OF CONTENTS (CONTINUED) 6.12 Retention Program...................................................................................35 6.13 Alternative Transaction.............................................................................35 6.14 Sharing Distribution................................................................................36 6.15 Taxes...............................................................................................40 6.16 Merger or Consolidation, Liquidation or Dissolution.................................................40 6.17 Further Assurances..................................................................................40 ARTICLE VII CONDITIONS PRECEDENT.........................................................................................40 7.1 Conditions to Each Party's Obligations..............................................................40 7.2 Conditions to Obligations of Purchaser..............................................................41 7.3 Conditions to Obligations of Company................................................................42 ARTICLE VIII TERMINATION AND AMENDMENT...................................................................................42 8.1 Voluntary Termination...............................................................................42 8.2 Effect of Termination...............................................................................44 8.3 Fees and Expenses...................................................................................44 8.4 Break-Up Fee........................................................................................44 8.5 Amendment...........................................................................................45 8.6 Extension; Waiver...................................................................................45 ARTICLE IX INDEMNIFICATION...............................................................................................45 9.1 Survival of Representation and Warranties...........................................................45 9.2 Indemnification.....................................................................................45 9.3 Procedures..........................................................................................46 ARTICLE X MISCELLANEOUS.................................................................................................46 10.1 Notices.............................................................................................46 10.2 Binding Effect; Benefits............................................................................47 10.3 Complete Agreement..................................................................................48 10.4 Assignability.......................................................................................48 10.5 Remedies............................................................................................48 10.6 Section and Other Headings..........................................................................48 10.7 Severability........................................................................................48 10.8 Counterparts........................................................................................49 10.9 Governing Law; Waiver of Jury Trial.................................................................49
iii TABLE OF CONTENTS (CONTINUED) Exhibit A Certificate of Designation - Convertible Preferred Stock Exhibit B Warrant Exhibit C Registration Rights Agreement Exhibit D Management Agreement iv EXECUTION COPY -------------- SECURITIES PURCHASE AGREEMENT ----------------------------- SECURITIES PURCHASE AGREEMENT, dated as of December 20, 2000, by and among The FINOVA Group Inc., a Delaware corporation having an office at 4800 North Scottsdale Road, Scottsdale, Arizona 85251-7623 ("Company"), and Leucadia National Corporation, a New York corporation having an office at 315 Park Avenue South, New York, New York 10010 ("Purchaser"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, Company has agreed to issue and sell to Purchaser, and Purchaser has agreed to purchase from Company, upon the terms and conditions hereinafter provided, (i) one million shares of Company's Series B Convertible Preferred Stock, $0.01 par value per share, the terms, preferences and limitations of which are set forth in the Certificate of Designation attached as Exhibit A hereto (the "Series B Preferred Stock"), and (ii) a ten-year warrant to purchase shares of Company's Common Stock, $0.01 par value per share ("Common Stock"), substantially in the form attached as Exhibit B hereto; and WHEREAS, as soon as practicable following the purchase of the Series B Preferred Stock by Purchaser, Company will issue up to an additional six hundred thousand shares of Company's Series C Convertible Preferred Stock, $0.01 par value per share, the terms, preferences and limitations of which are set forth in the Certificate of Designation attached as Exhibit A hereto and which are identical to those of the Series B Preferred Stock (the "Series C Preferred Stock" and together with the Series B Preferred Stock, the "Convertible Preferred Stock"), upon exercise of rights to be issued by Company to its existing holders of Common Stock, and Purchaser has agreed to act as a standby purchaser of up to four hundred thousand shares of Series C Preferred Stock that are not subscribed to by holders of Common Stock or their transferees in such rights offering. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: ARTICLE I DEFINITIONS 1.1 Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Acquisition Proposal" shall mean any proposal or offer of any Person, other than a proposal or offer by Purchaser or any of its Affiliates, relating to (i) any merger, consolidation, share exchange, recapitalization, business combination or other similar transaction involving Company, (ii) any sale, lease or exchange, mortgage, pledge, transfer or other disposition of 20% or more of the assets of Company, in a single transaction or in a series of transactions or (iii) any tender offer, exchange offer for securities of Company or any purchase or other acquisition of beneficial ownership of 20% or more of the equity of Company (or securities convertible into 20% or more of the equity of Company). Notwithstanding the foregoing, "Acquisition Proposal" shall not include any transaction set forth on Schedule 1.1A. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. The term "control" (including, with correlative meaning, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Bank Debt" shall mean Company's existing indebtedness to the Lenders in the principal amount of approximately $4.7 billion as of December 18, 2000 pursuant to the agreements set forth on Schedule 1.1B. "Board of Directors" shall mean the Board of Directors of Company. "Bond Indebtedness" shall mean indebtedness outstanding as of the date hereof and issued pursuant to the indentures set forth on Schedule 1.1C. "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Certificate of Designation" shall mean the Certificate of Designation, Rights and Preferences setting forth the rights and preferences of the Convertible Preferred Stock attached as Exhibit A hereto. "Common Stock" shall have the meaning set forth in the recitals hereto. "Convertible Preferred Stock" shall have the meaning set forth in the recitals hereto. "Credit Enhancement" shall mean any (i) security deposit, unapplied advance rental payment or dealer investment, (ii) investment certificate, certificate of deposit, authorization to hold funds, hypothecation of account or like instrument, (iii) letter of credit, repurchase agreement, agreement of indemnity, guarantee, lease guarantee bond or postponement agreement, (iv) recourse agreement, (v) security agreement, (vi) Property, (vii) certificate representing shares or the right to purchase capital of or interests in, any Person or (viii) bond or debenture, in each case pledged, assigned, mortgaged, made, delivered or transferred as security for the performance of any obligation under or with respect to any Financing Contract. "DGCL" shall mean the General Corporation Law of the State of Delaware, as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time and any applicable regulations thereunder. 2 "ERISA Affiliate" shall mean, with respect to Company, any trade or business (whether or not incorporated) under common control with Company and which, together with Company, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding Purchasers and each other person which would not be an ERISA Affiliate if Purchasers did not own any issued and outstanding shares of stock of Company. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and all rules and applicable regulations thereunder. "Executive Officer" shall mean those officers of Company and the Subsidiaries designated as executive officers for SEC reporting purposes. "Financing Contract" shall mean any contract (including any schedule or amendment thereto or assignment, assumption, renewal or novation thereof) in existence on or prior to the Closing in the form of (i) a lease of or rental agreement with respect to Property, (ii) a sale contract (including an installment sale contract or conditional sale agreement) arising out of the sale of Property, (iii) a secured or unsecured financing of Property, or (iv) a secured or unsecured loan, and in each case, which with respect thereto: (A) Company is the lessor, seller, lender, secured party or obligee (whether initially or as an assignee), or (B) is between an obligor, on the one hand, and a lessor, seller, obligee, secured party or assignee of any of the foregoing, on the other hand, and (1) which would be a Financing Contract if Company were the lessor, seller, obligee, secured party or assignee of any of the foregoing thereunder and (2) with respect to which Company is an assignee of the revenues or claims with respect thereto. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto. "IRS" shall mean the Internal Revenue Service, or any successor thereto. "Lenders" shall mean the banks, other financial institutions and other lenders who are lenders to Company pursuant to the credit agreements set forth on Schedule 1.1B. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement, encumbrance (including, without limitation, any conditional 3 sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing). "Material Adverse Effect" shall mean, with respect to any Person, a material adverse effect (i) on the business, assets, operations or financial condition of such Person and its Subsidiaries, if any, taken as a whole, or (ii) on the ability of such Person to perform on a timely basis any material obligation under this Agreement or any other Transaction Document or to consummate the transactions contemplated hereby or thereby, except any such effect resulting from or arising in connection with (a) changes in circumstances or conditions affecting the financial services industry in general or affecting any segment thereof in which such Person or its Subsidiaries operates, (b) changes in general economic or regulatory conditions or financial markets in the United States or, (c) any transaction to which Purchaser shall have consented or requested in writing. Notwithstanding the foregoing, (x) none of the matters set forth in Schedule 1.1C shall constitute a "Material Adverse Effect" with respect to Company and (y) any acceleration of Company's Bond Indebtedness shall constitute a "Material Adverse Effect" with respect to Company. "Material Contracts" means (i) all of Company's and its Subsidiaries' contracts, agreements, leases or other instruments to which Company or any of its Subsidiaries is a party or by which Company, its Subsidiaries or its properties are bound, which involve payments by Company or its Subsidiaries of more than $15 million annually, (ii) all of Company's and its Subsidiaries' loan agreements, bank lines of credit agreements, indentures, mortgages, deeds of trust, pledge and security agreements, factoring agreements, conditional sales contracts, letters of credit or other debt instruments which represent obligations of Company or its Subsidiaries in excess of $15 million, (iii) all non-competition agreements which restrict Company's ability to compete, (iv) all contracts for the employment of any officer or employee of Company or its Subsidiaries who is still employed with the Company or its Subsidiaries and received an annual compensation for 1999 in excess of $250,000 or who will receive base compensation in 2000 in excess of $200,000 or which has a term of more than 3 years, (v) all consulting agreements which require minimum payments by Company in excess of $1,000,000 annually and (vi) all other material contracts not made in the Ordinary Course of Business; provided, however, that "Material Contracts" shall not include any agreements, financing agreements, leases, Financing Contracts, Credit Enhancements or other similar agreements between Company or its Subsidiaries and borrowers, lessees, guarantors or customers entered into in the Ordinary Course of Business. "Non-Disclosure Agreement" means the Confidentiality Agreement between Purchaser and Company dated August 14, 2000. "NYSE" shall mean the New York Stock Exchange, Inc. "Ordinary Course of Business" shall mean the ordinary and usual course of business of Company, consistent with Company's past practices. Ordinary Course of Business shall not include any material modification to any Benefit Plan, compensation agreement, arrangement or policy (except to the 4 extent to reflect changes in position, responsibilities or duties) without the consent of Purchaser. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. "Permit" shall mean any domestic or foreign, federal, state, provincial, local, municipal or other governmental consent, license, permit, franchise, concession, grant, authorization, approval, exemption or similar right. "Permitted Lien" shall mean Taxes and general and special assessments not in default and payable without penalty and interest; other Liens which do not materially interfere with Company's or any of its Subsidiaries' use and enjoyment of the property to which they relate or materially detract from or diminish the value thereof; workman's, mechanic's and other similar Liens; Liens relating to assets which have been leased to Third Parties in the Ordinary Course of Business; Liens reflected in the Company Financial Statements and the notes thereto; Liens on any property or assets of a Subsidiary granted in favor of Company or any of its Subsidiaries; and Liens granted with the consent of Purchaser. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Portfolio Property" shall mean Property with respect to which Company is the lessor, seller or secured party, as the case may be, pursuant to the terms of a Financing Contract (whether initially or as an assignee). "Property" shall mean all property and assets of whatsoever nature including but not limited to personal property, whether tangible or intangible, and claims, rights and chooses in action. "Purchaser" shall have the meaning set forth in the recitals hereto. "Registration Rights Agreement" shall mean the Registration Rights Agreement by and between Company and Purchaser, substantially in the form attached hereto as Exhibit C, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Schedule" shall refer to one of several written Schedules to this Agreement, each of which is hereby incorporated into and made a part of this Agreement for all purposes. "SEC" shall mean the U.S. Securities and Exchange Commission, or any successor thereto. 5 "Securities" shall mean the Series B Preferred Stock and the Warrant. "Securities Act" shall mean the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder. "Series B Preferred Stock" shall have the meaning set forth in the recitals hereto. "Series C Preferred Stock" shall have the meaning set forth in the recitals hereto. "Subsidiary" shall mean, with respect to any Person, (i) each corporation, partnership, joint venture or other legal entity of which such Person owns, either directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or similar governing body of such corporation, partnership, joint venture or other legal entity, (ii) each partnership in which such Person or another Subsidiary of such Person is the general or managing partner and (iii) each limited liability company in which such Person or another Subsidiary of such Person is the managing member or otherwise controls (by contract, through ownership of membership interests or otherwise). "Tax" or "Taxes" shall mean any and all domestic or foreign, taxes, charges, fees, imposts, levies or other assessments by any Governmental Authority, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, together with any interest and any penalties, fines, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) and shall include any liability in respect of Taxes as a transferee or as an indemnitor, guarantor, surety or in a similar capacity under any contract, Tax sharing agreement, Tax indemnity agreement, Tax reimbursement agreement, Tax assumption agreement, arrangement, agreement, understanding or commitment (whether oral or written) and any liability in respect of Taxes which is payable by reason of contract, assumption, operation of law, Treasury Regulation Section 1.1502-6 (or any predecessor or successor thereof or any analogous or similar provision under state, local or foreign law) or otherwise. "Tax Return" shall mean any report, return, statement, information return or other information required to be supplied to a taxing authority in connection with Taxes (including any attachment thereto or amendment thereof), including, but not limited to, any claim for refund, declaration of any estimated Tax and combined or consolidated return for any group of entities that includes Company or any of its Subsidiaries. "Treasury Regulation" shall mean the regulations, including but not limited to proposed and temporary regulations, promulgated under the IRC, as amended from time to time. 6 "Third Party" shall mean any Person other than Purchaser and Company. "Transaction Documents" shall mean this Agreement, the Certificate of Designation, the Warrant and the Registration Rights Agreement. "Warrant" shall mean the Warrant to purchase Common Stock to be issued by Company to Purchaser hereunder, substantially in the form attached hereto as Exhibit B. References to this "Agreement" shall mean this Securities Purchase Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. 1.2 Terms Defined Elsewhere in the Agreement. For purposes of this Agreement, the following terms have the meanings set forth in the sections indicated: Term Section ---- ------- Actual Gain 6.14 Actual Loss 6.14 After-Tax Gain 6.14 After-Tax Loss 6.14 Agent BanksActual GainActual Gain 6.4(b) Baseline 6.14 Benefit Plans 4.20 Closing 2.3 Closing Date 2.3 Company Financial Advisors 4.23 Company Financial Statements 4.8 Company Representatives 6.4 Company Rights Agreement 4.25 Company SEC Documents 6.4(b) Covered Transactions 6.4(b) Damages 9.2 Downside Distribution 6.14 Environmental Costs and Liabilities 4.13(a) (i) Environmental Law 4.13(a) (ii) Environmental Permits 4.13(b) Fully Diluted Equity 6.14 Hazardous Material 4.13(a) (iii) Indemnified Party 9.3 Indemnifying Party 9.3 Material Adverse Effect 7.2(a) Old S/H Ownership 6.14 Other Equity Ownership 6.14 Portfolio 6.14 7 Term Section ---- ------- Preferred Ownership 6.14 Preferred Percentage of Other Equity 6.14 Purchaser Designees 6.7 Refinancing 6.5 Registration Statement 6.11(b) Release 4.13(a) (iv) Remedial Action 4.13(a) (v) Rights 4.25 Rights Offering 6.11(a) Rights Ownership 6.14 Rights Percentage of Other Equity 6.14 Sharing Amount 6.14 Standby Shares 6.11(a) Superior Proposal 6.4 Term Sheet 6.4(b) TOPrS 4.1 Upside Distribution 6.14 Warrant Ownership 6.14 Warrant Percentage of Other Equity 6.14 1.3 Other Definitional Provisions. (a) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given such term in accordance with GAAP. (b) The words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, including the Exhibits and Schedules hereto, as the same may from time to time be amended, modified or supplemented, and not to any particular provision of this Agreement. (c) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (d) The terms "dollars" and "$" shall mean United States dollars unless otherwise stated. (e) The term "including" shall be deemed to be immediately followed by the term "but not limited to." (f) The term "knowledge" as it applies to the knowledge of Company, means the knowledge of any of the individuals named on Schedule 1.3(e) (the "Company Officers") in each case after due inquiry. (g) Whenever in this Agreement a party is permitted to make a decision or take an action in its "sole and absolute discretion" or terms of similar latitude, such Person shall be entitled to consider only such interests 8 and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, any other Person. ARTICLE II PURCHASE OF SERIES B PREFERRED STOCK AND WARRANTS 2.1 Authorization of Issue. Prior to the Closing, Company shall have duly authorized the issuance and sale to Purchaser of (i) the number of shares of Series B Preferred Stock set forth in Section 2.2(a) below, (ii) the Warrant and (iii) the aggregate number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock and exercise of the Warrant. 2.2 Purchase of Series B Preferred Stock and Warrant. (a) Subject to the terms and conditions set forth in this Agreement, Purchaser agrees to subscribe for and purchase from Company, and Company agrees to issue and sell to Purchaser, on the Closing Date an aggregate of one million shares of Series B Preferred Stock containing the terms, preferences and limitations set forth in the Certificate of Designation. (b) Subject to the terms and conditions set forth in this Agreement, Company agrees to issue to Purchaser, on the Closing Date, the Warrant containing the terms set forth in Exhibit B hereto. (c) The aggregate purchase price for the aggregate number of shares of Series B Preferred Stock subscribed for by Purchaser and the Warrant is $250,000,000, payable in full on the Closing Date. Notwithstanding anything to the contrary contained herein, Company and Purchaser hereby further acknowledge and agree that for United States federal, state and local income tax purposes such aggregate purchase price shall be allocated between the Series B Preferred Stock and the Warrant. This allocation shall be determined in accordance with applicable rules, and for this purpose Purchaser shall provide good faith determinations of the value of each of the Series B Preferred Stock and the Warrant. Company and Purchaser agree to use the foregoing allocation for all tax purposes. (d) The parties hereto acknowledge that, pursuant to the Certificate of Designation and Section 6.14 of this Agreement, Company in 2006 may be required to make a payment to the holders of the Series B Preferred Stock and Purchaser, depending upon certain results of Company's operations through 2005. Company and Purchaser agree to treat any such payment as a reduction to the purchase price for the Securities for all Tax purposes. 2.3 Closing. (a) The closing of the purchase and sale of the Series B Preferred Stock and the issuance of the Warrant (the "Closing") shall take place within five Business Days after the satisfaction or waiver of the conditions set forth in Article VII hereof or such date and time as shall be mutually agreed to by the parties hereto (the "Closing Date") at the offices of 9 Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, or such other place as shall be mutually agreed to by the parties hereto. (b) On the Closing Date, Company will deliver to Purchaser (i) a certificate representing the Series B Preferred Stock and (ii) the Warrant to be purchased by Purchaser against delivery by Purchaser of the purchase price therefor by wire transfer of immediately available funds to an account of Company designated in writing by Company no later than two Business Days prior to the Closing. ARTICLE III PURCHASER'S REPRESENTATIONS Purchaser makes the following representations and warranties to Company, each and all of which shall survive the execution and delivery of this Agreement and the Closing hereunder: 3.1 Corporate Existence. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with all requisite power to enable it to own, lease and operate its assets and properties and to conduct its business as currently being conducted and is qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties owned or leased by it requires such qualification, except where the failure to be so duly qualified and in good standing does not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Purchaser. 3.2 Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to be executed by it: (i) are within Purchaser's corporate power; (ii) have been duly authorized by all necessary corporate action; (iii) are not in contravention of any provision of Purchaser's certificate of incorporation or by-laws; and (iv) will not violate any law or regulation applicable to Purchaser, or any order or decree of any court or governmental instrumentality binding on Purchaser. This Agreement has been, and at or prior to the Closing Date, each of the other Transaction Documents to which Purchaser is a party shall have been, duly executed and delivered by Purchaser and this Agreement constitutes, and at the Closing date each of the other Transaction Documents to which Purchaser is a party will constitute, the legal, valid and binding obligations of Purchaser, enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 3.3 Investment Intention. Purchaser is purchasing the Securities for its own account, for investment purposes and not with a view to the distribution thereof. Purchaser will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the 10 Securities (or solicit any offers to buy, purchase, or otherwise acquire any of the Securities), except in compliance with the Securities Act. Neither Purchaser nor any Person acting on its behalf has taken or will take action (including, without limitation, any offering of any securities of Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act and the rules and regulations of the SEC thereunder) which might subject the offering, issuance or sale of the Securities to the registration requirement of Section 5 of the Securities Act. 3.4 Accredited Investor. Purchaser is an "accredited investor" (as that term is defined in Rule 501 of Regulation D under the Securities Act) and by reason of its business and financial experience, it has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment, is able to bear the economic risk of such investment and is able to afford a complete loss of such investment. 3.5 Sufficiency of Funds. Purchaser has sufficient cash to consummate the transactions contemplated by this Agreement. ARTICLE IV COMPANY'S REPRESENTATIONS AND WARRANTIES Company makes the following representations and warranties to Purchaser except as otherwise contemplated by this Agreement or as set forth in the Schedules to this Agreement: 4.1 Authorized and Outstanding Shares of Capital Stock; Options and Other Rights to Acquire Capital Stock. The authorized capital stock of Company consists of (i) 400,000,000 shares of Common Stock, $0.01 par value per share and (ii) 20,000,000 shares of Preferred Stock, par value $0.01 per share, of which (A) 600,000 shares have been designated as Series A Junior Participating Preferred Stock and reserved for issuance under the Company Rights Agreement, and (B) 250,000 shares of Preferred Stock are reserved for issuance under the Benefit Plans. As of December 11, 2000, there were outstanding: (i) 61,301,410 shares of Common Stock; (ii) employee and director stock options to purchase an aggregate of 3,964,601 shares of Common Stock; (iii) performance-based restricted stock agreements that provide for the issuance of up to 482,510 shares of Common Stock, (iv) trust originated preferred securities ("TOPrS") convertible into 2,938,020 shares of Common Stock, and (v) no shares of Preferred Stock. As of December 11, 2000, 3,547,895 shares of Common Stock were held by Company in its treasury or by Company's Subsidiaries. All of such issued and outstanding shares are validly issued, fully paid and non-assessable. Since December 11, 2000, no options, warrants or other securities convertible into or exchangeable for capital stock of Company have been issued or otherwise committed by Company to be issued, except as provided for in this Agreement. Other than (i) as set forth on Schedule 4.1, and (ii) in connection with the transactions contemplated by the Transaction Documents, (a) there is no existing option, warrant, call, commitment or other agreement to which Company is a party 11 requiring, and there are no convertible securities of Company outstanding which upon conversion would require, the issuance of any additional shares of capital stock of Company or other securities convertible into shares of equity securities of Company, other than the Securities, (b) there are no agreements to which Company is a party with respect to the voting or transfer of the capital stock of Company or with respect to any other aspect of Company's affairs, and (c) there are no stockholders' preemptive rights, nor are there any rights of first refusal or other similar rights with respect to the issuance of capital stock by Company to which Company is a party. Except as set forth on Schedule 4.1, there are no voting trusts or other agreements or understandings to which Company or any of its Subsidiaries is a party with respect to the voting of capital stock of Company. 4.2 Authorization and Issuance of the Securities. (a) The issuance and sale of the Securities has been duly authorized by all necessary corporate action on the part of Company and, upon delivery to Purchaser of the Securities against payment in accordance with the terms hereof, the Securities will have been validly issued and the Series B Preferred Stock will be fully paid and non-assessable), free and clear of all Liens and preemptive rights. The issuance of shares of Common Stock upon conversion of the Convertible Preferred Stock and exercise of the Warrant has been duly authorized by all necessary corporate action on the part of Company and, when issued upon conversion of the Convertible Preferred Stock and exercise of the Warrant, as applicable, in each case in accordance with their respective terms such Common Stock will have been validly issued and fully paid and non-assessable. Company has duly reserved 1,000,000 shares of Series B Preferred Stock for issuance pursuant to this Agreement, 600,000 shares of Series C Preferred Stock for issuance pursuant to the Rights Offering and 317,539,000 shares of Common Stock for issuance pursuant to the terms of the Convertible Preferred Stock and the Warrant. (b) The Board of Directors has, by unanimous vote of those present (who constituted 100% of the directors then in office), duly and validly authorized the execution and delivery of this Agreement and the other Transaction Documents and approved the consummation of the transactions contemplated hereby and thereby, and taken all corporate actions required to be taken by the Board of Directors for the consummation of the transactions contemplated hereby and thereby and has resolved to deem this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, taken together, advisable and fair to, and in the best interests of, Company and its stockholders. 4.3 Securities Laws. In reliance on the investment representations contained in Sections 3.3 and 3.4, the offer, issuance, sale and delivery of the Securities, as provided in this Agreement, are exempt from the registration requirements of the Securities Act and all applicable state securities laws. Neither Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act and the rules and regulations of the SEC thereunder) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act. 12 4.4 Corporate Existence; Compliance with Law. Company and each of its Subsidiaries (i) is a corporation, partnership or limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware in the case of Company and set forth on Schedule 4.4 in the case of its Subsidiaries; (ii) is duly qualified as a foreign corporation, partnership or limited liability company and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification (except for jurisdictions in which such failure to so qualify or to be in good standing would not have a Material Adverse Effect on Company); (iii) has the requisite corporate, partnership or limited liability company power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now being conducted; (iv) has, or has applied for, all material Permits from or by, and has made all material filings with, and has given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (v) is in compliance with its certificate or articles of incorporation and by-laws or, if not a corporation, its governing documents; and (vi) is in compliance with all applicable provisions of law, except with respect to clauses (ii) through (vi) where such failure, individually or in the aggregate, would not have a Material Adverse Effect on Company. 4.5 Subsidiaries. Schedule 4.4 sets forth a complete list of Subsidiaries of Company. Except for TOPrS and the related convertible debentures, there are no options, warrants, rights to purchase or similar rights covering capital Stock for any such Subsidiary. 4.6 Corporate Power; Authorization; Enforceable Obligations. Except as set forth on Schedule 4.6, the execution, delivery and performance by Company of this Agreement, the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation of the other transactions contemplated by any of the foregoing: (i) are within Company's corporate power and authority; (ii) have been duly authorized by all necessary corporate action; (iii) are not in contravention of any provision of Company's certificate of incorporation or by-laws; (iv) will not violate any law or regulation applicable to Company or its Subsidiaries, or any order or decree of any court or governmental instrumentality binding upon Company or its Subsidiaries; (v) will not conflict with or result in the breach or termination of, the loss of any benefit to which Company is entitled under, constitute a default or require any payment to be made by Company under, or accelerate any performance required by, any indenture, mortgage, deed of trust, loan, credit agreement, lease, agreement or other instrument to which Company or any of its Subsidiaries is a party or by which Company, any of its Subsidiaries or any of their property is bound; (vi) will not result in the creation or imposition of any Lien upon any of the property of Company or any of its Subsidiaries and (vii) do not require the consent or approval of, or any filing with, any Governmental Authority or any other Person (except (A) for the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, (B) for those filings required by the Exchange Act, (C) for those filings required by the Registration Rights Agreement, (D) for those required by the HSR Act and (E) to the extent previously obtained or made), other than, in the case of clauses (iv) through (vii), any such violation, conflict, breach, 13 termination, loss, default, payment, acceleration, creation, imposition or failure to obtain the consent or approval, individually or in the aggregate, that would be immaterial to the Company and its Subsidiaries taken as a whole or to the Company's ability to own its assets and conduct its business. At or prior to the Closing Date, each of this Agreement and the other Transaction Documents shall have been duly executed and delivered by Company and each shall then constitute a legal, valid and binding obligation of Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity), and the Certificate of Designation shall have been duly filed with the Secretary of State of the State of Delaware. 4.7 SEC Documents. Company has made available to Purchaser a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by Company with the SEC since January 1, 1998 and prior to the date of this Agreement, as any such filings have been amended or restated (the "Company SEC Documents"), which are all the documents (other than preliminary material) that Company was required to file with the SEC since such date. As of their respective dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.8 Financial Statements. The financial statements of Company included in the Company SEC Documents (the "Company Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present (subject, in the case of the unaudited financial statements, to normal, recurring audit adjustments) the consolidated financial position of Company and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. 4.9 No Undisclosed Liabilities. Except as and to the extent publicly disclosed by Company in the Company SEC Documents filed as of the date of this Agreement, none of Company or any of its Subsidiaries has any material indebtedness or obligations, contingent or otherwise, including, without limitation, liabilities for charges, long-term leases or unusual forward or long-term commitments, required to be included in a financial statement prepared in accordance with GAAP, other than: (a) liabilities and obligations disclosed or provided for in the Company Financial Statements or in the notes thereto or in any of the Company SEC Documents; 14 (b) liabilities and obligations incurred or entered into in the Ordinary Course of Business since the date of the most recent financial statements included in the Company SEC Documents that would not, individually or in the aggregate, have, or be reasonably expected to have, a Material Adverse Effect on Company; and (c) liabilities and obligations under this Agreement or incurred in connection with the transactions contemplated hereby. 4.10 Absence of Certain Changes. Except as disclosed in the Company SEC Documents or as set forth on Schedule 4.10, since September 30, 2000 there has not been any event, occurrence or development or a state of circumstances or facts that has had or could be reasonably expected to have a Material Adverse Effect on Company. Except as set forth on Schedule 4.10, as disclosed in the Company SEC Documents or as contemplated by this Agreement, since September 30, 2000: (a) neither Company nor any of its Subsidiaries has sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than in the Ordinary Course of Business; (b) no Person (including Company) has accelerated, terminated, modified, or canceled any Material Contract other than in the Ordinary Course of Business; (c) neither Company nor any of its Subsidiaries has canceled, compromised, waived or released any right or claim (or series of related rights and claims), in any case, material to Company and its Subsidiaries, taken as a whole, other than in the Ordinary Course of Business; (d) there has been no change made or authorized in the certificate of incorporation or bylaws of Company; (e) neither Company nor any of its Subsidiaries has experienced any material damage, destruction or loss (whether or not covered by insurance) to its tangible property that had or would reasonably be expected to have a Material Adverse Effect on Company; (f) neither Company nor any of its Subsidiaries has made any loan to, or entered into any other transaction with, any of its directors, officers or employees, except for any advances made to employees in the Ordinary Course of Business; (g) neither Company nor any of its Subsidiaries has (i) granted any material increase in the compensation of any of its directors, Company Officers or, to the extent material individually or in the aggregate, of any of its officers, employees, consultants or independent contractors, or made any other material change in employment terms for any of its directors, Company Officers or, to the extent material individually or in the aggregate, officers, employees or, to the extent material individually or in the aggregate, in the terms of its agreements with any consultants or independent contractors except, in each case, to the extent to reflect changes in responsibility, position, or 15 duties or (ii) adopted, amended or modified in any material respect or terminated any bonus, profit-sharing, incentive, stock option, severance, retention, or other plan, contract, or commitment for the benefit of any of the directors, officers, and employees of the Company or its Subsidiaries (or taken any such action with respect to any other Benefit Plan); (h) neither Company nor any of its Subsidiaries has made or rescinded any material express or deemed election relating to Taxes, settled or compromised any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, entered into any Tax ruling, agreement, contract, arrangement or plan, filed any amended Tax Return, or except as may be required by applicable law, made any change to any of its material methods of reporting income or deductions for federal income Tax purposes from those employed in the preparation of its most recently filed federal income tax return; (i) there has not been any declaration or payment of any dividends, other than regular quarterly dividends declared and paid with respect to the TOPrS, or other distributions in respect of the outstanding shares of Company or any Subsidiary of Company (except for any dividends declared by any Subsidiary that was paid solely to Company); (j) neither Company nor any Subsidiary has entered into a contract or settlement with any taxing authority; (k) neither Company nor any Subsidiary has entered into any arrangement or commitment, whether written or oral, to do any of the foregoing. 4.11 Ownership of Property. Except as set forth on Schedule 4.11(a), neither Company nor any of its Subsidiaries owns any real estate. Each of Company and its Subsidiaries has good and marketable and insurable fee simple title to its material owned real property, free and clear of all Liens. Each of Company and its Subsidiaries has valid and marketable leasehold interests in the leases described in Schedule 4.11(b) hereto, and, except as set forth on Schedule 4.11(b), good and marketable title to, or valid leasehold interests in, all of its other material properties and assets free and clear of all Liens other than Permitted Liens. All material real property leased or subleased by Company and its Subsidiaries is set forth on Schedule 4.11(b). Each of such leases is valid and enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity)) and is in full force and effect. Company has made available to Purchasers true and complete copies of each of such leases set forth on Schedule 4.11(b) and all documents affecting the rights or obligations of Company or any of its Subsidiaries, including, without limitation, any non-disturbance and recognition agreements, subordination agreements, attornment agreements and agreements regarding the 16 term or rental of any of the leases. Except as set forth on Schedule 4.11(b), none of Company, any of its Subsidiaries nor, to its knowledge, any other party to any such lease is in default of its obligations thereunder or has delivered or received any notice of default under any such lease, nor has any event occurred which, with the giving of notice, the passage of time or both, would constitute a default under any such lease. None of such leases is subject to any Liens, other than Permitted Liens. Except as disclosed on Schedule 4.11(c), and except for leveraged, operating and financing leases entered into with Company or its Subsidiaries as lessor or sublessor, neither Company nor any of its Subsidiaries is obligated under or a party to, any option, right of first refusal or any other contractual right to purchase, acquire, sell, assign or dispose of any material real property owned or leased by Company or such Subsidiary. 4.12 Material Contracts. Other than (i) Material Contracts included in the Company SEC Documents and (ii) any other Material Contracts entered into after the date hereof in accordance with Section 5.1 hereof, Schedule 4.12 contains a true, correct and complete list and description of all Material Contracts. Each Material Contract is a valid and binding agreement of Company or its Subsidiaries (as the case may be) enforceable against Company or such Subsidiary in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity)), and neither Company nor any of its Subsidiaries has any knowledge that any Material Contract is not a valid and binding agreement against the other parties thereto. Except as set forth in Schedule 4.12, Company and each of its Subsidiaries has fulfilled all obligations required pursuant to the Material Contract to have been performed by Company or such Subsidiary on its part. Except as set forth in Schedule 4.12, neither Company nor any of its Subsidiaries is in default or breach, nor to Company's or such Subsidiary's knowledge is any third party in default or breach, under or with respect to any Material Contract. 4.13 Environmental Matters. (a) For purposes of this Agreement: (i) "Environmental Costs and Liabilities" means any and all losses, liabilities, obligations, damages (including compensatory, punitive and consequential damages), fines, penalties, judgments, actions, claims, costs and expenses (including, without limitation, reasonable fees, disbursements and expenses of legal counsel, experts, engineers and consultants and the costs of investigation, feasibility studies and the costs to clean up, remove, treat, or in any other way address any Hazardous Materials (as hereinafter defined)) arising from, under or pursuant to any Environmental Law (as hereinafter defined); (ii) "Environmental Law" means any applicable federal, state, local or foreign law (including common law), statute, or other legal requirement relating to the protection of natural resources, the environment and 17 public and employee health and safety or pollution or the release or exposure to Hazardous Materials (as hereinafter defined) as such laws have been and may be amended or supplemented as of the Closing Date; (iii) "Hazardous Material" means any substance, material or waste which is regulated, classified or otherwise characterized as hazardous, toxic, pollutant, contaminant or words of similar meaning or regulatory effect by any Governmental Authority, and includes, without limitation, petroleum, petroleum by-products and wastes, asbestos and polychlorinated biphenyl's; (iv) "Release" means any release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the indoor or outdoor environment, or into or out of any property owned, operated or leased by Company or its Subsidiaries; and (v) "Remedial Action" means all actions, including, without limitation, any capital expenditures, required by a Governmental Authority or required under or taken pursuant to any Environmental Law to (A) clean up, remove, treat, or in any other way, ameliorate or address any Hazardous Materials or other substance in the indoor or outdoor environment; (B) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public health or welfare of the indoor or outdoor environment; (C) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (D) bring the applicable party into compliance in all material respects with any Environmental Law. (b) Except as set forth in Schedule 4.13: (i) Company and its Subsidiaries have been and, as of the Closing Date, will be, in material compliance with all Environmental Laws, except where the failure to so comply does not or would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Company, and, to Company's knowledge, there are no facts, circumstances or conditions relating to the current or former operations of Company and its Subsidiaries or any real property currently or formerly owned, operated or leased by Company or its Subsidiaries, which without material capital expenditures, would prevent material compliance in the future; (ii) Company and its Subsidiaries have obtained and will, as of the Closing Date, maintain all permits, authorizations, licenses or similar approvals required under applicable Environmental Laws ("Environmental Permits") for the continued operations of their respective businesses as currently operated and as will be operated as of the Closing Date, except such Environmental Permits the lack of which do not or would not be reasonably 18 expected to have, individually or in the aggregate, a Material Adverse Effect on Company; (iii) Company and its Subsidiaries are not subject to any outstanding written orders or parties to material contracts with any Governmental Authority or other person respecting (A) Environmental Laws, (B) Remedial Action or (C) any Release or threatened Release of a Hazardous Material except for such orders or contracts that would not reasonably be expected to have a Material Adverse Effect on Company; (iv) Company and its Subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability (real or potential) under any Environmental Law, and to Company's knowledge there are no investigations or proceedings pending or threatened against Company regarding potential liability under Environmental Laws which violation or liability would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company; (v) To the knowledge of Company, neither Company nor any of its Subsidiaries has any contingent liability in connection with the Release of any Hazardous Material (whether on-site or off-site) which does or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company; (vi) The operations of Company or its Subsidiaries do not involve the transportation, treatment, storage or disposal of hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement) or any state equivalent at quantities or for durations requiring an Environmental Permit; (vii) There is not now, nor to Company's knowledge, has there been in the past, on or in any property of Company or its Subsidiaries any of the following: (A) any underground storage tanks or surface impoundments, (B) any asbestos-containing materials, or (C) any polychlorinated biphenyls, the presence of which would reasonably be expected to have a Material Adverse Effect on Company; and (c) None of the exceptions set forth on Schedule 4.13 are reasonably likely to result in Company and its Subsidiaries incurring Environmental Costs and Liabilities which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Company. (d) Company has made available to Purchaser copies of all environmentally related assessments, audits, investigations, sampling or similar reports relating to Company or its Subsidiaries or any real property currently or formerly owned, operated or leased by Company and its Subsidiaries, to the extent in the possession, custody or control of Company or its Subsidiaries. 19 4.14 Labor Matters. There are no strikes or other collective labor disputes against Company or any of its Subsidiaries pending or, to Company's or its Subsidiaries' knowledge, threatened. Neither Company nor any of its Subsidiaries is, or during the five years preceding the date hereof was, a party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of Company or any of its Subsidiaries. 4.15 Taxes. Except as set forth on Schedule 4.15: (a) all federal, state, local and foreign Tax Returns required to be filed by Company and its Subsidiaries have been properly prepared and timely filed with the appropriate Governmental Authority, and all such Tax Returns are true, correct and complete in all material respects. All Taxes due and payable for any period have been paid when due. With respect to any period for which Taxes are not yet due or owing, Company and its Subsidiaries have made due and sufficient current accruals for such Taxes in their books and records, including without limitation in the Company Financial Statements. Proper amounts have been withheld by Company and its Subsidiaries for all periods in compliance with the Tax withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authority; (b) neither Company nor any of its Subsidiaries has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending the period for assessment or collection of any Taxes; (c) no Tax audits or other administrative or judicial proceedings are pending or threatened in writing with regard to any Taxes for which Company or any Subsidiary may be liable, no assessment of Taxes is proposed against Company or any Subsidiary and no audit report has been issued in the five years prior to the date of this Agreement relating to Taxes due from or with respect to Company or its Subsidiaries, their respective incomes, assets or operations; (d) neither Company nor any of its Subsidiaries has filed a consent pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any dispositions of subsection (f) assets (as such term is defined in IRC Section 341(f)(4)); (e) there is no contract, plan or arrangement involving Company or its Subsidiaries and covering any Person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by Company or any of its Subsidiaries by reason of Section 280G or Section 162(m) of the IRC; (f) neither Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the IRC) in a distribution of stock qualifying for tax-free treatment under Section 355 of the IRC (A) in the two years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" 20 (within the meaning of Section 355(e) of the IRC) in conjunction with the transactions contemplated by this Agreement; (g) all of the lease agreements that the Company or any of its Subsidiaries have treated as true leases for federal income tax purposes are true leases for federal income tax purposes; (h) neither Company nor any of its Subsidiaries (i) engaged in any "intercompany transactions" in respect of which material gain was and continues to be deferred pursuant to Treasury Regulation Section 1.1502-13 or any predecessor or successor thereof or analogous or similar provision under state, local or foreign law or (ii) has material "excess loss accounts" in respect of the stock of any subsidiary pursuant to Treasury Regulation Section 1.1502-19, or any predecessor or successor thereof or analogous or similar provision under state, local or foreign law; (i) no prior ownership change (within the meaning of Section 382 of the IRC) has occurred (i) that would result in the imposition of a limitation upon the use of net operating losses or upon the future deductibility of any tax basis or built-in deduction item of Company or any of its Subsidiaries, or (ii) that resulted in a readjustment of the tax basis of the assets of Company or any of its Subsidiaries under Section 56(g)(4)(G) of the IRC; and (j) (i) the TOPrS are treated as debt for federal income Tax purposes; (ii) the federal income tax treatment of securitization transactions of the Company or any of its Subsidiaries are as set forth on Schedule 4.15(j); and (iii) there is no entity or asset included in Company Financial Statements which is not included in the consolidated federal income tax return filed by Company as the common parent. 4.16 No Litigation. Except as disclosed in the Company SEC Documents, or as set forth on Schedule 4.16, no action, suit, claim, proceeding or investigation is now pending or, to the knowledge of Company or its Subsidiaries, threatened against Company or any of its Subsidiaries, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which would be reasonably expected to have a Material Adverse Effect on Company. 4.17 Brokers. Except as set forth on Schedule 4.17, no broker or finder acting on behalf of Company or any of its Subsidiaries brought about the consummation of the transactions contemplated pursuant to this Agreement and neither Company nor any of its Subsidiaries has any obligation to any Person in respect of any finder's or brokerage fees (or any similar obligation) in connection with the transactions contemplated by this Agreement. Company is solely responsible for the payment of all such finder's or brokerage fees. 4.18 [Intentionally left blank]. 21 4.19 Intellectual Property. Company and each of its Subsidiaries owns or has a right to use all licenses, patents, patent applications, copyrights, service marks, trademarks and registrations and applications for registration thereof, and trade names necessary to continue to conduct its business as heretofore conducted by it and now being conducted by it, each of which is listed, together with Patent and Trademark Office or Copyright Office application or registration numbers, where applicable, on Schedule 4.19 hereto. To Company's knowledge, Company and each of its Subsidiaries conducts its businesses without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others, except as such would not reasonably expected to have a Material Adverse Effect or as set forth on Schedule 4.19 hereto. To Company's knowledge, there is no infringement by others of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of Company or any of its Subsidiaries, except as set forth on Schedule 4.19 hereto. 4.20 ERISA. (a) Schedule 4.20 sets forth: (i) all "employee benefit plans", as defined in Section 3(3) of ERISA, and all severance, retention, sick leave, vacation pay, salary continuation, retirement, deferred compensation, bonus or other incentive compensation, stock option, stock purchase, hospitalization, medical, life insurance and scholarship plans, programs or agreements (the "Benefit Plans") to which Company or any of its Subsidiaries has any obligation or liability (contingent or otherwise). (b) None of the Benefit Plans is a "multiemployer plan" within the meaning of Section 3(37) of ERISA or a plan subject to Section 4063 of ERISA. (c) The Benefit Plans intended to be qualified under Section 401 of the IRC have been determined by the I.R.S. to be so qualified and the trusts maintained pursuant thereto have been determined by the I.R.S. to be exempt from federal income taxation under Section 501(a) of the IRC. (d) All contributions required by law or pursuant to the terms of the Benefit Plans to any funds or trusts established thereunder or in connection therewith have been made by the due date therefor (including any valid extension). (e) True, correct and complete copies of the following documents, with respect to each of the Benefit Plans, have been made available or delivered to Purchasers by Company: (A) any plans and related trust documents, and amendments thereto, (B) the most recent Forms 5500 (including any schedules thereto) and the most recent actuarial valuation report, if any, (C) the last IRS determination letter and (D) the most recent summary plan descriptions. (f) Except as set forth in Schedule 4.15 there are no pending actions, audits, claims or lawsuits which have been asserted or instituted against the Benefit Plans, the assets of any of the trusts under such Benefit Plans or the Benefit Plan sponsor or the Benefit Plan administrator, or against any fiduciary of the Benefit Plans with respect to the operation of such Benefit Plans (other than routine benefit claims), which, if adversely 22 determined, could reasonably be expected to result in a Material Adverse Effect nor does Company or any of its Subsidiaries have knowledge of facts which could form the basis for any such claim or lawsuit. (g) Except as set forth in Schedule 4.20(g), the consummation of the transactions contemplated by this Agreement shall not result, with respect to any current or former employee or director of Company or any of its Subsidiaries, (i) in any acceleration of payment or vesting of any compensation or benefits, (ii) in any increase in compensation or benefits, (iii) in any requirement to fund any compensation or benefits, or (iv) in any vesting of rights with respect to compensation benefits. (h) The Benefit Plans have been maintained, in all material respects, in accordance with their terms and with all applicable Federal and state law, except for non-compliance which could not reasonably be expected to result in a Material Adverse Effect. (i) Except as set forth in Schedule 4.20(i), neither Company or any of its ERISA Affiliates sponsors, maintains or has established any welfare plan, as defined in Section 3(1) of ERISA, which provides for continuing benefits or coverage for any participant or any beneficiary of a participant after such participant's termination of employment, except as may be required by Code section 4980B or Section 601 (et seq.) of ERISA, or under any applicable state law, and at the expense of the participant or the beneficiary of the participant. (j) Company and its ERISA Affiliates have filed or caused to be filed every material return, report statement, notice, declaration and other document required by any law or governmental agency, federal, state and local (including, without limitation, the IRS and the Department of Labor) with respect to each such Benefit Plan, each of such filings has been complete and accurate in all material respects and neither Company or any of its ERISA Affiliates has incurred any liability in connection with such filings. (k) Company and its ERISA Affiliates have delivered or caused to be delivered to every participant, beneficiary and other party entitled to such material, all material plan descriptions, returns, reports, schedules, notices, statements and similar materials, including, without limitation, summary plan descriptions and summary annual reports, as are required under Title I of ERISA, the Code, or both and neither Company or any of its ERISA Affiliates has incurred any material liability in connection with such requirements. (l) Neither Company or any of its ERISA Affiliates is delinquent in making contributions or payments to or in respect of any Benefit Plan as to which any is obligated to make contributions or payments (without regard to any waiver granted by the IRS under Code Section 412), nor has Company or any of its ERISA Affiliates failed to pay any assessments made with respect to any such Benefit Plan. All contributions and payments (including salary deferral contributions elected by employees) with respect to Benefit Plans that 23 are due and owing or required to be made by Company or any of its ERISA Affiliates with respect to periods ending on or before the Closing Date (including periods from the first day of the current plan year or policy year to the Closing Date) have been, or will be, made before the Closing Date in accordance with the appropriate plan document, actuarial report, collective bargaining agreements or insurance contracts or arrangements or as otherwise required by ERISA or the Code. (m) With respect to each Benefit Plan, to the Company's knowledge there has not occurred, and no person or entity is contractually bound to enter into, any "prohibited transaction" within the meaning of Section 4975(c) of the Code or Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of the Code or Section 408 of ERISA. (n) There has not been any "Reportable Event," as described in Section 4043 of ERISA, with respect to any Benefit Plan (other than such events for which the thirty (30) day notification period has been waived by the Pension Benefit Guaranty Corporation ("PBGC")) subject to Title IV of ERISA. (o) Neither Company or any of its ERISA Affiliates has incurred: (i) any liability to the PBGC or to a trust (for plan terminations instituted prior to December 18, 1987) described in Section 4049 of ERISA (prior to its repeal), (ii) any multiemployer Plan (as defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan")) withdrawal liability (and no event has occurred which, with the giving of the notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA as a result of a complete or partial withdrawal (within the meaning of Sections 4203 or 4205 or ERISA, respectively) from, or on behalf of, a Multiemployer Plan, or (iii) any other liability under Title IV of ERISA other than premiums incurred in the Ordinary Course of Business. (p) Neither Company or any of its ERISA Affiliates, or any organization which is a successor or parent corporation of such entities, within the meaning of ERISA Section 4069(b), has engaged in a transaction described in ERISA Section 4069. (q) Except as otherwise previously disclosed, the value of the assets of each Benefit Plan subject to Title IV of ERISA (other than a Multiemployer Plan) equal or exceed the present value of "Benefit Liabilities" (as defined in Section 4001(a)(16) of ERISA) of each such Benefit Plan as of the last day of the plan year most recently ended using PBGC termination actuarial assumptions currently in effect or other actuarial assumptions certified by the Benefit Plan's actuary as reasonable for purposes of a standard termination (as described in 4041(b) of ERISA) with respect to any defined benefit pension plan. (r) With respect to each Benefit Plan maintained by Company or any of its ERISA Affiliates, such plan permits the plan sponsor to amend or terminate the plan at any time and without any liability, subject to the applicable requirements of ERISA and the Code for plan termination. 24 (s) To the Company's knowledge, no assets of, and no assets managed by, Company or any of its ERISA Affiliates constitute "plan assets" as defined in 29 C.F.R. Section 2510.3-101, and none of the transactions contemplated by this Agreement (including those transactions occurring after the Closing) with constitute a "prohibited transaction" within the meaning of Section 4975(c) of the Code or Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of the Code or Section 408 of ERISA. 4.21 Insurance. Other than insurance maintained in connection with the business, assets or operations of Company's or the Subsidiaries' borrowers or lessees or insurance insuring residual values, Schedule 4.21 hereto contains a complete and correct list of all policies of insurance of any kind or nature covering Company and its Subsidiaries, including, without limitation, policies of life, fire, theft, employee fidelity and other casualty and liability insurance, indicating the type of coverage, name of insured, the insurer, the premium, the expiration date of each policy and the amount of coverage, and such policies are in full force and effect. Complete and correct copies of each such policy have been furnished or made available to Purchasers. Such policies are in amounts customary for the industry in which Company or such Subsidiary operates. 4.22 Related Party Transactions. Except as disclosed in the Company SEC Documents or as set forth in Schedule 4.22, no director or Executive Officer of Company nor any Affiliate of Company (other than a Subsidiary of Company) or of any such director or Executive Officer (i) has borrowed any money from or has outstanding, directly or indirectly, any indebtedness or other similar obligations to Company or any Subsidiary thereof; (ii) to the knowledge of Company, owns any direct or indirect interest equal to or in excess of 5% of the equity in, or controls or is a director, officer or partner of, or consultant or lender to, or borrower from, or has the right to participate in the profits of, any Person which is a competitor, lender, landlord, lessor or creditor of Company; (iii) is a party to any contract with Company; or (iv) has entered into any other transaction with the Company or its Subsidiaries which would require disclosure thereof under Item 404 of Regulation S-K under the Securities Act. 4.23 Opinions of Financial Advisor. Credit Suisse First Boston and Lehman Brothers (the "Company Financial Advisors") have delivered to the Board of Directors their opinions to the effect that the transactions contemplated hereby are fair to Company from a financial point of view, and such opinions have not been withdrawn or modified. 4.24 Takeover Statutes. Company has taken all action required to be taken by it in order to exempt each of this Agreement and the other Transaction Documents and each of the transactions contemplated hereby and thereby including the conversion or exercise of any Securities (the "Covered Transactions") from, and each of this Agreement, the other Transaction Documents and the Covered Transactions is exempt from the requirements of any "moratorium", "control share", "fair price", "affiliate transaction", "business combination" or other antitakeover laws and regulations of any state, including Section 203 of the DGCL, or any antitakeover provision in Company's restated certificate of incorporation (including the approval of each Covered Transaction 25 under Section 2(A) of Article IX thereof) and bylaws. The provisions of Section 203 of the DGCL do not apply to this Agreement, the Other Transaction Documents or the Covered Transactions. 4.25 Amendment to the Company Rights Agreement. The Board of Directors of Company has taken all necessary action (including any amendment thereof) under the Company Rights Agreement, dated as of February 15, 1992, as amended and restated as of September 14, 1995, between Company and Bank One, Arizona, NA (succeeded by Harris Trust & Savings Bank, NA), as Rights Agent, as amended (the "Company Rights Agreement") so that none of the execution or delivery of this Agreement or the other Transaction Documents or consummation of each Covered Transaction will cause (i) the rights (the "Rights") issued pursuant to the Company Rights Agreement to become exercisable under the Company Rights Agreement, (ii) Purchaser to be deemed an "Acquiring Person" (as defined in the Company Rights Agreement), or (iii) the "Distribution Date" (as defined in the Company Rights Agreement) to occur upon any such event. 4.26 Refinancing Representations. Company hereby incorporates for the benefit of Purchaser any representation and warranty made or to be made to the Lenders in connection with the consummation of the Refinancing as if such representation and warranty was specifically incorporated herein. 4.27 Financing Contracts; Portfolio Property. (a) Except as set forth on Schedule 4.27, each Financing Contract and Credit Enhancement (i) is valid, binding and enforceable by Company or its Subsidiaries against the lessee, obligor or borrower thereunder in accordance with its terms, except (x) as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors rights and remedies generally and, with respect to enforceability, by general principles of equity and fair dealing, and (y) to the extent that the failure of any Financing Contract or Credit Enhancement to be valid, binding and enforceable would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect on Company and (ii) arose out of a bona fide business transaction entered into in the Ordinary Course of Business. (b) Except as set forth on Schedule 4.27, to the knowledge of Company, (i) each Financing Contract and Credit Enhancement is held free and clear of Liens (in the case of Credit Enhancements, to the extent of any Liens that are superior to Company's Liens) other than Permitted Liens, and is not subject to any defense, offset, right of rescission or counterclaim by the obligor, borrower or lessee under such Financing Contract in the case of a Financing Contract or by the obligor thereunder in the case of a Credit Enhancement, except where such Lien or defense, offset, right of rescission or counterclaim would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect on Company and (ii) Company is not in breach of or in default under any Financing Contract or Credit Enhancement and no other event has occurred which, with notice and/or lapse of time, would constitute a default by Company or any other party thereunder, except where such breach or 26 default would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect on Company. (c) Company and its Subsidiaries maintain appropriate and customary documentation in their files evidencing their respective Financing Contracts and Credit Enhancements and the Company's or such Subsidiary's title thereto, except where the failure to maintain such documentation would not reasonably be likely to have a Material Adverse Effect on Company. Such documentation has been made available to Purchaser. Company and its Subsidiaries have taken all commercially reasonable action to ensure that Company or such Subsidiary, as the case may be, has good and valid title to its Portfolio Property, Financing Contracts and Credit Enhancements, in each case free and clear of all Liens other than Permitted Liens or, in the case of Credit Enhancements, Liens that are junior to Company's Liens, except where the failure to take such action or to have good and valid title would not reasonably be likely to have a Material Adverse Effect on Company. (d) Except as set forth on Schedule 4.27, Company has, with respect to each item of Portfolio Property and to each Financing Contract and Credit Enhancement, good and valid title to such Property (or, with respect to Portfolio Property, a valid security interest in such Portfolio Property), Financing Contract and Credit Enhancement, free and clear of all Liens other than Permitted Liens, except where the failure to have such title or security interest would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect on Company. 4.28 Full Disclosure. No information contained in this Agreement, any other Transaction Document or any written statement furnished by or on behalf of Company pursuant to the terms of this Agreement (or any Schedules hereto) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which made. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Business of Company. Except as otherwise expressly permitted by the terms of this Agreement or as set forth on Schedule 5.1, from the date hereof to the Closing, Company shall, and shall cause each of its Subsidiaries to, carry on their respective businesses in the Ordinary Course of Business in substantially the same manner as presently conducted and in compliance in all material respects with applicable laws, and use their respective reasonable best efforts consistent with past practices to preserve their relationships with customers, suppliers and others with whom they deal. Company shall not, and shall cause each of its Subsidiaries not to, take any action that would, or that is reasonably likely to, result in any of the representations and warranties of Company set forth in Article IV being untrue in any material respect as of the date made or as of the Closing Date or in any of the conditions to the consummation of the transactions contemplated hereby not being satisfied. In addition, and without limiting the generality of the foregoing, except as otherwise expressly permitted or required by the terms of 27 this Agreement, during the period from the date hereof to the Closing, Company shall not, and shall cause any of its Subsidiaries not to, without the written consent of Purchaser, which decision regarding consents shall be made promptly (in light of its circumstances) after receipt of notice seeking such consent: (i) amend its certificate of incorporation, bylaws or other comparable organizational documents or those of any Subsidiary of Company; (ii) except (A) pursuant to the exercise or conversion of outstanding securities, (B) for issuances of Common Stock upon the exercise of outstanding options under the Benefit Plans, (C) in connection with other awards outstanding on the date of this Agreement under any Benefit Plan, or (D) upon conversion of TOPrS, redeem or otherwise acquire any shares of its capital stock, or issue or sell any securities (including securities convertible into or exchangeable for any shares of its capital stock), or grant any option, warrant or right relating to any shares of its capital stock, or split, combine or reclassify any of its capital stock or issue any securities in exchange or in substitution for shares of its capital stock; (iii) make any material amendment to any existing, or enter into any new, employment, consulting, severance, change in control or similar agreement, or establish any new compensation or benefit or commission plans or arrangements for directors or employees, or amend or agree to amend any existing benefit plan; (iv) other than in connection with foreclosures in the Ordinary Course of Business and mergers or consolidations among wholly-owned Subsidiaries of Company, merge, amalgamate or consolidate with any other entity in any transaction, sell all or any substantial portion of its business or assets, or acquire all or substantially all of the business or assets of any other Person; (v) enter into any plan of reorganization or recapitalization, dissolution or liquidation of Company; (vi) declare, set aside or make any dividends, payments or distributions in cash, securities or property to the stockholders of Company in respect of any capital stock of Company other than dividends and distributions by a direct or indirect wholly owned Subsidiary of Company to its parent and for any quarterly dividends payable with respect to the TOPrS; (vii) except for borrowings under credit facilities or lines of credit existing on the date hereof, incur or assume any indebtedness of the Company or any of its Subsidiaries, except indebtedness of the Company or any of its Subsidiaries incurred in the Ordinary Course of Business; (viii) refinance any existing indebtedness with a principal amount in excess of $15 million; 28 (ix) voluntarily grant any material Lien on any of its material assets, other in the Ordinary Course of Business; (x) take any action that would have a material impact on the consolidated federal income tax return filed by Company as the common parent, make or rescind any express or deemed material election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, enter into any material Tax ruling, agreement, contract, arrangement or plan, file any amended Tax Return, or, except as required by applicable law or GAAP or in accordance with past practices, make any material change in any method of accounting for Taxes or otherwise or any Tax or accounting practice or policy; (xi) enter into any Contract, understanding or commitment that restrains, restricts, limits or impedes the ability of Company or any of its Subsidiaries, or the ability of Purchaser, to compete with or conduct any business or line of business in any geographic area; (xii) enter into, or amend the terms of, any Contract relating to interest rate swaps, caps or other hedging or derivative instruments relating to Indebtedness of Company or any of its Subsidiaries; or (xiii) agree or commit, whether in writing or otherwise, to do any of the foregoing. 5.2 Access to Information. (a) From the date hereof until the Closing, Company shall, and shall cause each of its Subsidiaries to, permit Purchaser and its representatives to have reasonable access during normal business hours to the management, facilities, accounts, books, stock transfer records and other records (including budgets, forecasts and personnel files and records), contracts and other written materials of Company and each of its Subsidiaries and, with the consent of Company which shall not be withheld unreasonably, the names and other reasonably requested information concerning Company's borrowers, as is reasonably requested by Purchaser or such representatives and to make available to Purchaser and its representatives the officers, employees and independent accountants of Company and each of its Subsidiaries for interviews for the purpose, among other things, of verifying the information furnished to Purchaser. Such access shall be conducted by Purchaser and its representatives during normal business hours, upon reasonable advance notice and in such a manner as not to interfere unreasonably with the business or operations of Company and its Subsidiary. (b) Purchaser will hold, and will cause its consultants and advisers to hold, in confidence all documents and information furnished to it by or on behalf of Company in connection with the transactions contemplated by this Agreement pursuant to the terms of the Non-Disclosure Agreement. 29 ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by this Agreement, including (a) the obtaining of all necessary actions, waivers, consents and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings required under the HSR Act), and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority, (b) the obtaining of all necessary consents, approvals or waivers from Third Parties and (c) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement; provided, however, that nothing herein shall limit or diminish each party's right to approve the Refinancing referred to in Section 6.5. In furtherance of the foregoing, Purchaser and Company each shall furnish to the other such necessary information and reasonable assistance as the other may request in connection with obtaining any consents required to be obtained by it hereunder. 6.2 Supplemental Disclosure. Company shall promptly notify Purchaser of, and furnish Purchaser with, any information it may reasonably request with respect to, any event or condition or the existence of any fact that would cause any of the conditions to Purchaser's obligation to consummate the transactions contemplated hereby not to be completed, and Purchaser shall promptly notify Company of, and furnish Company any information it may reasonably request with respect to, any event or condition or the existence of any fact that would cause any of the conditions to Company's obligation to consummate the transactions contemplated hereby not to be completed. 6.3 Announcements. Each of Company and Purchaser shall not, without the prior written consent of the other (which consent shall not be unreasonably withheld) issue any press release or otherwise make any public statement with respect to this Agreement, the other Transaction Documents and the transaction contemplated hereby and thereby, in each case except as may be required by applicable law (including pursuant to U.S. federal securities laws) or rules of the SEC or the NYSE, or as such party may be advised by its counsel is legally necessary or advisable, in which event the party required to make the release or announcement shall allow the other party reasonable time, in light of the circumstances, to comment on such release or announcement in advance of such issuance. 6.4 No Solicitation. (a) To allow time for negotiation of the Refinancing, from and after the date hereof until the earlier of (i) the Closing and (ii) expiration of the provisions of this Section 6.4(a) pursuant to Section 6.4(b) hereof, and except as expressly permitted by the following provisions of this Section 6.4(a), Company shall not, and shall not authorize or permit any of Company's officers, directors, employees, agents, investment 30 bankers, attorneys, financial advisors or other representatives (collectively, "Company Representatives") to, directly or indirectly, solicit, initiate or encourage (including by way of furnishing information or assistance), or take other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, an Acquisition Proposal from any Third Party or engage in any discussions or negotiations relating thereto or in furtherance thereof or furnish to any Person any information with respect to, or accept or enter into any agreement that would result in, or waive any agreement that would prevent or discourage, any Acquisition Proposal; provided, however, that nothing contained in this paragraph shall prohibit the Board of Directors from (1) obtaining such information with respect to any unsolicited Acquisition Proposal, which the Board of Directors determines, after consultation with counsel, is necessary to determine whether such Acquisition Proposal would constitute a Superior Proposal, or (2) furnishing information to, or entering into discussions or negotiations with, any person that makes an unsolicited bona fide, fully financed, written Acquisition Proposal which relates to the acquisition by any Third Party of all of the equity of Company, whether by merger, tender offer or otherwise, if and only to the extent that (A) the Board of Directors, after consultation with independent legal counsel, determines in good faith that such action is necessary for the Board of Directors to comply with its fiduciary duties to Company's stockholders under applicable law, (B) the Board of Directors determines in good faith after consultation with a nationally recognized expert with experience in appraising the terms and conditions of such unsolicited Acquisition Proposal, that such unsolicited Acquisition Proposal after taking into account the strategic benefits to be derived from the transaction with Purchaser and the long-term prospects of Company, would, if consummated, result in a transaction more favorable to the Company's stockholders from a financial point of view than the transactions contemplated hereby (any such more favorable bona fide unsolicited Acquisition Proposal being referred to as a "Superior Proposal"), and (C) prior to taking such action, Company (i) notifies Purchaser of any Acquisition Proposal (including, without limitation, the material terms and conditions thereof and the identity of the person making the Acquisition Proposal) as promptly as practicable (but in no case later than 24 hours) after receipt thereof, (ii) provides Purchaser with a copy of any written Acquisition Proposal, (iii) thereafter informs Purchaser on a prompt basis of the status of any discussion or negotiations with such a Third Party and any material changes to the terms and conditions of such Acquisition Proposal, (iv) promptly gives Purchaser a copy of any information delivered to such Third Party which has not been previously reviewed by Purchaser and (v) receives from such Third Party an executed confidentiality agreement in reasonably customary form and in any event containing terms at least as stringent as those contained in the Non-Disclosure Agreement. (b) The provisions of Section 6.4(a) shall expire (without affecting the provisions of Section 8.4) if either (i) a term sheet for the Refinancing (which shall have been agreed to by Company and Purchaser) (the "Term Sheet") is not presented to the agent banks for the Company's Bank Debt (the "Agent Banks") by December 21, 2000 assuming reasonable cooperation from Company, or (ii) if the Agent Banks do not recommend approval of the Term Sheet (as such Term Sheet may be amended from time to time with the approval of Company and Purchaser) to the Lenders by February 27, 2001. 31 6.5 Refinancing of Existing Company Bank Debt. As soon as practicable after the date hereof, Company and Purchaser shall use their respective commercially reasonable efforts so that Company may complete a refinancing or restructuring of the Bank Debt with the Lenders (the "Refinancing") upon terms acceptable both to Purchaser and Company. Company has notified the Lenders of its agreement with Purchaser and has requested the Lenders to commence negotiation of the Refinancing with Company and Purchaser. Purchaser shall participate in the Refinancing negotiations. Company and Purchaser shall keep the other party fully informed in all respects to such negotiations. The parties shall make their respective personnel available to each other in Scottsdale, Arizona, Los Angeles, California or New York, New York and shall cause their personnel to cooperate with the other in establishing a mutually acceptable plan for the Refinancing and shall promptly notify the other party of any threatened event of default, termination or acceleration of the Bank Debt or any long term indebtedness of Company or its Subsidiaries. Company shall promptly notify Purchaser of the receipt of any written notices from any Lender or any holder of the Bond Indebtedness of Company or its Subsidiaries and shall promptly provide a copy of same to Purchaser. 6.6 Certificate of Designations. Prior to the Closing, Company shall cause to be filed the Certificate of Designations with the Secretary of State of the State of Delaware, as required pursuant to the laws of the State of Delaware. 6.7 Board Representation. (a) Upon consummation of the purchase and sale of the Series B Preferred Stock and the Warrant pursuant to Section 2.1 hereof, Purchaser shall be entitled to designate for appointment to the Board of Directors six (6) out of the ten (10) members of the Board of Directors, which designees (the "Purchaser Designees") shall be distributed evenly among the three classes of members of the Board of Directors. Prior to the Closing, Company shall take all necessary corporate action to increase the size of its Board of Directors to ten (10) members and obtain all necessary resignations in consultation with Purchaser for existing directors to enable all six Purchaser Designees to be appointed to the Board of Directors, and Company shall cause the Board of Directors to fill the vacancies created thereby by electing the Purchaser Designees effective as of the Closing. If a vacancy shall exist on the Board of Directors as a result of the resignation, removal, death or failure to stand for re-election of a Purchaser Designee, Purchaser shall be entitled to designate a successor who shall be appointed to the Board of Directors by the remaining Directors. If a vacancy shall exist on the Board of Directors as a result of the resignation, removal, death or failure to stand for re-election of a Continuing Director (as such term is defined in Article IX of Company's Restated Certificate of Incorporation), the remaining Continuing Directors shall be entitled to designate a successor who shall be appointed to the Board of Directors by the remaining directors pursuant to the recommendation of the remaining Continuing Directors. If, prior to Closing, the number of directors of Company is increased by virtue of any right of security holders (in the event dividends or other payments provided for under the terms of such securities are not made, or otherwise), then such increase shall include a sufficient number of directors of the Company, who shall be designated by Purchaser and appointed to the Board of Directors by the Continuing Directors so that Purchaser's Designees shall constitute a majority of such increased Board 32 of Directors. Purchaser agrees that it shall vote all Company securities beneficially owned by it that are entitled to vote in the election of directors in favor of the Continuing Directors' designees for election or re-election as Continuing Directors until the first election of directors following the payment of the distribution contemplated by Section 6.14 of this Agreement, and that it will require any transferee of any such Company securities (other than transferees that acquire such securities in a registered public offering or in a transaction pursuant to Rule 144 of the Securities Act) to agree to vote such securities in the manner provided herein. For so long as Purchaser is obligated to vote for the Continuing Directors' designees, no Purchaser Designee shall be deemed to be a Continuing Director for purposes of Article IX of Company's Restated Certificate of Incorporation. (b) Prior to the Closing, Purchaser shall timely furnish to Company all information concerning the Purchaser Designees required to be included in the information statement referred to in Section 7.2(d) so that such information may be included in that information statement. 6.8 Management Fee. Upon consummation of the purchase and sale of the Series B Preferred Stock and the Warrant pursuant to Section 2.1 hereof, Purchaser and Company shall enter into a Management Agreement substantially in the form of Exhibit D hereto, pursuant to which Purchaser shall receive an annual management fee of $5,000,000 per year for a period of five years commencing on the Closing Date. The management fee shall be payable quarterly in advance at the beginning of each calendar quarter; provided, however, that the first quarterly installment on account of the annual management fee (in the amount of $1,250,000) shall be paid at the Closing. Each payment on account of the management fee shall be paid by wire transfer of immediate funds to an account designated in writing by Purchaser and delivered to Company no later than two Business Days prior to the scheduled payment date. 6.9 Reservation of Common Stock. Company shall take all action necessary to reserve for issuance a sufficient number of shares of Common Stock to satisfy its conversion obligations under the Certificate of Designation and the Warrant, respectively. Company shall recommend amendments to its Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock necessary to satisfy this provision. 6.10 Legends. Each of the certificates representing (i) shares of Series B Preferred Stock, (ii) shares of Common Stock issued upon conversion of the Series B Preferred Stock, (iii) the Warrant, and (iv) shares of Common Stock issued upon exercise of the Warrant, unless registered pursuant to an effective registration statement under the Securities Act, shall bear a legend substantially in the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES OR "BLUE SKY" 33 LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM." 6.11 Rights Offering. (a) As soon as practicable after the Closing, Company shall conduct a rights offering (the "Rights Offering") whereby then existing holders of Common Stock will be offered the right to purchase up to six hundred thousand shares of Series C Preferred Stock to be issued by Company at a price of $250.00 per share. Pursuant to the Rights Offering, each such holder of Common Stock shall have the right to purchase from Company such number of shares of Series C Preferred Stock (rounded up or down, with .5 being rounded up, to the nearest whole number which could be zero or as otherwise required by the rules of the NYSE) equal to the product of (i) a fraction, the numerator of which is the number of shares of Common Stock then held by such holder and the denominator of which is the total number of shares of Common Stock then outstanding, multiplied by (ii) 600,000. The rights shall be transferable. If fewer than 400,000 shares of Series C Preferred Stock are purchased pursuant to the Rights Offering, Purchaser shall purchase a number of shares of Series C Preferred Stock (the "Standby Shares") equal to the difference between (x) 400,000 and (y) the number of shares of Series C Preferred Stock that are purchased in the Rights Offering at a purchase price of $250.00 per share. In addition, Purchaser shall have the right to purchase, but shall not be required to purchase, any shares of Series C Preferred Stock offered in the Rights Offering (in addition to the Standby Shares) that are not purchased in the Rights Offering. As compensation for agreeing to act as standby purchaser of up to 400,000 shares of Series C Preferred Stock that are not purchased in the Rights Offering, Company shall pay Purchaser $5,000,000 in immediately available funds upon distribution of the rights under the Rights Offering. (b) Company shall, as promptly as practicable following the Closing prepare and file with the SEC a registration statement, including a prospectus (the "Registration Statement"), in connection with the registration under the Securities Act of the Rights Offering, including shares of Series C Preferred Stock (and the underlying share of Common Stock issuable upon conversion thereof) issuable pursuant to the Rights Offering. Company will provide Purchaser with a reasonable opportunity to review and comment on the Registration Statement (including the prospectus contained therein) or any amendment or supplement thereto prior to the filing thereof with the SEC. Company and Purchaser shall consult and cooperate with each other in the preparation and filing of the Registration Statement (including the Prospectus contained therein) and will provide Purchaser with a copy of all such filings with the SEC. Company shall, as promptly as practicable after the receipt thereof, provide to Purchaser copies of any written comments and advise Purchaser of any oral comments, with respect to the Registration Statement received from the staff of the SEC. Company shall use commercially reasonable 34 efforts to cause the Registration Statement to be declared effective as promptly as practicable after filing with the SEC, including, without limitation, using commercially reasonable efforts to cause its accountants to deliver necessary or required instruments, such as opinions, consents and certificates, and will take any other action required or necessary to be taken under federal or state securities laws or otherwise in connection with the registration process (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process in any such jurisdiction). Each of the parties hereto shall furnish all information concerning itself which is required or customary for inclusion in the Registration Statement (including in response to any comments of the staff of the SEC). The information provided by any party hereto for use in the Registration Statement shall be true and correct in all material respects, without misstatement of any material fact or omission of any material fact which is necessary or required to make the statements therein, in light of the circumstances under which they were made, not false or misleading and, in the event any party becomes aware of any information that should be included in the Registration Statement such that the Registration Statement shall not contain any misstatement of any material fact or omission of any material fact which is necessary or required to make the statements therein, in light of the circumstances under which they were made, not false or misleading, such party shall promptly notify the other party and, to the extent required by applicable law, an appropriate amendment to the Registration Statement shall be promptly prepared, filed with the SEC and disseminated to stockholders. 6.12 Retention Program. As promptly as practicable after the date of this Agreement, Company shall adopt a retention program for senior executives and other key employees of Company and its Subsidiaries acceptable to Purchaser as to covered executives and employees and the terms of such program. Company shall consult with Purchaser in the development of the retention program, which shall commence immediately upon execution of this Agreement. 6.13 Alternative Transaction. Company and Purchaser agree that they will cooperate in implementing this Agreement and the transactions contemplated hereby pursuant to a proceeding under chapter 11 of title 11 of the United States Code, 11 U.S.C. Sections 101 et seq. if, in the good faith judgment of each of Company and Purchaser, such a proceeding would be feasible and the most advantageous method of implementing this Agreement and the transactions contemplated hereby. Company and Purchaser agree that this Section is not intended to create any obligations on Company that it would not otherwise have if this Section had not been included in the Agreement, nor shall this Section operate to increase or decrease any claim that Purchaser otherwise would have for a breach or rejection of this Agreement. 6.14 Sharing Distribution. Company hereby agrees that, as soon as practicable after December 31, 2005, but in no event later than May 31, 2006 (or if not then permitted under Delaware law, as soon thereafter as it is legally able to make such distribution), the Board of Directors shall determine the Sharing Amount (as defined herein) and shall make the distribution provided herein. If the Sharing Amount shall be a number other than zero, Company shall make the required distribution to (a) the holders of shares of Common Stock that were outstanding immediately prior to consummation of the transactions 35 contemplated by this Agreement, if the Sharing Amount results in an Upside Distribution, or (b) the holders of the Other Equity determined pursuant to the provisions of this Section, if the Sharing Amount results in a Downside Distribution. Company agrees that any equity securities of Company that may be issued on or after the Closing Date (other than the Convertible Preferred Stock, the Warrant or pursuant to the Rights Offering to the extent provided herein) shall not participate in the Upside Distribution or the Downside Distribution and any such securities shall have such limitation noted conspicuously on the face of such securities. Company and Purchaser agree to modify this provision in a manner that will achieve the same economic results if necessary to comply with Delaware law or the rules of the NYSE. (a) The distribution shall be made by Company, out of funds legally available therefore and shall be in an amount determined in accordance with the applicable formula below: For Upside Distributions, the formula for the distribution (D) shall be: D = T [(.5-C) / E] For Downside Distributions, the formula for the distribution (D) shall be: D = T [(.5 - E)/C] The letters in the foregoing formulas refer to terms defined in this Section 6.14, as follows: D: Amount of the Upside Distribution or Downside Distribution T: Sharing Amount C: Old S/H Ownership E: Other Equity (b) An Upside Distribution or Downside Distribution shall be paid in such form or forms, including capital stock of Company, as the Board of Directors of the Company shall determine. The valuation of any such securities or property shall be determined by the Board of Directors, with the concurrence of a majority of the Continuing Directors. The Continuing Directors collectively may retain, at Company's expense, independent advisors to advise them on any determinations required under Sections 6.14(b) and 6.14(d). If a majority of the Board of Directors and a majority of the Continuing Directors are unable to agree upon such valuation, the matter shall be referred for final determination to an investment banking firm mutually acceptable to the majority of the Board of Directors and a majority of the Continuing Directors. Company shall make available to such investment banking firm all such information, books and records as the investment banking firm may determine to be necessary for the purpose of its determination and shall pay the fees and expenses of such firm. 36 No payments are guaranteed to be made under this Section. No interest shall be payable in respect of any distribution pursuant to this Section. (c) Company will maintain such records as may be required for calculation of the Sharing Amount, including a cumulative record of the actual collection of assets in the Portfolio measured against the gross amount recorded for each asset as of June 30, 2000 or, in the case of commitments, actual collections measured against the actual amount funded pursuant to or in connection with the commitment. The gross amount recorded for each asset shall mean the amount recorded before any specific or general reserves in respect of such asset. In the case of loans, a particular loan will be deemed "collected" for purposes of this calculation when the loan is collected, sold or written-off in full; it is not deemed collected at such time as it is extended or modified. In the case of a leased asset, the asset will be deemed "collected" for purposes of this calculation when the leased asset is finally sold or otherwise disposed of. To the extent the investment in any loan or lease is increased or extended pursuant either to a revolving commitment or due to management's judgment that, to protect collection of the loan or recovery of Company's investment in the lease, such increase or extension is in the Company's best interest, the final collection will be compared to the loan or lease as so increased. (d) In determining the "Actual Gain" or "Actual Loss" for purposes of determining the Sharing Amount hereunder, unrealized gains and unrealized losses, if any, on the balance of the Portfolio outstanding at December 31, 2005 shall be estimated by the Board of Directors, which estimate shall be approved by a majority of the Continuing Directors. If a majority of the Board of Directors and a majority of the Continuing Directors are unable to agree upon any such estimate, the matter shall be referred for final determination of an independent accounting firm, (other than the Company's or Purchaser's independent auditors), which is mutually acceptable to a majority of the Board of Directors and a majority of the Continuing Directors. The Company shall make available to such independent accounting firm all such information, books and records as the independent accounting firm may determine to be necessary for the purpose of its determination and shall pay the fees and expenses of such firm. Any determination made by the Board of Directors, or where so required made by the Board of Directors with the concurrence of a majority of the Continuing Directors, or made by an independent accounting firm or investment banking firm as herein provided, shall be conclusive and binding and shall not be subject to challenge or dispute absent manifest error. Set forth on Schedule 6.14 are examples, solely for purposes of illustration, of various calculations of the Sharing Amount and the Upside Distribution or Downside Distribution relating to such Sharing Amounts. (e) For purposes of this Section, the following definitions shall apply: "Actual Loss" shall mean the actual cumulative loss on the Portfolio. Actual cumulative loss on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and 37 losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "Actual Gain" shall mean the actual cumulative gain on the Portfolio. Actual cumulative gain on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "After-Tax Loss" shall mean the Actual Loss multiplied by 60%. "After-Tax Gain" shall mean the Actual Gain multiplied by 60%. "Baseline" shall mean $780 million. "Downside Distribution" shall mean the distribution made to the holders of the Convertible Preferred Stock and the Purchaser in respect of the Warrant (the "Other Equity") The allocation of any Downside Distribution shall be calculated by multiplying the amount of the Downside Distribution by the Preferred Percentage of Other Equity, the Warrant Percentage of Other Equity and the Rights Percentage of Other Equity, respectively. Amounts in respect of the Preferred Percentage of Other Equity shall be paid to the holders of record of the Series B Preferred Stock and of the Series C Preferred Stock, if any, purchased by Purchaser as a result of its standby commitment set forth in Section 6.11(a), amounts in respect of the Warrant Percentage shall be paid to Purchaser, and amounts in respect of the Rights Percentage shall be paid to holders of record of Series C Preferred Stock purchased in the Rights Offering (which shall exclude shares of Series C Preferred Stock, if any, purchased by Purchaser as a result of its standby commitment set forth in Section 6.11(a), but which shall include any shares of Series C Preferred Stock subsequently purchased by Purchaser). "Fully Diluted Equity" shall mean all outstanding shares of Common Stock of Company and all other shares of Common Stock that may be issued by Company upon the exercise, conversion or exchange of all rights, options, warrants or other securities convertible into or exchangeable for shares of Common Stock (including the Convertible Preferred Stock and the Warrant), whether or not such rights, options, warrants or other securities are then vested, convertible or exercisable. "Other Equity Ownership" shall mean the sum of (i) Preferred Ownership, (ii) Warrant Ownership, and (iii) Rights Ownership. "Old S/H Ownership" shall mean the percentage of Fully Diluted Equity represented by the shares of Common Stock of Company outstanding immediately prior to Purchaser's acquisition of securities pursuant to the Purchase Agreement. "Portfolio" shall mean (a) all loans, advances, capital leases or other investments included in the (i) gross "Investment in Financing Transactions," as reflected on the Company's June 30, 2000 consolidated balance sheet (the "June 30 Balance Sheet"), (ii) "Investments," as reflected on the June 30 Balance Sheet, (iii) "Offlease Aircraft," as reflected in the June 30 Balance Sheet and (b) the aggregate amount of all unfunded commitments of the 38 Company existing as of June 30, 2000 as reflected on Schedule 6.14(e), which shall be prepared by Company upon consultation with Purchaser and shall be finalized and delivered prior to the Closing Date, but only to the extent that such commitments have been funded by the Company after June 30, 2000. "Preferred Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by Purchaser by virtue of Purchaser's ownership of shares of Convertible Preferred Stock (including any Convertible Preferred Stock owned by Purchaser pursuant to Purchaser's obligations in connection with the Rights Offering) based on the number of shares of Common Stock into which each share of Convertible Preferred Stock may be converted, regardless of whether or not such Convertible Preferred Stock is then convertible. "Preferred Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Preferred Ownership and the denominator of which is the Other Equity Ownership. "Rights Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by stockholders (excluding Purchaser in respect of shares of Series C Preferred Stock included in the Preferred Ownership, but including shares of Series C Preferred Stock subsequently purchased by Purchaser) by virtue of their respective ownership of shares of Series C Preferred Stock based on the number of shares of Common Stock into which each share of Series C Preferred Stock may be converted, regardless of whether or not such Series C Preferred Stock is then convertible. "Rights Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Rights Ownership and the denominator of which is the Other Equity Ownership. "Sharing Amount" shall mean the Baseline minus the After-Tax Loss or plus the After-Tax Gain. If such amount is negative, it shall be divided by 60%. "Upside Distribution" shall mean the distribution to be made to certain holders of Common Stock, as contemplated by this Section 6.14, if the Sharing Amount is a positive number. "Warrant Ownership" shall mean the percentage of Fully Diluted Equity of Company represented by the Warrant based on the number of shares of Common Stock into which the Warrant is exercisable as of the date of determination, regardless of whether or not the Warrant is then exercisable. "Warrant Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Warrant Ownership and the denominator of which is the Other Equity Ownership. 6.15 Taxes. Company shall consult with Purchaser in connection with any Tax planning and in the fashioning and implementation of any transaction or course of conduct that would materially impact Company's tax attributes, including Company's tax attributes after completion of the 39 transactions contemplated under this Agreement; Company will not effectuate any such planning, transaction or course of action without prior written consent of Purchaser, which consent may not be unreasonably withheld. 6.16 Merger or Consolidation, Liquidation or Dissolution. In case the Company shall consolidate or merge with or into another corporation (where Company is not the surviving corporation), the successor corporation shall expressly assume the due and punctual observance and performance of Company's obligations under Section 6.14. In case Company shall liquidate or dissolve prior to December 31, 2005, Company and any trustee, receiver and similar person shall make appropriate arrangements to satisfy Company's obligations under Section 6.14. Company agrees that it will not enter into any agreements that would reasonably be expected to restrict Company's ability to make the distribution provided for in Section 6.14. 6.17 Further Assurances. Each of the parties hereto shall execute such documents and other instruments and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and consummate the transactions contemplated by this Agreement and the other Transaction Documents. Upon the terms and subject to the conditions hereof, each of the parties hereto shall take or cause to be taken all actions and to do or cause to be done all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement and to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings. ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligations. The respective obligation of each party to complete the purchase and sale of the Securities hereunder shall be subject to the satisfaction prior to or concurrently with the Closing Date of the following conditions: (a) No Injunctions or Restraints. No statute, rule, regulation, injunction, restraining order or decree of any court or Governmental Authority of competent jurisdiction shall be in effect which restrains or prevents the transactions contemplated hereby. (b) HSR Act. The waiting period applicable to the consummation of the transaction contemplated hereunder under the HSR Act shall have expired or been terminated. (c) Refinancing. The Refinancing shall have been consummated upon terms acceptable to both Company and Purchaser (it being understood that in making this determination, Purchaser may consider the effect such Refinancing will have on Purchaser and on the value of the securities contemplated to be purchased under this Agreement or the other Transaction Documents). 40 (d) Bond Indebtedness. Modification of the Bond Indebtedness on terms acceptable to both Company and Purchaser shall have been consummated (it being understood that in making this determination, Purchaser may consider the effect this modification of the Bond Indebtedness will have on Purchaser and on the value of the security contemplated to be purchased under this agreement or the other Transaction Documents). 7.2 Conditions to Obligations of Purchaser. The obligation of Purchaser to complete the purchase of the Securities hereunder is subject to the satisfaction of the following conditions, any or all of which may be waived in whole or in part by Purchaser: (a) Representations and Warranties. The representations and warranties of Company made hereunder shall be true and correct in all material respects (except for those representations and warranties that are qualified as to materiality, "Material Adverse Effect," which shall be true and correct), on and as of the date hereof (except to the extent such representations and warranties speak as of an earlier date) and after giving effect to consummation of the Refinancing on and as of the Closing Date. (b) Agreements. Company shall have performed and complied in all material respects with all of its respective undertakings, covenants, conditions and agreements required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) Certificate of Designation. The Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware in accordance with the laws of that State. (d) Rule 14f-1 Information Statement. Company shall have filed with the SEC and transmitted to all holders of record of securities of Company who would be entitled to vote at a meeting for election of directors the information required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, and the Closing shall not take place until at least ten days shall have elapsed after such transmittal. (e) Officer's Certificate. Company shall have delivered to Purchaser (i) a copy of the resolutions adopted by the Board of Directors, certified by the Secretary or an Assistant Secretary of Company authorizing this Agreement and evidencing compliance with Sections 4.24 and 4.25 hereof and (ii) a certificate dated the Closing Date, of an appropriate officer of Company (without any personal liability) certifying as to fulfillment of the conditions set forth in Sections 7.2(a) and 7.2(b). (f) Registration Rights Agreement. Company shall have executed and delivered the Registration Rights Agreement. (g) Opinion of Company's Counsel. Purchaser shall have received an opinion letter, dated as of the Closing Date, of Gibson, Dunn & Crutcher LLP, counsel to Company, in form and substance reasonably satisfactory 41 to Purchaser. In rendering such opinion, Gibson, Dunn & Crutcher LLP may rely on the opinion of Company's general counsel. 7.3 Conditions to Obligations of Company. The obligation of Company to complete the sale of the Securities hereunder is subject to the satisfaction of the following conditions, any or all of which may be waived, in whole or in part, by Company: (a) Representations and Warranties. The representations and warranties of Purchaser made hereunder shall be true and correct in all material respects on and as of the date hereof and (except to the extent such representations and warranties speak as of an earlier date) on and as of the Closing Date as if made on such date. (b) Agreements. Purchaser shall have performed and complied in all material respects with all of the undertakings, covenants, conditions and agreements required by this Agreement to be performed or complied with by Purchaser prior to or at the Closing. (c) Officer's Certificate. Company shall have received a certificate signed by an appropriate officer of Purchaser certifying as to fulfillment of the conditions set forth in Sections 7.3(a) and 7.3(b). (d) Opinion of Purchaser's Counsel. Company shall have received an opinion letter, dated as of the Closing Date, of Weil, Gotshal & Manges LLP, counsel to Purchaser, in form and substance reasonably satisfactory to Company. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Voluntary Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by mutual written consent of Company and Purchaser; (b) by Purchaser, if either (i) any of the conditions set forth in Section 7.1 or 7.2 shall have become impossible to satisfy, and shall not have been waived by Purchaser, or (ii) Company shall breach in any material respect any of its representations, warranties, covenants or obligations hereunder and such breach shall not have been cured in all material respects or waived and Company shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; (c) by Company, if either (i) any of the conditions set forth in Section 7.1 or 7.3 shall have become impossible to satisfy, and shall not have been waived by Company, or (ii) Purchaser shall breach in any material respect any of its representations, warranties, covenants or obligations hereunder and such breach shall not have been cured in all material respects or 42 waived and Purchaser shall not have provided reasonable assurance that such breach will be cured in all material respects on or before the Closing Date; (d) by Company if (i) Company is not in material breach of Section 6.4 hereof, (ii) the Board of Directors authorizes Company, subject to complying with the terms of this Agreement, to enter into a binding written agreement concerning a transaction that constitutes a Superior Proposal and Company notifies Purchaser in writing that it intends to enter into such an agreement, attaching the most current form of such agreement to such notice, and (iii) during the three-day period after Company's notice, (A) Company shall have negotiated with, and shall have caused its respective financial and legal advisors to, negotiate with Purchaser to attempt to make such commercially reasonable adjustments in the terms and conditions of this Agreement as would enable Company to proceed with the transactions contemplated herein and (B) the Board of Directors shall have concluded, after considering the results of such negotiations, that any Superior Proposal giving rise to Company's notice continues to be a Superior Proposal. Company may not effect such termination unless contemporaneously therewith Company pays to Purchaser in immediately available funds the fee required to be paid pursuant to Section 8.4. Company agrees (x) that it will not enter into a binding agreement referred to in clause (ii) above until at least the fourth day after it has provided the notice to Purchaser required thereby and (y) to notify Purchaser promptly if its intention to enter into a written agreement referred to in its notification shall change at any time after giving such notification. (e) by Purchaser, if Company accepts an offer or enters into a written agreement for an Acquisition Proposal; (f) by either Company or Purchaser, if the Closing shall not have occurred on or before June 30, 2001; (g) by either Company or Purchaser if, in the good faith judgment of the Board of Directors, the Board determines that it is in the best interests of the Company to commence a voluntary petition for reorganization relief pursuant to chapter 11 of title 11 of the United States Code, 11 U.S.C. Sections 101 et seq. Company shall provide Purchaser notice of such determination as promptly as practicable following the Board's determination; or (h) by Company if, in its good faith judgment after reasonable inquiry of Purchaser, Company determines that Purchaser is not pursuing the Refinancing in good faith. In the event of a termination by Company or Purchaser pursuant to this Section 8.1, written notice thereof shall promptly be given to the other party hereto. Notwithstanding the foregoing, a party shall not be permitted to terminate this Agreement pursuant to clause (b) or (c) hereof if such party is in breach of any of its representations, warranties, covenants or agreements contained in this Agreement and such breach would have a material adverse effect on the ability of such party to consummate the transactions contemplated hereby. Neither party may rely on the failure of any condition 43 precedent set forth in Article VII to be satisfied if such failure was caused by such party's failure to act in good faith or to use its commercially reasonable efforts to consummate the transactions contemplated by this Agreement in accordance with Section 6.1. 8.2 Effect of Termination. In the event of a termination by Company or Purchaser pursuant to Section 8.1, except as otherwise provided herein, the transactions contemplated by this Agreement shall be terminated without further action by any party, and such termination shall be without liability of either party (or any stockholder, director, officer, partner, employee, agent, consultant or representative of such party). Notwithstanding the foregoing, nothing in this Section 8.2 shall be deemed to release any party from any liability for (i) the willful failure of such party to fulfill a condition to the performance of any obligation of the other party hereto, (ii) any breach by such party of the terms and provisions of any covenant or agreement contained in this Agreement, or (iii) the breach by such party of any representation or warranty contained in this Agreement. The provisions of this Article VIII and Article X and Sections 5.2(b) and 6.3 shall survive any termination of this Agreement pursuant to Section 8.1 hereof. In the event of a termination pursuant to Section 8.1(g), Purchaser shall have a liquidated damages claim of $3 million. Upon a termination of this Agreement pursuant to Section 8.1(g), Purchaser shall be released from the restrictions set forth in paragraph 9 of the Non-Disclosure Agreement. 8.3 Fees and Expenses. Except as contemplated by Article IX hereof, each of the parties hereto shall pay the fees and expenses of its counsel, accountants, financial advisors and other experts and shall pay all other costs and expenses incurred by it in connection with the conduct of due diligence reviews, the negotiation, preparation and execution of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. 8.4 Break-Up Fee. In the event that this Agreement is terminated by Company or Purchaser for any reason and on or before November 10, 2001, Company accepts an offer or enters into a written agreement with respect to, or consummates, an Acquisition Proposal, Company shall pay to Purchaser in immediately available funds, at Purchaser's option, either (I) $15 million or (II) in the case of an Acquisition Proposal involving the Common Stock of Company, an amount equal to the product of 3,000,000 multiplied by the excess of (x) the fair market value of the consideration to be paid for each share of Common Stock pursuant to such Acquisition Proposal over (y) $2.50; provided, however, for the purpose of determining the amount referred to in clause (II), the amount referred to in clause (y) shall be adjusted downwards or upwards, as appropriate, to give effect to any stock split or reverse split applicable to the Common Stock or to any stock dividend or other distribution payable in shares of Common Stock which occurs after the date hereof. Company hereby waives any right to set off or counterclaim against Purchaser with respect to such payment. 8.5 Amendment. This Agreement may be amended, modified or supplemented at any time by an agreement in writing signed by the parties hereto by written agreement of Purchaser and Company. 44 8.6 Extension; Waiver. At any time prior to the Closing, Purchaser and Company may, to the extent legally allowed: (i) extend the time for the performance of any of the obligations or other acts of the other party hereto; (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto; and (iii) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in a written instrument. The failure of Purchaser or Company to assert any of its rights hereunder shall not constitute a waiver of such rights nor in any way affect the validity of this Agreement or any part hereof or the right of such party thereafter to enforce each and every provision of this Agreement. No waiver of any breach of or non-compliance with this Agreement shall be held to be a waiver of any other or subsequent breach or non-compliance. ARTICLE IX INDEMNIFICATION 9.1 Survival of Representation and Warranties. All representations and warranties contained in this Agreement and all claims with respect thereto shall terminate upon the expiration of the later of (i) 12 months after the Closing Date or (ii) March 31 of the year following the year in which the Closing Date occurs, except that the representations and warranties contained in Sections 4.1 and 4.2 shall survive indefinitely and the representations and warranties contained in Section 4.15 and in the certificate delivered pursuant to section 7.2(e) as they relate to section 4.15 shall survive until the applicable statute of limitations has run for the matters contained therein. Notwithstanding the preceding sentence, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. 9.2 Indemnification. (a) Company shall indemnify Purchaser against and shall hold Purchaser harmless from any and all damages, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding, including any action, suit or proceeding against Company to enforce its indemnification rights hereunder) ("Damages") incurred or suffered by Purchaser arising out of any material misrepresentation or breach of warranty, covenant or agreement made or to be performed by Company pursuant to this Agreement; provided that (i) Company shall not be liable under this Section 9.2(a) with respect to any misrepresentation or breach of warranty unless the aggregate amount of Damages with respect to all misrepresentations and breaches of warranties exceeds $10 million, in which event Purchaser shall be entitled to make a claim against Company for the full amount of such Damages with respect to any misrepresentation or breach of warranty and (ii) Company's maximum liability under this Section 9.2(a) with respect to any misrepresentation or breach of warranty shall not exceed the aggregate amount invested by Purchaser in Company pursuant to this Agreement and the Rights Offering, up to a maximum amount of $350 million. 45 (b) Purchaser shall indemnify Company against and shall hold Company harmless from any and all Damages (including any action, suit or proceeding against Purchaser to enforce its indemnification rights hereunder) incurred or suffered by Company arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Purchaser pursuant to this Agreement; provided that (i) Purchaser shall not be liable under this Section 9.2(b) with respect to any misrepresentation or breach of warranty unless the aggregate amount of Damages with respect to all misrepresentations and breaches of warranties exceeds $10 million, in which event Company shall be entitled to make a claim against the Purchaser for the full amount of such Damages and (ii) Purchaser's maximum liability under this Section 9.2(b) with respect to any misrepresentation or breach of warranty shall not exceed the aggregate amount invested by Purchaser in Company pursuant to this Agreement and the Rights Offering, up to a maximum of $350 million. 9.3 Procedures. The party seeking indemnification under Section 9.2 (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section; provided, however, that the failure of an Indemnified Party to give prompt notice to the Indemnifying Party shall not affect the rights of the Indemnified Party to indemnification hereunder except (and then only to the extent that) the Indemnifying Party is actually materially prejudiced by reason of such failure to give prompt notice. The Indemnifying Party may at the request of the Indemnified Party participate in and control the defense of any such suit, action or proceeding at its own expense. The Indemnifying Party shall not be liable under Section 9.2 for any settlement effected without its prior written consent (which shall not be unreasonably withheld) of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder. ARTICLE X MISCELLANEOUS 10.1 Notices. All notices, requests, permissions, waivers, and other communications hereunder shall be in writing and shall be deemed to have been duly given, (a) five Business Days following sending by registered or certified mail, postage prepaid, (b) when sent if sent by facsimile during the normal business hours of the recipient, or one Business Day after the date sent if sent by facsimile after the normal business hours of the recipient; provided that the sending party receives written confirmation that the facsimile has been successfully transmitted to the intended recipient, (c) when delivered, if delivered personally to the intended recipient and (d) one Business Day following sending by overnight delivery via a national courier service, and in each case, addressed to a party at the following address for such party: 46 (i) If to Company, to: The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: William Hallinan, Senior Vice-President, General Counsel and Secretary Facsimile No.: (480) 636-4949 with a copy (which shall not constitute notice) to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attention: Andrew E. Bogen, Esq. Facsimile No.: (213) 229-7520 (ii) If to Purchaser, to: Leucadia National Corporation 315 Park Avenue South New York, New York 10010 Attention: Joseph S. Steinberg, President Facsimile No.: (212) 598-4869 with a copy (which shall not constitute notice) to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Stephen E. Jacobs, Esq. Facsimile No: (212) 310-8007 Such names and addresses may be changed by notice given in accordance with this Section. 10.2 Binding Effect; Benefits. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any Person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein, other than the Continuing Directors and then solely with respect to the provisions of Sections 6.7 and 6.14 of this Agreement. The Continuing Directors shall be entitled to pursue such rights, remedies and claims at Company's expense. 47 10.3 Complete Agreement. This Agreement (including the Exhibits and Schedules attached hereto, all of which are a part hereof), together with the Non-Disclosure Agreement and the Transaction Documents, constitute the complete agreement and understanding of the parties with respect to the subject matter hereof and thereof and supersede any previous agreement or understanding between them relating thereto. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action, of compliance with any representations, warranties, covenants or agreements contained herein. 10.4 Assignability. Neither this Agreement nor any of the rights, interest or obligations hereunder or under any other Transaction Document shall be assigned by any of the parties hereto without the prior written consent of the other party; provided, however, that Purchaser shall have the right to assign this Agreement and the other Transaction Documents to any wholly-owned Subsidiary of Purchaser without obtaining such consent. 10.5 Remedies. Purchaser, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement and the other Transaction Documents. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement or any other Transaction Documents and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Agreement or any other Transaction Document or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. 10.6 Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. All references herein to "Articles", "Sections" or "Exhibits" shall be deemed to be references to Articles or Sections hereof or Exhibits hereto unless otherwise indicated. 10.7 Severability. In the event that any one or more of the provisions contained in this Agreement shall be determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision or provisions in every other respect and the remaining provisions of this Agreement shall not be in any way impaired. 10.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 10.9 Governing Law; Waiver of Jury Trial. This Agreement shall be governed by, construed and enforced in accordance with, the laws of the State of New York without regard to the principles thereof relating to conflict 48 of laws. Each of the parties hereby submits to personal jurisdiction and waives any objection as to venue in the federal or state courts located in the County of New York, State of New York. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties in accordance with Section 10.1 hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any rights under this Agreement and any other Transaction Document. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 49 IN WITNESS WHEREOF, Company and Purchaser have executed this Agreement as of the day and year first above written. THE FINOVA GROUP INC. By: /s/ Matthew M. Breyne ---------------------------------------- Name: Matthew M. Breyne Title: President and Chief Executive Officer LEUCADIA NATIONAL CORPORATION By: /s/ Joseph S. Steinberg ---------------------------------------- Name: Joseph S. Steinberg Title: President 50 EX-99 3 0003.txt 99.3 Exhibit 99.3 Exhibit A to Securities Purchase Agreement THE FINOVA GROUP INC. CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF ------------------------ SERIES B CONVERTIBLE PREFERRED STOCK AND SERIES C CONVERTIBLE PREFERRED STOCK ------------------------ Pursuant to Section 151 of the Delaware General Corporation Law ------------------------ THE FINOVA GROUP INC. (the "Company"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies that pursuant to the provisions of Section 151 of the Delaware General Corporation Law, its Board of Directors, [by unanimous written consent], dated ___________, 200_ adopted the following resolution, which resolution remains in full force and effect as of the date hereof: WHEREAS, the Board of Directors of the Company is authorized, within the limitations and restrictions stated in the Restated Certificate of Incorporation, to fix by resolution or resolutions the designation of preferred stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the Delaware General Corporation Law; and WHEREAS, it is the desire of the Board of Directors of the Company, pursuant to its authority as aforesaid, to authorize and fix the terms of (i) a series of preferred stock to be designated the Series B Convertible Preferred Stock of the Company and (ii) a series of preferred stock to be designated the Series C Convertible Preferred Stock of the Company, and the number of shares constituting each such series preferred stock. NY2:\984588\14\L3P_14!.DOC\76830.0246 NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock on the terms and with the provisions herein set forth: 2 I. TERMS, PREFERENCES, RIGHTS AND LIMITATIONS of SERIES B CONVERTIBLE PREFERRED STOCK of THE FINOVA GROUP INC. The relative rights, preferences, powers, qualifications, limitations and restrictions granted to or imposed upon the Series B Convertible Preferred Stock or the holders thereof are as follows: 1. Definitions. For purposes of this Designation, the following definitions shall apply: "Actual Gain" has the meaning set forth in Section 5(e) hereof. "Actual Loss" has the meaning set forth in Section 5(e) hereof. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "After-Tax Gain" has the meaning set forth in Section 5(e) hereof. "After-Tax Loss" has the meaning set forth in Section 5(e) hereof. "Baseline" has the meaning set forth in Section 5(e) hereof. "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Common Special Distribution" means the distribution to be made to the certain holders of Common Stock of record on the record date established for the distribution if the Sharing Amount results in an Upside Distribution, as contemplated by Section 5. "Common Stock" shall mean the Common Stock, par value $0.01 per share, of the Company. "Company" shall mean The FINOVA Group Inc., a Delaware corporation. "Continuing Directors" has the meaning ascribed thereto in the Purchase Agreement. 3 "Conversion Period" has the meaning set forth in Section 8(a) hereof. "Conversion Price" shall mean as of any date of measurement, the amount computed by dividing the Liquidation Preference as of such date by the number of shares of Common Stock into which one share of Series B Convertible Preferred Stock is convertible as of such date determined in accordance with Section 8 hereof. "Conversion Ratio" has the meaning set forth in Section 8 hereof. "Convertible Preferred Stock" shall refer to the Series B Convertible Preferred Stock and to the Series C Convertible Preferred Stock of the Company. "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the average of the daily market prices for the five consecutive Trading Days before such date. The daily market price for each such Trading Day shall be (i) the last sale price on such day on the principal stock exchange or the NASDAQ National Market on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes place on such day on any such exchange or market, the average of the last reported closing bid and asked prices on such day as officially quoted on any such exchange or market, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange or such market, the average of the last reported closing bid and asked prices on such day in the over-the-counter market, as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers ("NASD") selected mutually by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the Required Holders and one of which shall be selected by Company. "Dividend Payment Date" shall have the meaning set forth in Section 4 hereof. "Dividend Rate" shall mean 14% per annum, compounded quarterly calculated on a 360 day per year basis, based on the actual number of days elapsed. "Downside Distribution" has the meaning set forth in Section 5(e) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction, with neither being under any compulsion to buy or sell. 4 "Fully Diluted Equity" has the meaning set forth in Section 5(e) hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Junior Securities" shall have the meaning set forth in Section 3(b). "Leucadia" shall mean Leucadia National Corporation and its successors and Affiliates. "Liquidation Preference" shall mean the sum of (i) $250.00 per share of Series B Convertible Preferred Stock, and (ii) the aggregate of all declared and unpaid dividends and all accrued and unpaid dividends in respect of a share of Series B Convertible Preferred Stock calculated in accordance with Article 4 hereof. "Old S/H Ownership" has the meaning set forth in Section 5(e) hereof. "Other Equity" has the meaning set forth in Section 5(e) hereof. "Other Equity Ownership" has the meaning set forth in Section 5(e) hereof. "Other Equity Special Distribution" means the distribution to be made to the holders of the Convertible Preferred Stock of record on the record dated established for the distribution and to the Purchaser with respect to the Warrant if the Sharing Amount results in a Downside Distribution, as contemplated by Section 5. "Original Issue Date" shall mean the date of the original issuance of shares of Series B Convertible Preferred Stock. "Parity Securities" shall have the meaning set forth in Section 3(b). "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Portfolio" has the meaning set forth in Section 5(e) hereof. "Preferred Ownership" has the meaning set forth in Section 5(e) hereof. "Preferred Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. "Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of December 20, 2000, by and among the Company and Purchaser named therein, as it may be amended from time to time, a copy of which is on file at the principal office of the Company. "Purchaser" shall mean Leucadia National Corporation. 5 "Purchaser Designees" has the meaning ascribed thereto in the Purchase Agreement. "Required Holders" shall mean the holders of at least of a majority of the outstanding shares of Convertible Preferred Stock, determined as if both the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock constituted only one series of preferred stock. "Rights Offering" shall have the meaning ascribed thereto in the Purchase Agreement. "Rights Ownership" has the meaning set forth in Section 5(e) hereof. "Rights Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. "Senior Securities" shall have the meaning set forth in Section 3(b). "Series A Junior Participating Preferred Stock" shall refer to the Series A Junior Participating Preferred Stock, $0.01 par value per share, of the Company. "Series B Convertible Preferred Stock" shall refer to the Series B Convertible Preferred Stock, $0.01 par value per share, of the Company. "Series C Convertible Preferred Stock" shall refer to the Series C Convertible Preferred Stock, $0.01 par value per share, of the Company. "Sharing Amount" has the meaning set forth in Section 5(e) hereof. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power or the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "TOPrS" shall refer to the trust originated preferred securities of the Company. "Trading Day" shall mean a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or NASDAQ market, a day on which such exchange or market is open for the transaction of business. "Upside Distribution" has the meaning set forth in Section 5(e) hereof. "Warrant" shall mean the warrants to purchase shares of Common Stock dated _________, 2001 issued by the Company to Leucadia. "Warrant Ownership" has the meaning set forth in Section 5(e) hereof. "Warrant Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. 6 2. Designation: Number of Shares. The designation of the preferred stock authorized by this resolution shall be "Series B Convertible Preferred Stock" and the number of shares of Series B Convertible Preferred Stock authorized hereby shall be one million shares. 3. Rank. (a) The Series B Convertible Preferred Stock shall rank, with respect to the payment of dividends or other amounts and with respect to distribution of assets upon liquidation, dissolution or winding up of the Company, pari passu with the Series C Convertible Preferred Stock. (b) Any class or series of stock of the Company shall be deemed to rank: (i) prior to the Convertible Preferred Stock, either as to the payment of dividends or other amounts or as to distribution of assets upon liquidation, dissolution or winding up of the Company, or both, if the holders of such class or series shall be entitled by the terms thereof to the receipt of dividends or other amounts and of amounts distributable upon liquidation, dissolution or winding up of the Company, in preference or priority to the holders of the Convertible Preferred Stock ("Senior Securities"); (ii) on a parity with the Convertible Preferred Stock, either as to the payment of dividends or other amounts or as to distribution of assets upon liquidation, dissolution or winding up of the Company, or both, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Convertible Preferred Stock, if the holders of the Convertible Preferred Stock and of such class of stock or series shall be entitled by the terms thereof to the receipt of dividends or other amounts or of amounts distributable upon liquidation, dissolution or winding up of the Company, or both, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences (including, but not limited to preferences as to payment of dividends or other amounts distributable upon liquidation), without preference or priority one over the other and such class of stock or series is not a class of Senior Securities ("Parity Securities"); and (iii) junior to the Convertible Preferred Stock, either as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up of the Company, or both, if such stock or series shall be Common Stock or the Series A Junior Participating Preferred Stock or if the holders of the Convertible Preferred Stock shall be entitled by the terms thereof to receipt of dividends or other amounts, and of amounts distributable upon liquidation, dissolution or winding up of the Company, in preference or priority to the holders of shares of such stock or series (including, but not limited to preferences as to payment of dividends or other amounts distributable upon liquidation) ("Junior Securities"). 7 4. Dividends. (a) So long as any shares of Series B Convertible Preferred Stock shall be outstanding, and subject to the right of holders of Common Stock to receive the Common Special Distribution, or if applicable, the right of the holders of the Convertible Preferred Stock and Purchaser in respect of the Warrant to receive the Other Equity Special Distribution, the holders of shares of Series B Convertible Preferred Stock shall be entitled to receive during each year with respect to each share of Series B Convertible Preferred Stock, when, as and if declared by the Board out of any funds legally available for the payment of dividends in cash, an amount equal to the greater of (x) the Dividend Rate on the Liquidation Preference hereunder, or (y) all dividends paid in respect of a share of Common Stock (excluding the Common Special Distribution) during such year calculated on the basis of the number of shares of Common Stock into which a share of Series B Preferred Stock may be converted, regardless of whether such stock is then convertible. Dividends in an amount equal to the greater of clauses (x) or (y) in the preceding sentence, shall begin to accrue on a cumulative basis from the Original Issue Date, whether or not there shall be net profits or net assets of the Company legally available for the payment of those dividends and shall continue to accrue on a daily basis thereon until the date such share is converted into Common Stock in accordance with the provisions of this Certificate. As set forth in the definition of Liquidation Preference, unpaid dividends, whether or not declared, shall be added to and become a part of the Liquidation Preference. (b) Notwithstanding the foregoing, during the period commencing on the Original Issue Date and ending on the fifth anniversary of the Original Issue Date, the Company may not declare or pay dividends (except as otherwise provided herein) in respect of the Series B Convertible Preferred Stock, any Parity Securities or any Junior Securities, but dividends in respect of the Series B Convertible Preferred Stock shall continue to accrue in accordance with the provisions of Section 4(a). Thereafter, dividends to the extent declared by the Board of Directors shall be payable quarterly in arrears on the first Business Day of each calendar quarter (a "Dividend Payment Date") to holders of record on the tenth Business Day immediately prior to such Dividend Payment Date. (c) So long as any share of the Series B Convertible Preferred Stock is outstanding, no dividends (other than the Common Special Distribution, or the Rights Offering, or if applicable, the Other Equity Special Distribution due to Purchaser in respect of the Warrant) shall be declared or paid or set apart for payment or other distribution, declared or made upon Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company, directly or indirectly (except by conversion into or exchange for Junior Securities), other than (i) a redemption, purchase or other acquisition of shares of Common Stock (or Common Stock equivalents) made for purposes of an employee incentive or benefit plan of the Company or any subsidiary or to satisfy the Company's obligations pursuant to any contract or security requiring the Company to purchase shares of Common Stock (or Common Stock equivalents), (ii) any distribution in respect of the TOPrS or the 5 1/4% Convertible Subordinated Debentures due 2016 required pursuant to the terms of 8 such securities, (iii) dividends or distribution of shares of Common Stock or rights on Common Stock, (iv) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (v) purchases of shares of Common Stock (or Common Stock equivalents) from officers or employees of the Company or its Subsidiaries upon termination of employment or retirement, or (vi) as a result of a reclassification of the Company's capital stock for another class or series of the Company's capital stock, unless and until in each case (i) all accrued and unpaid dividends for all past dividend periods on the Series B Convertible Preferred Stock and any other Parity Securities shall have been paid and (ii) sufficient funds shall have been paid for the current dividend period with respect to the Series B Convertible Preferred Stock and any such Parity Securities. 5. Special Distribution. As soon as practicable after December 31, 2005, but in no event later than May 31, 2006 (or if not then permitted under Delaware law, as soon thereafter as it is legally able to make such distribution), the Board shall determine the Sharing Amount and shall make the distribution provided herein. If the Sharing Amount shall be a number other than zero, Company shall make the required distribution to (a) the holders of shares of Common Stock that were outstanding immediately prior to consummation of the transactions contemplated by the Purchase Agreement, if the Sharing Amount results in an Upside Distribution, or (b) the holders of the Other Equity determined pursuant to the provisions of this Section, if the Sharing Amount results in a Downside Distribution. Any equity securities of Company that may be issued on or after the Closing Date (other than the Convertible Preferred Stock, the Warrant or pursuant to the Rights Offering to the extent provided in the Purchase Agreement) shall not participate in the Upside Distribution or the Downside Distribution. (a) The distribution shall be made by Company, out of funds legally available therefore and shall be in an amount determined in accordance with the applicable formula below: For Upside Distributions, the formula for the distribution (D) shall be: D = T [(.5-C) / E] For Downside Distributions, the formula for the distribution (D) shall be: D = T [(.5 - E)/C] The letters in the foregoing formulas refer to terms defined in this Section 5, as follows: D = Amount of the Upside Distribution or Downside Distribution T = Sharing Amount 9 C = Old S/H Ownership E = Other Equity (b) An Upside Distribution or Downside Distribution shall be paid in such form or forms, including capital stock of Company, as the Board shall determine. The valuation of any such securities or property shall be determined by the Board, with the concurrence of a majority of the directors who are the Continuing Directors. The Continuing Directors collectively may retain, at Company's expense, independent advisors to advise them on any determinations required under clauses (b) and (d) of this Section 5. If a majority of the Board and a majority of the Continuing Directors are unable to agree upon such valuation, the matter shall be referred for final determination to an investment banking firm mutually acceptable to the majority of the Board and a majority of the Continuing Directors. Company shall make available to such investment banking firm all such information, books and records as the investment banking firm may determine to be necessary for the purpose of its determination and shall pay the fees and expenses of such firm. No payments are guaranteed to be made under this Section. No interest shall be payable in respect of any distribution pursuant to this Section. (c) Company will maintain such records as may be required for calculation of the Sharing Amount, including a cumulative record of the actual collection of assets in the Portfolio measured against the gross amount recorded for each asset as of June 30, 2000 or, in the case of commitments, actual collections measured against the actual amount funded pursuant to or in connection with the commitment. The gross amount recorded for each asset shall mean the amount recorded before any specific or general reserves in respect of such asset. In the case of loans, a particular loan will be deemed "collected" for purposes of this calculation when the loan is collected, sold or written-off in full; it is not deemed collected at such time as it is extended or modified. In the case of a leased asset, the asset will be deemed "collected" for purposes of this calculation when the leased asset is finally sold or otherwise disposed of. To the extent the investment in any loan or lease is increased or extended pursuant either to a revolving commitment or due to management's judgment that, to protect collection of the loan or recovery of Company's investment in the lease, such increase or extension is in the Company's best interest, the final collection will be compared to the loan or lease as so increased. (d) In determining the "Actual Gain" or "Actual Loss" for purposes of determining the Sharing Amount hereunder, unrealized gains and unrealized losses, if any, on the balance of the Portfolio outstanding at December 31, 2005 shall be estimated by the Board, which estimate shall be approved by a majority of the Continuing Directors. If a majority of the Board and a majority of the Continuing Directors are unable to agree upon any such estimate, the matter shall be referred for final determination of an independent accounting firm (other than the Company's or Leucadia's independent auditors), which is mutually acceptable to a majority of the Board and a majority of the Continuing Directors. The Company shall make available to such independent accounting firm all such information, books and records as the independent accounting firm may determine to be necessary for the purpose of its 10 determination and shall pay the fees and expenses of such firm. Any determination made by the Board, or where so required made by the Board with the concurrence of a majority of the Continuing Directors, or made by an independent accounting firm or investment banking firm as herein provided, shall be conclusive and binding and shall not be subject to challenge or dispute absent manifest error. Set forth on Schedule 5 are examples, solely for purposes of illustration, of various calculations of the Sharing Amount and the Upside Distribution or Downside Distribution relating to such Sharing Amounts. (e) For purposes of this Section, the following definitions shall apply: "Actual Loss" shall mean the actual cumulative loss on the Portfolio. Actual cumulative loss on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "Actual Gain" shall mean the actual cumulative gain on the Portfolio. Actual cumulative gain on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "After-Tax Loss" shall mean the Actual Loss multiplied by 60%. "After-Tax Gain" shall mean the Actual Gain multiplied by 60%. "Baseline" shall mean $780 million. "Downside Distribution" shall mean the distribution made to the holders of the Convertible Preferred Stock and Leucadia in respect of the Warrant (the "Other Equity"). The allocation of any Downside Distribution shall be calculated by multiplying the amount of the Downside Distribution by the Preferred Percentage of Other Equity, the Warrant Percentage of Other Equity and the Rights Percentage of Other Equity, respectively. Amounts in respect of the Preferred Percentage of Other Equity shall be paid to the holders of record of the Series B Preferred Stock and of the Series C Preferred Stock, if any, purchased by Leucadia as a result of its standby commitment set forth in Section 6.11(a) of the Purchase Agreement, amounts in respect of the Warrant Percentage shall be paid to Leucadia, and amounts in respect of the Rights Percentage shall be paid to holders of record of Series C Preferred Stock purchased in the Rights Offering (which shall exclude shares of Series C Preferred Stock, if any, purchased by Leucadia as a result of its standby commitment set forth in Section 6.11(a) of the Purchase Agreement, but which shall include any shares of Series C Preferred Stock subsequently purchased by Leucadia). "Fully Diluted Equity" shall mean all outstanding shares of Common Stock of Company and all other shares of Common Stock that may be issued by Company upon the exercise, conversion or exchange of all rights, options, 11 warrants or other securities convertible into or exchangeable for shares of Common Stock (including the Convertible Preferred Stock and the Warrant), whether or not such rights, options, warrants or other securities are then vested, convertible or exercisable. "Other Equity Ownership" shall mean the sum of (i) Preferred Ownership, (ii) Warrant Ownership, and (iii) Rights Ownership. "Old S/H Ownership" shall mean the percentage of Fully Diluted Equity represented by the shares of Common Stock of Company outstanding immediately prior to Leucadia's acquisition of securities pursuant to the Purchase Agreement. "Portfolio" shall mean (a) all loans, advances, capital leases or other investments included in the (i) gross "Investment in Financing Transactions," as reflected on the Company's June 30, 2000 consolidated balance sheet (the "June 30 Balance Sheet"), (ii) "Investments," as reflected on the June 30 Balance Sheet, (iii) "Offlease Aircraft," as reflected in the June 30 Balance Sheet and (b) the aggregate amount of all unfunded commitments of the Company existing as of June 30, 2000 as reflected on Schedule 6.14(e) to the Purchase Agreement, but only to the extent that such commitments have been funded by the Company after June 30, 2000. "Preferred Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by Purchaser by virtue of Purchaser's ownership of shares of Convertible Preferred Stock (including any Convertible Preferred Stock owned by Purchaser pursuant to Purchaser's obligations in connection with the Rights Offering) based on the number of shares of Common Stock into which each share of Convertible Preferred Stock may be converted, regardless of whether or not such Convertible Preferred Stock is then convertible. "Preferred Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Preferred Ownership and the denominator of which is the Other Equity Ownership. "Rights Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by stockholders (excluding Purchaser in respect of shares of Series C Preferred Stock included in the Preferred Ownership, but including shares of Series C Preferred Stock subsequently purchased by Purchaser) by virtue of their respective ownership of shares of Series C Preferred Stock based on the number of shares of Common Stock into which each share of Series C Preferred Stock may be converted, regardless of whether or not such Series C Preferred Stock is then convertible. "Rights Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Rights Ownership and the denominator of which is the Other Equity Ownership. "Sharing Amount" shall mean the Baseline minus the After-Tax Loss or plus the After-Tax Gain. If such amount is negative, it shall be divided by 60%. 12 "Upside Distribution" shall mean the distribution to be made to certain holders of Common Stock as contemplated by this Section 5, if the Sharing Amount is a positive number. "Warrant Ownership" shall mean the percentage of Fully Diluted Equity of Company represented by the Warrant based on the number of shares of Common Stock into which the Warrant is exercisable as of the date of determination, regardless of whether or not the Warrant is then exercisable. "Warrant Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Warrant Ownership and the denominator of which is the Other Equity Ownership. 6. Liquidation Rights of Series B Convertible Preferred Stock. (a) In the event of any liquidation, dissolution or winding up of Company, whether voluntary or involuntary, the holders of Series B Convertible Preferred Stock then outstanding shall be entitled to receive with respect to each share of Series B Convertible Stock out of the assets of the Company available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount (other than the Common Special Distribution or the Other Equity Special Distribution, as applicable, which shall be paid first if such liquidation, dissolution or winding up occurs after December 31, 2005) shall be made in respect of any Junior Securities, an amount equal to the greater of (x) an amount in cash equal to the Liquidation Preference, in respect of any liquidation, dissolution or winding up consummated, or (y) the amount per share that each holder of shares of Common Stock would be entitled to receive (assuming the conversion of all Convertible Preferred Stock) multiplied by the number of shares of Common Stock into which such shares of Series B Convertible Preferred Stock then would be convertible (without giving effect to any restrictions on convertibility). (b) If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof (after payment in full of the Common Special Distribution or the Other Equity Special Distribution, as applicable, if such liquidation, dissolution or winding up occurs after December 31, 2005), shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on all shares of Series C Convertible Preferred Stock and all Parity Securities, if any, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of the Convertible Preferred Stock and all such Parity Securities ratably in accordance with the respective amounts that would be payable on the Convertible Preferred Stock and any such Parity Securities if all amounts payable thereon were paid in full. For the purposes of this Section 6, (i) a consolidation or merger of the Company with one or more corporations, or (ii) a sale or transfer of all or substantially all of the Company's assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company. 13 (c) Subject to the rights of the holders of any Series C Preferred Stock and any Parity Securities, after payment shall have been made in full to the holders of the Series B Convertible Preferred Stock, as provided in this Section 6(c), any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Convertible Preferred Stock shall not be entitled to share therein, except to the extent set forth in Section 6(a) hereof. 7. Voting Rights. In addition to any voting rights provided by law, the holders of shares of Series B Convertible Preferred Stock shall have the following voting rights: (a) So long as any of the Series B Convertible Preferred Stock is outstanding, each share of Series B Convertible Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting together as a single class with the holders of the Common Stock and the Series C Convertible Preferred Stock, and together with the holders of other shares, if any, entitled to vote at all meetings of the stockholders of the Company. With respect to any such vote, each share of Series B Convertible Preferred Stock shall entitle the holder thereof to cast the number of votes equal to two times the number of shares of Common Stock of the Company into which such share of Series B Convertible Preferred Stock may be convertible on the record date for such vote (without regard to any restriction or limitation on convertibility). (b) The affirmative vote of the Required Holders, voting together as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, or pursuant to a written consent of stockholders shall be necessary to: (i) authorize, adopt or approve an amendment to the Certificate of Incorporation of the Company which would adversely affect the terms, powers, preferences or rights (including special rights) of the shares of Convertible Preferred Stock or grant waivers thereof, provided that no such modification or amendment may, without the consent of each holder of Convertible Preferred Stock affected thereby, (A) raise the Conversion Price or reduce the Liquidation Preference or dividend, of such Convertible Preferred Stock; or (B) reduce the percentage of outstanding Convertible Preferred Stock necessary to modify or amend the terms thereof or to grant waivers thereof; and (ii) issue any Senior Securities or Parity Securities, or issue any securities convertible into or exchangeable for any such securities (other than the issuance of rights to subscribe for shares of Series C Preferred Stock to be issued by the Company pursuant to the Rights Offering and the issuance of shares of Series C Preferred Stock upon the exercise of such rights). (c) The foregoing rights of holders of shares of Convertible Preferred Stock to take any actions as provided in this Section 7 may be exercised at any annual meeting of stockholders or at a special meeting 14 of stockholders held for such purpose as hereinafter provided or at any adjournment thereof or pursuant to any written consent of stockholders. 8. Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, during the period commencing on June 30, 2006 and ending on the close of business on the tenth anniversary of the Original Issuance Date (the "Conversion Period"), each share of Series B Convertible Preferred Stock shall be convertible at any time and from time to time, at the option of the holder thereof, into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of each share of Series B Convertible Preferred Stock, adjusted as hereinafter provided, shall equal the "Conversion Ratio" which shall be a number (not necessarily a whole number) as of any date equal to the Liquidation Preference, divided by $2.50, subject to adjustment from time to time pursuant to paragraph (e) of this Section 8. No fractional shares shall be issued upon the conversion of any shares of Series B Convertible Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Convertible Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the Current Market Price of such fraction on the date of conversion. (b) (i) A conversion of the Series B Convertible Preferred Stock may be effected by any such holder upon the surrender to the Company at the principal office of the Company of the certificate for such Series B Convertible Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares (which may be fractional shares) in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If a holder of Series B Convertible Preferred Stock delivers to the Company a notice of election to convert, the Series B Convertible Preferred Stock to be converted shall cease to accrue dividends but shall continue to be entitled to receive pro rata dividends for the period from the last dividend payment date to the date of delivery of the notice of election to convert in preference to and in priority over any dividends on any Junior Securities. Except as provided above and in Section 8(f), the Company shall make no payment or adjustment for accrued and unpaid dividends on shares of Series B Convertible Preferred Stock, whether or not in arrears, on conversion of such shares or for dividends in cash, if any, on the shares of Common Stock issued upon such conversion. 15 (ii) In case the written notice specifying the name or name in which such holder wishes the certificate or certificates for shares of Common Stock to be issued shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such transfer taxes, the Company will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series B Convertible Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five (5) Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such transfer taxes have been paid), the Company shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series B Convertible Preferred Stock being converted shall be entitled and (ii) if less than the full number of shares of Series B Convertible Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. (iii) In the event of a conversion, such conversion shall be deemed to have been made at the close of business on the date of giving the written notice referred to in the first sentence of (b)(ii) above and of such surrender of the certificate or certificates representing the shares of Series B Convertible Preferred Stock to be converted and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such transfer taxes have been paid), so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (c) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as herein provided. (d) So long as any shares of Series B Convertible Preferred Stock are outstanding, the Company shall at all times reserve, and keep available for issuance upon the conversion of the Series B Convertible Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series B Convertible Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary, to permit the conversion of all outstanding shares of Series B Convertible Preferred Stock. (e) The Conversion Ratio will be subject to adjustment from time to time as follows: 16 (i) In case the Company shall at any time or from time to time after the Original Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock (other than pursuant to the Common Special Distribution or the Rights Offering), (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Company, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series B Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series B Convertible Preferred Stock been surrendered for conversion (without giving effect to any restrictions on convertibility) immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (e) applies. (ii) In case the Company shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exchangeable for shares of Common Stock) after the Original Issue Date, other than issuances covered by clause (i) above and other than pursuant to the Common Special Distribution, the Rights Offering, the Warrant or the Other Equity Special Distribution, at a price per share (or having an exercise, conversion or exchange price per share) less than the Conversion Price per share of Common Stock, as of the date of issuance of such shares or of such rights, warrants or other convertible or exchangeable securities, then, and in each such case, the Conversion Price shall be reduced (but not increased) to a price determined by dividing (A) an amount equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue multiplied by the then existing Conversion Price, plus (y) the consideration, if any, received by Company upon such issue, by (B) the total number of shares of Common Stock outstanding immediately after such issue or sale (inclusive of any shares of Common Stock issuable upon exercise, conversion or exchange of such securities so issued). The Conversion Ratio shall be adjusted to equal the Liquidation Preference divided by the Conversion Price. For the purpose of determining the consideration received by the Company upon any such issue pursuant to clause (y) above, if the consideration received by the Company is other than cash, its value will be deemed its Fair Market Value, as determined in good faith by the Board. 17 (iii) An adjustment made pursuant to clause (ii) above shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively immediately after the close of business on such date. For purposes of clause (ii), the aggregate consideration received by the Company in connection with the issuance of shares of Common Stock or of rights, warrants or other securities exchangeable or convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price of all such Common Stock and such rights, warrants, or other exchangeable or convertible securities plus the minimum aggregate amount, if any, receivable upon exchange or conversion of any such exchangeable or convertible securities into shares of Common Stock. If an adjustment is made pursuant to clause (ii) above in respect of an issuance of rights, warrants or other securities convertible into or exchangeable for shares of Common Stock, then no further adjustment shall be made pursuant to clause (ii) above in connection with the issuance of shares of Common Stock upon the exercise, conversion or exchange of such rights, warrants or securities so issued in accordance with the terms thereof; provided, however, that if at any time the exercise, conversion or exchange price per share of any rights, warrants or other securities convertible into or exchangeable for shares of Common Stock previously issued by the Company is reduced after the date of the issuance of such rights, warrants or other securities then, and in each such case, a further adjustment shall be made pursuant to clause (ii) above on the next Business Day following the date on which any such reduction is made (which adjustment shall be effective retroactively immediately after the close of business on such date) such that, after giving effect to such adjustment and any previous adjustment made pursuant to clause (ii) above in respect of such rights, warrants or other securities, the adjusted Conversion Ratio and Conversion Price calculated pursuant to such clause (ii) shall reflect the reduced exercise, conversion or exchange price per share for such rights, warrants or other securities. (iv) In case the Company shall at any time or from time to time after the Original Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Company or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than pursuant to the Common Special Distribution or the Rights Offering or the Other Equity Special Distribution, and other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this Section 8(e) or made in compliance with Sections 3(b) or (c) hereof, then, and in each such case, the Conversion Ratio shall be adjusted so that the holder of each share of Series B Convertible Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock at such record date, and the 18 denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value of such dividend or distribution per share of Common Stock. No adjustment shall be made pursuant to this clause (iv) in connection with any transaction to which Section 8(f) applies. (v) For purposes of this Section 8(e), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Company or any of its wholly-owned subsidiaries. (vi) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this Section 8(e) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (vii) Anything in this Section 8(e) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Conversion Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one-tenth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by at least one-tenth of one share of Common Stock, such change in Conversion Ratio shall thereupon be given effect. (viii) Unless otherwise provided herein, for the purposes of this Section 8(e), the number of shares of Common Stock outstanding at any time shall include all shares of Common Stock issuable upon the exercise of all options and warrants then outstanding and the conversion of all convertible securities then outstanding other than the Convertible Preferred Stock. (ix) If any option or warrant expires or is cancelled without having been exercised, then, for the purposes of the adjustments set forth above, such option or warrant shall have been deemed not to have been issued and the Conversion Ratio shall be adjusted accordingly. No holder of Common Stock which was previously issued upon conversion of Series B Convertible Preferred Stock shall have any obligation to redeem or cancel any such shares of Common Stock as a result of the operation of this clause (ix). (f) In case of any capital reorganization or reclassification of the Common Stock of the Company or in case of any merger or consolidation of the Company with or into another corporation, or in case of any sale or transfer to another corporation of the property of the Company as an entirety or substantially as an entirety, or in case of any share tender or share exchange, in any such case pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, each share of 19 Series B Convertible Preferred Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange by a holder of that number of shares of Common Stock into which one share of Series B Convertible Preferred Stock would have been convertible (without giving effect to any restriction on convertibility) immediately prior to such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any such transaction. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. (g) In case at any time or from time to time the Company shall pay any stock dividend or make any other non-cash distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Company or consolidation or merger of the Company with or into another corporation, or any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of said cases, the Company shall give at least 10 days' prior written notice to the registered holders of the Series B Convertible Preferred Stock at the addresses of each as shown on the books of the Company as of the date on which (i) the books of the Company shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of record of Common Stock shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. 9. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 8, then, and in each such case, the Company shall promptly deliver to each holder of the Series B Convertible Preferred Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares 20 issuable upon the conversion granted by Section 8, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Series B Convertible Preferred Stock may be given in advance. 10. Certain Covenants. Required Holders may proceed to protect and enforce the rights of the holders of the Convertible Preferred Stock by any available remedy by proceeding at law or in equity, whether for the specific enforcement of any provision in this Certificate of Designation for the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy. Any protection, enforcement or remedy sought shall apply equally to the Series B Convertible Preferred Stock and to the Series C Convertible Preferred Stock. 11. No Reissuance of Preferred Stock. No Series B Convertible Preferred Stock acquired by the Company by reason of purchase, or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Company shall be authorized to issue. 12. Notices. All notices to the Company permitted hereunder shall be personally delivered or sent by first class mail, postage prepaid, addressed to its principal office located at 4800 North Scottsdale Road, Scottsdale, Arizona 85251-7623, Attention: General Counsel and Secretary, or to such other address at which its principal office is located and as to which notice thereof is similarly given to the holders of the Series B Convertible Preferred Stock at their addresses appearing on the books of the Company. 21 II. TERMS, PREFERENCES, RIGHTS AND LIMITATIONS of SERIES C CONVERTIBLE PREFERRED STOCK of THE FINOVA GROUP INC. The relative rights, preferences, powers, qualifications, limitations and restrictions granted to or imposed upon the Series C Convertible Preferred Stock or the holders thereof are as follows: 1. Definitions. For purposes of this Designation, the following definitions shall apply: "Actual Gain" has the meaning set forth in Section 5(e) hereof. "Actual Loss" has the meaning set forth in Section 5(e) hereof. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "After-Tax Gain" has the meaning set forth in Section 5(e) hereof. "After-Tax Loss" has the meaning set forth in Section 5(e) hereof. "Baseline" has the meaning set forth in Section 5(e) hereof. "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Common Special Distribution" means the distribution to be made to the certain holders of Common Stock of record on the record date established for the distribution if the Sharing Amount results in an Upside Distribution, as contemplated by Section 5. "Common Stock" shall mean the Common Stock, par value $0.01 per share, of the Company. "Company" shall mean The FINOVA Group Inc., a Delaware corporation. "Continuing Directors" has the meaning ascribed thereto in the Purchase Agreement. 22 "Conversion Period" has the meaning set forth in Section 8(a) hereof. "Conversion Price" shall mean as of any date of measurement, the amount computed by dividing the Liquidation Preference as of such date by the number of shares of Common Stock into which one share of Series C Convertible Preferred Stock is convertible as of such date determined in accordance with Section 8 hereof. "Conversion Ratio" has the meaning set forth in Section 8 hereof. "Convertible Preferred Stock" shall refer to the Series B Convertible Preferred Stock and to the Series C Convertible Preferred Stock of the Company. "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the average of the daily market prices for the five consecutive Trading Days before such date. The daily market price for each such Trading Day shall be (i) the last sale price on such day on the principal stock exchange or the NASDAQ National Market on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes place on such day on any such exchange or market, the average of the last reported closing bid and asked prices on such day as officially quoted on any such exchange or market, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange or such market, the average of the last reported closing bid and asked prices on such day in the over-the-counter market, as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers ("NASD") selected mutually by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the Required Holders and one of which shall be selected by Company. "Dividend Payment Date" shall have the meaning set forth in Section 4 hereof. "Dividend Rate" shall mean 14% per annum, compounded quarterly calculated on a 360 day per year basis, based on the actual number of days elapsed. "Downside Distribution" has the meaning set forth in Section 5(e) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction, with neither being under any compulsion to buy or sell. 23 "Fully Diluted Equity" has the meaning set forth in Section 5(e) hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Junior Securities" shall have the meaning set forth in Section 3(b). "Leucadia" shall mean Leucadia National Corporation and its successors and Affiliates. "Liquidation Preference" shall mean the sum of (i) $250.00 per share of Series C Convertible Preferred Stock, and (ii) the aggregate of all declared and unpaid dividends and all accrued and unpaid dividends in respect of a share of Series C Convertible Preferred Stock calculated in accordance with Article 4 hereof. "Old S/H Ownership" has the meaning set forth in Section 5(e) hereof. "Other Equity" has the meaning set forth in Section 5(e) hereof. "Other Equity Ownership" has the meaning set forth in Section 5(e) hereof. "Other Equity Special Distribution" means the distribution to be made to the holders of the Convertible Preferred Stock of record on the record dated established for the distribution and to the Purchaser with respect to the Warrant if the Sharing Amount results in a Downside Distribution, as contemplated by Section 5. "Original Issue Date" shall mean the date of the original issuance of shares of Series C Convertible Preferred Stock. "Parity Securities" shall have the meaning set forth in Section 3(b). "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Portfolio" has the meaning set forth in Section 5(e) hereof. "Preferred Ownership" has the meaning set forth in Section 5(e) hereof. "Preferred Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. "Purchase Agreement" shall mean the Securities Purchase Agreement, dated as of December 20, 2000, by and among the Company and Purchaser named therein, as it may be amended from time to time, a copy of which is on file at the principal office of the Company. "Purchaser" shall mean Leucadia National Corporation. 24 "Purchaser Designees" has the meaning ascribed thereto in the Purchase Agreement. "Required Holders" shall mean the holders of at least of a majority of the outstanding shares of Convertible Preferred Stock, determined as if both the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock constituted only one series of preferred stock. "Rights Offering" shall have the meaning ascribed thereto in the Purchase Agreement. "Rights Ownership" has the meaning set forth in Section 5(e) hereof. "Rights Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. "Senior Securities" shall have the meaning set forth in Section 3(b). "Series A Junior Participating Preferred Stock" shall refer to the Series A Junior Participating Preferred Stock, $0.01 par value per share, of the Company. "Series B Convertible Preferred Stock" shall refer to the Series B Convertible Preferred Stock, $0.01 par value per share, of the Company. "Series C Convertible Preferred Stock" shall refer to the Series C Convertible Preferred Stock, $0.01 par value per share, of the Company. "Sharing Amount" has the meaning set forth in Section 5(e) hereof. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power or the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "TOPrS" shall refer to the trust originated preferred securities of the Company. "Trading Day" shall mean a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or NASDAQ market, a day on which such exchange or market is open for the transaction of business. "Upside Distribution" has the meaning set forth in Section 5(e) hereof. "Warrant" shall mean the warrants to purchase shares of Common Stock dated _________, 2001 issued by the Company to Leucadia. "Warrant Ownership" has the meaning set forth in Section 5(e) hereof. "Warrant Percentage of Other Equity" has the meaning set forth in Section 5(e) hereof. 25 2. Designation: Number of Shares. The designation of the preferred stock authorized by this resolution shall be "Series C Convertible Preferred Stock" and the number of shares of Series C Convertible Preferred Stock authorized hereby shall be 600,000 shares. 3. Rank. (a) The Series C Convertible Preferred Stock shall rank, with respect to the payment of dividends or other amounts and with respect to distribution of assets upon liquidation, dissolution or winding up of the Company, pari passu with the Series B Convertible Preferred Stock. (b) Any class or series of stock of the Company shall be deemed to rank: (i) prior to the Convertible Preferred Stock, either as to the payment of dividends or other amounts or as to distribution of assets upon liquidation, dissolution or winding up of the Company, or both, if the holders of such class or series shall be entitled by the terms thereof to the receipt of dividends or other amounts and of amounts distributable upon liquidation, dissolution or winding up of the Company, in preference or priority to the holders of the Convertible Preferred Stock ("Senior Securities"); (ii) on a parity with the Convertible Preferred Stock, either as to the payment of dividends or other amounts or as to distribution of assets upon liquidation, dissolution or winding up of the Company, or both, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Convertible Preferred Stock, if the holders of the Convertible Preferred Stock and of such class of stock or series shall be entitled by the terms thereof to the receipt of dividends or other amounts or of amounts distributable upon liquidation, dissolution or winding up of the Company, or both, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences (including, but not limited to preferences as to payment of dividends or other amounts distributable upon liquidation), without preference or priority one over the other and such class of stock or series is not a class of Senior Securities ("Parity Securities"); and (iii) junior to the Convertible Preferred Stock, either as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up of the Company, or both, if such stock or series shall be Common Stock or the Series A Junior Participating Preferred Stock or if the holders of the Convertible Preferred Stock shall be entitled by the terms thereof to receipt of dividends or other amounts, and of amounts distributable upon liquidation, dissolution or winding up of the Company, in preference or priority to the holders of shares of such stock or series (including, but not limited to preferences as to payment of dividends or other amounts distributable upon liquidation) ("Junior Securities"). 26 4. Dividends. (a) So long as any shares of Series C Convertible Preferred Stock shall be outstanding, and subject to the right of holders of Common Stock to receive the Common Special Distribution, or if applicable, the right of the holders of the Convertible Preferred Stock and Purchaser in respect of the Warrant to receive the Other Equity Special Distribution, the holders of shares of Series C Convertible Preferred Stock shall be entitled to receive during each year with respect to each share of Series C Convertible Preferred Stock, when, as and if declared by the Board out of any funds legally available for the payment of dividends in cash, an amount equal to the greater of (x) the Dividend Rate on the Liquidation Preference hereunder, or (y) all dividends paid in respect of a share of Common Stock (excluding the Common Special Distribution) during such year calculated on the basis of the number of shares of Common Stock into which a share of Series C Preferred Stock may be converted, regardless of whether such stock is then convertible. Dividends in an amount equal to the greater of clauses (x) or (y) in the preceding sentence, shall begin to accrue on a cumulative basis from the Original Issue Date, whether or not there shall be net profits or net assets of the Company legally available for the payment of those dividends and shall continue to accrue on a daily basis thereon until the date such share is converted into Common Stock in accordance with the provisions of this Certificate. As set forth in the definition of Liquidation Preference, unpaid dividends, whether or not declared, shall be added to and become a part of the Liquidation Preference. (b) Notwithstanding the foregoing, during the period commencing on the Original Issue Date and ending on the fifth anniversary of the Original Issue Date, the Company may not declare or pay dividends (except as otherwise provided herein) in respect of the Series C Convertible Preferred Stock, any Parity Securities or any Junior Securities, but dividends in respect of the Series C Convertible Preferred Stock shall continue to accrue in accordance with the provisions of Section 4(a). Thereafter, dividends to the extent declared by the Board of Directors shall be payable quarterly in arrears on the first Business Day of each calendar quarter (a "Dividend Payment Date") to holders of record on the tenth Business Day immediately prior to such Dividend Payment Date. (c) So long as any share of the Series C Convertible Preferred Stock is outstanding, no dividends (other than the Common Special Distribution, or the Rights Offering, or if applicable, the Other Equity Special Distribution due to Purchaser in respect of the Warrant) shall be declared or paid or set apart for payment or other distribution, declared or made upon Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company, directly or indirectly (except by conversion into or exchange for Junior Securities), other than (i) a redemption, purchase or other acquisition of shares of Common Stock (or Common Stock equivalents) made for purposes of an employee incentive or benefit plan of the Company or any subsidiary or to satisfy the Company's obligations pursuant to any contract or security requiring the Company to purchase shares of Common Stock (or Common Stock equivalents), (ii) any distribution in respect of the TOPrS or the 5 1/4% Convertible Subordinated Debentures due 2016 required pursuant to the terms of 27 such securities, (iii) dividends or distribution of shares of Common Stock or rights on Common Stock, (iv) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (v) purchases of shares of Common Stock (or Common Stock equivalents) from officers or employees of the Company or its Subsidiaries upon termination of employment or retirement, or (vi) as a result of a reclassification of the Company's capital stock for another class or series of the Company's capital stock, unless and until in each case (i) all accrued and unpaid dividends for all past dividend periods on the Series C Convertible Preferred Stock and any other Parity Securities shall have been paid and (ii) sufficient funds shall have been paid for the current dividend period with respect to the Series C Convertible Preferred Stock and any such Parity Securities. 5. Special Distribution. As soon as practicable after December 31, 2005, but in no event later than May 31, 2006 (or if not then permitted under Delaware law, as soon thereafter as it is legally able to make such distribution), the Board shall determine the Sharing Amount and shall make the distribution provided herein. If the Sharing Amount shall be a number other than zero, Company shall make the required distribution to (a) the holders of shares of Common Stock that were outstanding immediately prior to consummation of the transactions contemplated by the Purchase Agreement, if the Sharing Amount results in an Upside Distribution, or (b) the holders of the Other Equity determined pursuant to the provisions of this Section, if the Sharing Amount results in a Downside Distribution. Any equity securities of Company that may be issued on or after the Closing Date (other than the Convertible Preferred Stock, the Warrant or pursuant to the Rights Offering to the extent provided in the Purchase Agreement) shall not participate in the Upside Distribution or the Downside Distribution. (a) The distribution shall be made by Company, out of funds legally available therefore and shall be in an amount determined in accordance with the applicable formula below: For Upside Distributions, the formula for the distribution (D) shall be: D = T [(.5-C) / E] For Downside Distributions, the formula for the distribution (D) shall be: D = T [(.5 - E)/C] The letters in the foregoing formulas refer to terms defined in this Section 5, as follows: D = Amount of the Upside Distribution or Downside Distribution T = Sharing Amount 28 C = Old S/H Ownership E = Other Equity (b) An Upside Distribution or Downside Distribution shall be paid in such form or forms, including capital stock of Company, as the Board shall determine. The valuation of any such securities or property shall be determined by the Board, with the concurrence of a majority of the directors who are Continuing Directors. The Continuing Directors collectively may retain, at Company's expense, independent advisors to advise them on any determinations required under clauses (b) and (d) of this Section 5. If a majority of the Board and a majority of the Continuing Directors are unable to agree upon such valuation, the matter shall be referred for final determination to an investment banking firm mutually acceptable to the majority of the Board and a majority of the Continuing Directors. Company shall make available to such investment banking firm all such information, books and records as the investment banking firm may determine to be necessary for the purpose of its determination and shall pay the fees and expenses of such firm. No payments are guaranteed to be made under this Section. No interest shall be payable in respect of any distribution pursuant to this Section. (c) Company will maintain such records as may be required for calculation of the Sharing Amount, including a cumulative record of the actual collection of assets in the Portfolio measured against the gross amount recorded for each asset as of June 30, 2000 or, in the case of commitments, actual collections measured against the actual amount funded pursuant to or in connection with the commitment. The gross amount recorded for each asset shall mean the amount recorded before any specific or general reserves in respect of such asset. In the case of loans, a particular loan will be deemed "collected" for purposes of this calculation when the loan is collected, sold or written-off in full; it is not deemed collected at such time as it is extended or modified. In the case of a leased asset, the asset will be deemed "collected" for purposes of this calculation when the leased asset is finally sold or otherwise disposed of. To the extent the investment in any loan or lease is increased or extended pursuant either to a revolving commitment or due to management's judgment that, to protect collection of the loan or recovery of Company's investment in the lease, such increase or extension is in the Company's best interest, the final collection will be compared to the loan or lease as so increased. (d) In determining the "Actual Gain" or "Actual Loss" for purposes of determining the Sharing Amount hereunder, unrealized gains and unrealized losses, if any, on the balance of the Portfolio outstanding at December 31, 2005 shall be estimated by the Board, which estimate shall be approved by a majority of the Continuing Directors. If a majority of the Board and a majority of the Continuing Directors are unable to agree upon any such estimate, the matter shall be referred for final determination of an independent accounting firm, (other than the Company's or Leucadia's independent auditors), which is mutually acceptable to a majority of the Board and a majority of the Continuing Directors. The Company shall make available to such independent accounting firm all such information, books and records as the independent accounting firm may determine to be necessary for the purpose of its 29 determination and shall pay the fees and expenses of such firm. Any determination made by the Board, or where so required made by the Board with the concurrence of a majority of the Continuing Directors, or made by an independent accounting firm or investment banking firm as herein provided, shall be conclusive and binding and shall not be subject to challenge or dispute absent manifest error. Set forth on Schedule 5 are examples, solely for purposes of illustration, of various calculations of the Sharing Amount and the Upside Distribution or Downside Distribution relating to such Sharing Amounts. (e) For purposes of this Section, the following definitions shall apply: "Actual Loss" shall mean the actual cumulative loss on the Portfolio. Actual cumulative loss on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "Actual Gain" shall mean the actual cumulative gain on the Portfolio. Actual cumulative gain on the Portfolio shall include all realized and unrealized gains and losses as set forth in (c) and (d) above. Gains and losses on the Portfolio shall be determined without reference to any specific or general reserves in respect of the relevant assets. "After-Tax Loss" shall mean the Actual Loss multiplied by 60%. "After-Tax Gain" shall mean the Actual Gain multiplied by 60%. "Baseline" shall mean $780 million. "Downside Distribution" shall mean the distribution made to the holders of the Convertible Preferred Stock and Leucadia in respect of the Warrant (the "Other Equity"). The allocation of any Downside Distribution shall be calculated by multiplying the amount of the Downside Distribution by the Preferred Percentage of Other Equity, the Warrant Percentage of Other Equity and the Rights Percentage of Other Equity, respectively. Amounts in respect of the Preferred Percentage of Other Equity shall be paid to the holders of record of the Series B Preferred Stock and of the Series C Preferred Stock, if any, purchased by Leucadia as a result of its standby commitment set forth in Section 6.11(a) of the Purchase Agreement, amounts in respect of the Warrant Percentage shall be paid to Leucadia, and amounts in respect of the Rights Percentage shall be paid to holders of record of Series C Preferred Stock purchased in the Rights Offering (which shall exclude shares of Series C Preferred Stock, if any, purchased by Leucadia as a result of its standby commitment set forth in Section 6.11(a) of the Purchase Agreement, but which shall include any shares of Series C Preferred Stock subsequently purchased by Leucadia). "Fully Diluted Equity" shall mean all outstanding shares of Common Stock of Company and all other shares of Common Stock that may be issued by Company upon the exercise, conversion or exchange of all rights, options, 30 warrants or other securities convertible into or exchangeable for shares of Common Stock (including the Convertible Preferred Stock and the Warrant), whether or not such rights, options, warrants or other securities are then vested, convertible or exercisable. "Other Equity Ownership" shall mean the sum of (i) Preferred Ownership, (ii) Warrant Ownership, and (iii) Rights Ownership. "Old S/H Ownership" shall mean the percentage of Fully Diluted Equity represented by the shares of Common Stock of Company outstanding immediately prior to Leucadia's acquisition of securities pursuant to the Purchase Agreement. "Portfolio" shall mean (a) all loans, advances, capital leases or other investments included in the (i) gross "Investment in Financing Transactions," as reflected on the Company's June 30, 2000 consolidated balance sheet (the "June 30 Balance Sheet"), (ii) "Investments," as reflected on the June 30 Balance Sheet, (iii) "Offlease Aircraft," as reflected in the June 30 Balance Sheet and (b) the aggregate amount of all unfunded commitments of the Company existing as of June 30, 2000 as reflected on Schedule 6.14(e) to the Purchase Agreement, but only to the extent that such commitments have been funded by the Company after June 30, 2000. "Preferred Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by Purchaser by virtue of Purchaser's ownership of shares of Convertible Preferred Stock (including any Convertible Preferred Stock owned by Purchaser pursuant to Purchaser's obligations in connection with the Rights Offering) based on the number of shares of Common Stock into which each share of Convertible Preferred Stock may be converted, regardless of whether or not such Convertible Preferred Stock is then convertible. "Preferred Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Preferred Ownership and the denominator of which is the Other Equity Ownership. "Rights Ownership" shall mean the percentage of Fully Diluted Equity of Company owned by stockholders (excluding Purchaser in respect of shares of Series C Preferred Stock included in the Preferred Ownership, but including shares of Series C Preferred Stock subsequently purchased by Purchaser) by virtue of their respective ownership of shares of Series C Preferred Stock based on the number of shares of Common Stock into which each share of Series C Preferred Stock may be converted, regardless of whether or not such Series C Preferred Stock is then convertible. "Rights Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Rights Ownership and the denominator of which is the Other Equity Ownership. "Sharing Amount" shall mean the Baseline minus the After-Tax Loss or plus the After-Tax Gain. If such amount is negative, it shall be divided by 60%. 31 "Upside Distribution" shall mean the distribution to be made to certain holders of Common Stock as contemplated by this Section 5 if the Sharing Amount is a positive number. "Warrant Ownership" shall mean the percentage of Fully Diluted Equity of Company represented by the Warrant based on the number of shares of Common Stock into which the Warrant is exercisable as of the date of determination, regardless of whether or not the Warrant is then exercisable. "Warrant Percentage of Other Equity" shall mean the fraction, expressed as a percentage, the numerator of which is the Warrant Ownership and the denominator of which is the Other Equity Ownership. 6. Liquidation Rights of Series C Convertible Preferred Stock. (a) In the event of any liquidation, dissolution or winding up of Company, whether voluntary or involuntary, the holders of Series C Convertible Preferred Stock then outstanding shall be entitled to receive with respect to each share of Series C Convertible Stock out of the assets of the Company available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount (other than the Common Special Distribution or the Other Equity Special Distribution, as applicable, which shall be paid first if such liquidation, dissolution or winding up occurs after December 31, 2005) shall be made in respect of any Junior Securities, an amount equal to the greater of (x) an amount in cash equal to the Liquidation Preference, in respect of any liquidation, dissolution or winding up consummated, or (y) the amount per share that each holder of shares of Common Stock would be entitled to receive (assuming the conversion of all Convertible Preferred Stock) multiplied by the number of shares of Common Stock into which such shares of Series C Convertible Preferred Stock then would be convertible (without giving effect to any restrictions on convertibility). (b) If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof (after payment in full of the Common Special Distribution or the Other Equity Special Distribution, as applicable, if such liquidation, dissolution or winding up occurs after December 31, 2005), shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on all shares of Series B Convertible Preferred Stock and all Parity Securities, if any, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of the Convertible Preferred Stock and all such Parity Securities ratably in accordance with the respective amounts that would be payable on the Convertible Preferred Stock and any such Parity Securities if all amounts payable thereon were paid in full. For the purposes of this Section 6, (i) a consolidation or merger of the Company with one or more corporations, or (ii) a sale or transfer of all or substantially all of the Company's assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company. 32 (c) Subject to the rights of the holders of any Series B Preferred Stock and any Parity Securities, after payment shall have been made in full to the holders of the Series C Convertible Preferred Stock, as provided in this Section 6(c), any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series C Convertible Preferred Stock shall not be entitled to share therein, except to the extent set forth in Section 6(a) hereof. 7. Voting Rights. In addition to any voting rights provided by law, the holders of shares of Series C Convertible Preferred Stock shall have the following voting rights: (a) So long as any of the Series C Convertible Preferred Stock is outstanding, each share of Series C Convertible Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting together as a single class with the holders of the Common Stock and the Series B Convertible Preferred Stock, and together with the holders of other shares, if any, entitled to vote at all meetings of the stockholders of the Company. With respect to any such vote, each share of Series C Convertible Preferred Stock shall entitle the holder thereof to cast the number of votes equal to two times the number of shares of Common Stock of the Company into which such share of Series C Convertible Preferred Stock may be convertible on the record date for such vote (without regard to any restriction or limitation on convertibility). (b) The affirmative vote of the Required Holders, voting together as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, or pursuant to a written consent of stockholders shall be necessary to: (i) authorize, adopt or approve an amendment to the Certificate of Incorporation of the Company which would adversely affect the terms, powers, preferences or rights (including special rights) of the shares of Convertible Preferred Stock or grant waivers thereof, provided that no such modification or amendment may, without the consent of each holder of Convertible Preferred Stock affected thereby, (A) raise the Conversion Price or reduce the Liquidation Preference or dividend, of such Convertible Preferred Stock; or (B) reduce the percentage of outstanding Convertible Preferred Stock necessary to modify or amend the terms thereof or to grant waivers thereof; and (ii) issue any Senior Securities or Parity Securities, or issue any securities convertible into or exchangeable for any such securities (other than the issuance of rights to subscribe for shares of Series C Preferred Stock to be issued by the Company pursuant to the Rights Offering and the issuance of shares of Series C Preferred Stock upon the exercise of such rights). (c) The foregoing rights of holders of shares of Convertible Preferred Stock to take any actions as provided in this Section 7 may be exercised at any annual meeting of stockholders or at a special meeting 33 of stockholders held for such purpose as hereinafter provided or at any adjournment thereof or pursuant to any written consent of stockholders. 8. Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, during the period commencing on June 30, 2006 and ending on the close of business on the tenth anniversary of the Original Issuance Date (the "Conversion Period"), each share of Series C Convertible Preferred Stock shall be convertible at any time and from time to time, at the option of the holder thereof, into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of each share of Series C Convertible Preferred Stock, adjusted as hereinafter provided, shall equal the "Conversion Ratio" which shall be a number (not necessarily a whole number) as of any date equal to the Liquidation Preference, divided by $2.50, subject to adjustment from time to time pursuant to paragraph (e) of this Section 8. No fractional shares shall be issued upon the conversion of any shares of Series C Convertible Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series C Convertible Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the Current Market Price of such fraction on the date of conversion. (b) (i) A conversion of the Series C Convertible Preferred Stock may be effected by any such holder upon the surrender to the Company at the principal office of the Company of the certificate for such Series C Convertible Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares (which may be fractional shares) in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If a holder of Series C Convertible Preferred Stock delivers to the Company a notice of election to convert, the Series C Convertible Preferred Stock to be converted shall cease to accrue dividends but shall continue to be entitled to receive pro rata dividends for the period from the last dividend payment date to the date of delivery of the notice of election to convert in preference to and in priority over any dividends on any Junior Securities. Except as provided above and in Section 8(f), the Company shall make no payment or adjustment for accrued and unpaid dividends on shares of Series C Convertible Preferred Stock, whether or not in arrears, on conversion of such shares or for dividends in cash, if any, on the shares of Common Stock issued upon such conversion. 34 (ii) In case the written notice specifying the name or name in which such holder wishes the certificate or certificates for shares of Common Stock to be issued shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such transfer taxes, the Company will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series C Convertible Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five (5) Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such transfer taxes have been paid), the Company shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series C Convertible Preferred Stock being converted shall be entitled and (ii) if less than the full number of shares of Series C Convertible Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. (iii) In the event of a conversion, such conversion shall be deemed to have been made at the close of business on the date of giving the written notice referred to in the first sentence of (b)(ii) above and of such surrender of the certificate or certificates representing the shares of Series C Convertible Preferred Stock to be converted and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such transfer taxes have been paid), so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (c) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as herein provided. (d) So long as any shares of Series C Convertible Preferred Stock are outstanding, the Company shall at all times reserve, and keep available for issuance upon the conversion of the Series C Convertible Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series C Convertible Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary, to permit the conversion of all outstanding shares of Series C Convertible Preferred Stock. (e) The Conversion Ratio will be subject to adjustment from time to time as follows: 35 (i) In case the Company shall at any time or from time to time after the Original Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock (other than pursuant to the Common Special Distribution or the Rights Offering), (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Company, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Series C Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Series C Convertible Preferred Stock been surrendered for conversion (without giving effect to any restrictions on convertibility) immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (e) applies. (ii) In case the Company shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exchangeable for shares of Common Stock) after the Original Issue Date, other than issuances covered by clause (i) above and other than pursuant to the Common Special Distribution, the Rights Offering, the Warrant or the Other Equity Special Distribution, at a price per share (or having an exercise, conversion or exchange price per share) less than the Conversion Price per share of Common Stock, as of the date of issuance of such shares or of such rights, warrants or other convertible or exchangeable securities, then, and in each such case, the Conversion Price shall be reduced (but not increased) to a price determined by dividing (A) an amount equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue multiplied by the then existing Conversion Price, plus (y) the consideration, if any, received by Company upon such issue, by (B) the total number of shares of Common Stock outstanding immediately after such issue or sale (inclusive of any shares of Common Stock issuable upon exercise, conversion or exchange of such securities so issued). The Conversion Ratio shall be adjusted to equal the Liquidation Preference divided by the Conversion Price. For the purpose of determining the consideration received by the Company upon any such issue pursuant to clause (y) above, if the consideration received by the Company is other than cash, its value will be deemed its Fair Market Value, as determined in good faith by the Board. 36 (iii) An adjustment made pursuant to clause (ii) above shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively immediately after the close of business on such date. For purposes of clause (ii), the aggregate consideration received by the Company in connection with the issuance of shares of Common Stock or of rights, warrants or other securities exchangeable or convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price of all such Common Stock and such rights, warrants, or other exchangeable or convertible securities plus the minimum aggregate amount, if any, receivable upon exchange or conversion of any such exchangeable or convertible securities into shares of Common Stock. If an adjustment is made pursuant to clause (ii) above in respect of an issuance of rights, warrants or other securities convertible into or exchangeable for shares of Common Stock, then no further adjustment shall be made pursuant to clause (ii) above in connection with the issuance of shares of Common Stock upon the exercise, conversion or exchange of such rights, warrants or securities so issued in accordance with the terms thereof; provided, however, that if at any time the exercise, conversion or exchange price per share of any rights, warrants or other securities convertible into or exchangeable for shares of Common Stock previously issued by the Company is reduced after the date of the issuance of such rights, warrants or other securities then, and in each such case, a further adjustment shall be made pursuant to clause (ii) above on the next Business Day following the date on which any such reduction is made (which adjustment shall be effective retroactively immediately after the close of business on such date) such that, after giving effect to such adjustment and any previous adjustment made pursuant to clause (ii) above in respect of such rights, warrants or other securities, the adjusted Conversion Ratio and Conversion Price calculated pursuant to such clause (ii) shall reflect the reduced exercise, conversion or exchange price per share for such rights, warrants or other securities. (iv) In case the Company shall at any time or from time to time after the Original Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Company or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than pursuant to the Common Special Distribution or the Rights Offering or the Other Equity Special Distribution, and other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this Section 8(e) or made in compliance with Sections 3(b) or (c) hereof, then, and in each such case, the Conversion Ratio shall be adjusted so that the holder of each share of Series C Convertible Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock at such record date, and the 37 denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value of such dividend or distribution per share of Common Stock. No adjustment shall be made pursuant to this clause (iv) in connection with any transaction to which Section 8 (f) applies. (v) For purposes of this Section 8(e), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Company or any of its wholly-owned subsidiaries. (vi) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this Section 8(e) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (vii) Anything in this Section 8(e) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Conversion Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one-tenth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by at least one-tenth of one share of Common Stock, such change in Conversion Ratio shall thereupon be given effect. (viii) Unless otherwise provided herein, for the purposes of this Section 8(e), the number of shares of Common Stock outstanding at any time shall include all shares of Common Stock issuable upon the exercise of all options and warrants then outstanding and the conversion of all convertible securities then outstanding other than the Convertible Preferred Stock. (ix) If any option or warrant expires or is cancelled without having been exercised, then, for the purposes of the adjustments set forth above, such option or warrant shall have been deemed not to have been issued and the Conversion Ratio shall be adjusted accordingly. No holder of Common Stock which was previously issued upon conversion of Series C Convertible Preferred Stock shall have any obligation to redeem or cancel any such shares of Common Stock as a result of the operation of this clause (ix). (f) In case of any capital reorganization or reclassification of the Common Stock of the Company or in case of any merger or consolidation of the Company with or into another corporation, or in case of any sale or transfer to another corporation of the property of the Company as an entirety or substantially as an entirety, or in case of any share tender or share exchange, in any such case pursuant to which all of the outstanding shares of Common Stock are converted into other securities or property, each share of 38 Series C Convertible Preferred Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange by a holder of that number of shares of Common Stock into which one share of Series C Convertible Preferred Stock would have been convertible (without giving effect to any restriction on convertibility) immediately prior to such reorganization, reclassification, merger, consolidation, sale, transfer or tender or share exchange including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any such transaction. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. (g) In case at any time or from time to time the Company shall pay any stock dividend or make any other non-cash distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Company or consolidation or merger of the Company with or into another corporation, or any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of said cases, the Company shall give at least 10 days' prior written notice to the registered holders of the Series C Convertible Preferred Stock at the addresses of each as shown on the books of the Company as of the date on which (i) the books of the Company shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of record of Common Stock shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. 9. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 8, then, and in each such case, the Company shall promptly deliver to each holder of the Series C Convertible Preferred Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares 39 issuable upon the conversion granted by Section 8, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Series C Convertible Preferred Stock may be given in advance. 10. Certain Covenants. Required Holders may proceed to protect and enforce the rights of the holders of the Convertible Preferred Stock by any available remedy by proceeding at law or in equity, whether for the specific enforcement of any provision in this Certificate of Designation for the Series B Convertible Preferred Stock and the Series C Convertible Preferred Stock or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy. Any protection, enforcement or remedy sought shall apply equally to the Series B Convertible Preferred Stock and to the Series C Convertible Preferred Stock. 11. No Reissuance of Preferred Stock. No Series C Convertible Preferred Stock acquired by the Company by reason of purchase, or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Company shall be authorized to issue. 12. Notices. All notices to the Company permitted hereunder shall be personally delivered or sent by first class mail, postage prepaid, addressed to its principal office located at 4800 North Scottsdale Road, Scottsdale, Arizona 85251-7623, Attention: General Counsel and Secretary, or to such other address at which its principal office is located and as to which notice thereof is similarly given to the holders of the Series C Convertible Preferred Stock at their addresses appearing on the books of the Company. 40 IN WITNESS WHEREOF, THE FINOVA GROUP INC. has caused this Certificate to be signed by its President and Secretary, respectively, on this ____ day of ________, 2001. --------------------------------------- President --------------------------------------- Secretary 41 EX-99 4 0004.txt 99.4 Exhibit 99.4 EXHIBIT B TO SECURITIES PURCHASE AGREEMENT WARRANT TO PURCHASE COMMON STOCK OF THE FINOVA GROUP INC. NY2:\991490\05\L91#05!.DOC\76830.0246 TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1. DEFINITIONS....................................................................................................1 2. EXERCISE OF WARRANT............................................................................................5 2.1. Manner of Exercise...................................................................................5 2.2. Payment of Taxes.....................................................................................7 2.3. Fractional Shares....................................................................................7 2.4. Continued Validity...................................................................................7 3. TRANSFER, DIVISION AND COMBINATION.............................................................................8 3.1. Transfer.............................................................................................8 3.2. Division and Combination.............................................................................8 3.3. Expenses.............................................................................................8 3.4. Maintenance of Books.................................................................................9 4. ADJUSTMENT TO THE CURRENT WARRANT PRICE........................................................................9 4.1. Stock Dividends, Subdivisions and Combinations.......................................................9 4.2. Certain Other Distributions and Adjustments..........................................................9 4.3. Other Provisions Applicable to Adjustments under this Section.......................................10 4.4. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets....................11 4.5. Other Action Affecting Common Stock.................................................................12 5. NOTICES TO WARRANT HOLDER.....................................................................................12 5.1. Notice of Adjustments...............................................................................12 5.2. Notice of Corporate Action..........................................................................12 6. NO IMPAIRMENT.................................................................................................13 7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY....14 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS............................................................14 9. RESTRICTIONS ON TRANSFERABILITY...............................................................................14 9.1. Restrictive Legend..................................................................................15 9.2. Notice of Proposed Transfers; Requests for Registration.............................................15 9.3. Required Registration...............................................................................16 i TABLE OF CONTENTS (CONTINUED) 9.4. Incidental Registration.............................................................................16 9.5. Registration Procedures.............................................................................17 9.6. Expenses............................................................................................18 9.7. Indemnification and Contribution....................................................................19 9.8. Termination of Restrictions.........................................................................20 9.9. Listing on Securities Exchange......................................................................21 9.10. Certain Limitations on Registration Rights..........................................................21 9.11. Selection of Managing Underwriters..................................................................21 10. SUPPLYING INFORMATION.........................................................................................21 11. LOSS OR MUTILATION............................................................................................22 12. OFFICE OF COMPANY.............................................................................................22 13. LIMITATION OF LIABILITY.......................................................................................22 14. MISCELLANEOUS.................................................................................................22 14.1. Nonwaiver and Expenses..............................................................................22 14.2. Notice Generally....................................................................................22 14.3. Remedies............................................................................................23 14.4. Successors and Assigns..............................................................................23 14.5. Amendment...........................................................................................24 14.6. Severability........................................................................................24 14.7. Headings............................................................................................24 14.8. Governing Law.......................................................................................24
ii THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR "BLUE SKY" LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. WARRANT To Purchase Common Stock of THE FINOVA GROUP INC. THIS IS TO CERTIFY THAT LEUCADIA NATIONAL CORPORATION, or its permitted registered assigns, is entitled, at any time during the Exercise Period (as hereinafter defined), to purchase from THE FINOVA GROUP INC., a Delaware corporation ("Company"), in whole or in part, such number of shares of Common Stock (as hereinafter defined and subject to adjustment as provided herein) that is equal to twenty percent (20%) (the "Maximum Percentage") of the Diluted Common Stock as of the date on which this Warrant is exercised, after giving effect to the exercise of this Warrant, at an aggregate purchase price of $125,000,000, subject to downward adjustment as provided herein (the "Maximum Aggregate Price"), all on the terms and subject to the conditions and pursuant to the provisions hereinafter set forth. 1. DEFINITIONS Terms used in this Warrant which are defined in the Purchase Agreement (as defined below) are used herein as defined therein unless otherwise provided, and the following terms have the respective meanings set forth below: "Acceleration Event" shall mean a merger or consolidation involving Company or sale of all or substantially all of the assets of Company (whether in one transaction or in a series of related transactions) or the acquisition after the Closing Date by any Person, or any group of two or more Persons acting in concert (in each case, other than Leucadia and its Affiliates), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under Exchange Act) directly or indirectly of securities of Company (including any securities convertible into such securities) representing 20% or more of the combined voting power of all securities of Company generally entitled to vote for the election of directors, or any Bankruptcy Event. "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by Company after the Closing Date, other than Warrant Stock. "Affiliate" shall mean, with respect to any person or entity, any one controlling, controlled by or under common control with such person or entity. "Bankruptcy Event" shall occur if Company shall commence a voluntary case or other proceeding, or an involuntary case or other proceeding shall be commenced by a third party against Company, 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, liquidator, custodian or other similar official of Company or any substantial part of its property, and in the case of an involuntary case or other proceeding, such case or proceeding shall remain undismissed or stayed for a period of 60 days; or an order for relief shall be entered against Company under the federal bankruptcy laws as now or hereafter in effect; or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors or shall take any corporate action to authorize any of the foregoing. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Closing Date" shall have the meaning set forth in the Purchase Agreement. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Special Distribution" shall have the meaning ascribed thereto in the Certificate of Designation for the Convertible Preferred Stock. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock, par value $0.01 per share, of Company, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of Company of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets over any other class of stock of Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.4) received by or distributed to the holders of Common Stock of Company in the circumstances contemplated by Section 4.4. "Convertible Preferred Stock" shall mean the Series B Convertible Preferred Stock of Company and the Series C Convertible Preferred Stock of Company, in each case having a par value of $.01 per share. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable, with or without payment of additional consideration in cash or property, for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. 2 "Current Market Price" shall mean, in respect of any share of Common Stock on any date herein specified, the average of the daily market prices for the five consecutive Business Days before such date. The daily market price for each such Business Day shall be (i) the last sale price on such day on the NYSE or such other principal stock exchange or NASDAQ Stock Market ("NASDAQ") on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes place on such day on any such exchange or NASDAQ, the average of the last reported closing bid and asked prices on such day as officially quoted on any such exchange or NASDAQ, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange or NASDAQ, the average of the last reported closing bid and asked prices on such day in the over-the-counter market, as furnished by the National Association of Securities Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the NASD selected mutually by the Majority Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the Majority Holders and one of which shall be selected by Company. "Current Warrant Price" shall mean $125,000,000, subject to adjustment as provided herein, provided that the Current Warrant Price shall not exceed the Maximum Aggregate Price. "Diluted Common Stock" as of any date means the aggregate number of Fully Diluted Outstanding shares of Common Stock excluding: (i) any shares of Common Stock issued or issuable after the date hereof in a merger or acquisition or in a public offering for cash at not less than the then fair market value as determined in good faith by the Company's Board of Directors; (ii) any shares of Common Stock issued or issuable after the date hereof in respect of "out of the money" employee and director stock options outstanding on the date hereof; (iii) any shares of Common Stock issued or issuable after the date hereof in respect of trust originated preferred securities issued by FINOVA Finance Trust and outstanding on the date hereof; (iv) any shares of Common Stock or Convertible Securities issued after the date hereof in satisfaction of the payment of any "Upside Distribution" or "Downside Distribution" pursuant to the terms of the Purchase Agreement or the Convertible Preferred Stock; and (v) any other shares of Common Stock or Convertible Securities issued or issuable after the date hereof that may otherwise be agreed to by the Majority Holders and Company. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1. "Expiration Date" shall mean _________ __, 2011. 3 "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock remaining issuable by Company in respect of (i) this Warrant on such date (whether or not this Warrant is then exercisable), and (ii) all other options, rights or warrants to purchase, or securities exchangeable or convertible into, shares of Common Stock, outstanding on such date, whether or not such options, rights, warrants or other securities are then vested, exercisable, or convertible. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. "Holder" shall mean the Person in whose name the Warrant set forth herein is registered on the books of Company maintained for such purpose. "Leucadia" shall mean Leucadia National Corporation, a New York corporation, or any successor corporation. "Majority Holders" shall mean the holders of Warrants exercisable for in excess of 50% of the aggregate percentage of the Diluted Common Stock then purchasable upon exercise of all Warrants, whether or not then exercisable. "Maximum Aggregate Price" shall mean $125,000,000, subject to reduction pursuant to Section 4 hereof or to reflect any partial exercise or transfer of the Warrant. "Maximum Percentage" shall mean twenty percent (20%), subject to adjustment in the event of a partial exercise or transfer of this Warrant. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NYSE" shall mean the New York Stock Exchange, Inc. "Other Property" shall have the meaning set forth in Section 4.4. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of Company or any subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Permitted Issuances" shall mean the issuance of: (i) any shares of Common Stock issued upon conversion of the Convertible Preferred Stock; (ii) any shares of Common Stock issued or issuable after the date hereof in a merger or acquisition or in a public offering for cash at not less than the then fair market value as determined in good faith by the Company's Board of Directors; (iii) any shares of Common Stock issued or issuable after the date hereof in respect of "out of the money" employee and director stock options or 4 above target performance-based restricted stock outstanding on the date hereof; (iv) any shares of Common Stock issued or issuable after the date hereof in respect of trust originated preferred securities issued by FINOVA Finance Trust and outstanding on the date hereof; and (v) any other shares of Common Stock or Convertible Securities issued or issuable after the date hereof that may otherwise be agreed to by Majority Holders and Company. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Purchase Agreement" shall mean the Securities Purchase Agreement dated as of December 20, 2000 by and between Company and Leucadia, as the same may be amended or restated from time to time by such parties. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance upon exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 9.1(a). "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act. "Transfer Notice" shall have the meaning set forth in Section 9.2. "Warrant Price" shall mean an amount equal to the product of (i) a fraction, the numerator of which is the percentage of the Diluted Common Stock being purchased upon any exercise of this Warrant pursuant to Section 2.1 and the denominator of which is the Maximum Percentage, multiplied by (ii) the Current Warrant Price as of the date of such exercise. "Warrants" shall mean the warrants to purchase shares of Common Stock represented by this Warrant. "Warrant Stock" shall mean the shares of Common Stock purchased upon the exercise of the Warrant. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. From and after the third anniversary of the Closing Date (subject to earlier exercisability as described in this Section 2.1) and until 5:00 P.M., New York time, on the Expiration Date (the "Exercise Period"), Holder may exercise this Warrant, on any Business Day, 5 in whole or in part as provided herein; provided, however, that this Warrant may only be exercised in part if exercised in respect of a number of shares of Common Stock representing at least one percent (1%) of the Diluted Common Stock as of the date of such partial exercise of this Warrant, after giving effect to such partial exercise of this Warrant. In the event of a partial exercise, (a) the Maximum Percentage for the unexercised portion of the Warrant shall be reduced to a fraction expressed as a percentage, the numerator of which is the difference between (x) the maximum number of shares of Common Stock into which the Warrant is then exercisable (prior to such partial exercise) and (y) the number of shares of Common Stock to be acquired in the partial exercise, and the denominator of which is the sum of (x) the actual number of shares of Common Stock outstanding and (y) the additional number of shares of Common Stock to be outstanding after giving effect to such partial exercise; and (b) the Maximum Aggregate Price for the remaining portion of the Warrant shall be reduced the product of (x) the Maximum Aggregate Price in effect immediately before giving effect to such partial exercise and (y) a fraction the numerator of which is the result of (i) the total number of shares of Common Stock for which this Warrant is exercisable immediately prior to such partial exercise minus (ii) the number of shares of Common Stock to be issued pursuant to the partial exercise, and the denominator of which is the total number of shares for which the Warrant is exercisable immediately prior to such partial exercise. In order to exercise this Warrant, in whole or in part, Holder shall deliver to Company at its principal office at 4800 North Scottsdale Road, Scottsdale, Arizona 85251-7623 or at the office or agency designated by Company pursuant to Section 12, (i) a written notice of Holder's election to exercise this Warrant, which notice shall specify the percentage of the Diluted Common Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such notice shall be substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit A, duly executed by Holder or its agent or attorney. Upon receipt thereof, Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as such Holder shall request in the notice and shall be registered in the name of Holder or, subject to Section 9, such other name as shall be designated in the notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the notice, together with the cash or check or other payment as provided below and this Warrant, is received by Company as described above and all taxes required to be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance of such shares have been paid. If this Warrant shall have been exercised in part, Company shall, at the time of delivery of the certificate or certificates representing Warrant Stock, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the balance of the percentage of the 6 Diluted Common Stock in respect of which this Warrant has not been exercised, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of Holder, appropriate notation may be made on this Warrant and the same returned to Holder. Notwithstanding any provision herein to the contrary, Company shall not be required to register shares in the name of any Person who acquired this Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with this Warrant. Payment of the Warrant Price shall be made at the option of the Holder by certified or official bank check or wire transfer of immediately available funds to an account designated by Company, or by the Holder's surrender to Company of that number of shares of Warrant Stock (or the right to receive such number of shares) or shares of Common Stock having an aggregate Current Market Price equal to or greater than the Warrant Price for the percentage of the Diluted Common Stock then being purchased (including those being surrendered) or a combination thereof, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by Holder or by Holder's attorney duly authorized in writing. If not otherwise then exercisable, this Warrant shall become exercisable upon the occurrence of an Acceleration Event; provided that in no event shall this Warrant be exercisable prior to the first anniversary of the Closing Date (other than as a result of a Bankruptcy Event). 2.2. Payment of Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable and without any preemptive rights. Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon Holder, in which case such taxes or charges shall be paid by Holder. Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock issuable upon exercise of this Warrant in any name other than that of Holder, and in such case Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of Company that no such tax or other charge is due. 2.3. Fractional Shares. Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, except as otherwise provided in Section 2.1, Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price per share of Common Stock on the date of exercise. 2.4. Continued Validity. A holder of Warrant Shares (other than a holder who acquires such shares after the same have been publicly sold pursuant to a Registration Statement under the Securities Act or sold pursuant to Rule 144 thereunder or who may otherwise sell all of such shares without restriction or limitation pursuant to Rule 144(k) of the Securities Act), shall continue to be entitled with respect to such shares to all rights to which it 7 would have been entitled as Holder under Sections 9, 10 and 14 of this Warrant. Company will, at the time of each exercise of this Warrant, in whole or in part, upon the request of the holder of the shares of Common Stock issued upon such exercise hereof, acknowledge in writing, in form reasonably satisfactory to such holder, its continuing obligation to afford to such holder all such rights; provided, however, that if such holder shall fail to make any such request, such failure shall not affect the continuing obligation of Company to afford to such holder all such rights. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 9 hereof, any transfer of this Warrant and all rights hereunder, in whole or in part, (i) if made in part, shall be made only with respect to a specific whole percentage of the Diluted Common Stock purchasable hereunder and an adjustment shall be made to the Maximum Percentage and the Maximum Aggregate Price pursuant to the provisions of Section 2.1 (as if such transfer were treated as a partial exercise of the Warrant) to reflect the division of this Warrant to one or more Warrants, and (ii) shall be registered on the books of Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of Company referred to in Section 2.1 or the office or agency designated by Company pursuant to Section 12, together with a written assignment of this Warrant substantially in the form of Exhibit B hereto duly executed by Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, Company shall, subject to Section 9, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in compliance with Section 9, may be exercised by a new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to Section 9, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. In the event that this Warrant is divided or combined, an adjustment shall be made to the Maximum Percentage and the Maximum Aggregate Price to reflect the division of this Warrant to one or more Warrants or the combination of one or more Warrants into one Warrant, as applicable. Subject to compliance with Section 3.1 and with Section 9, as to any transfer which may be involved in such division or combination, Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 3. 8 3.4. Maintenance of Books. Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Warrants. 4. ADJUSTMENT TO THE CURRENT WARRANT PRICE No adjustment shall be made to the Current Warrant Price in respect of any Permitted Issuances. In no event shall the Current Warrant Price exceed the Maximum Aggregate Price. Subject to the foregoing, the Current Warrant Price shall be subject to adjustment from time to time as set forth in this Section 4. Company shall give each Holder notice of any event described below which requires an adjustment pursuant to this Section 4 at the time of such event. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time Company shall: (a) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Additional Shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such case no adjustment shall be made to the Current Warrant Price and the effect for purposes hereof of any such act shall be limited to the adjustment of Diluted Common Stock for purposes of the provisions of the Warrant. 4.2. Certain Other Distributions and Adjustments. (a) If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution (other than the Common Special Distribution or the Rights Offering) of: (i) cash (other than ordinary cash dividends paid in accordance with the dividend policy established by the Board of Directors), (ii) any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than cash, Convertible Securities or Additional Shares of Common Stock), or (iii) any warrants or other rights (other than pursuant the Rights Offering) to subscribe for or purchase any evidences of its indebtedness, any shares of its stock or any other securities or property of any nature whatsoever (other than cash, Convertible Securities or Additional Shares of Common Stock), 9 then at the time of such dividend or distribution the Current Warrant Price shall be adjusted to equal (x) the Current Warrant Price immediately prior to such adjustment minus (y) the product of (A) the aggregate amount of cash so distributable, and the fair value (as determined in good faith by the Company's Board of Directors and, unless waived by the Majority Holders, supported by an opinion from an investment banking firm of recognized national standing acceptable to the Majority Holders) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, multiplied by the (B) the Maximum Percentage. (b) A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by Company to the holders of its Common Stock of such shares of such other class of stock within the meaning of paragraph (a) above and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4.1. 4.3. Other Provisions Applicable to Adjustments under this Section. The following provisions shall be applicable to the making of adjustments of the Current Warrant Price provided for in this Section 4: (a) When Adjustments to Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the Current Warrant Price that would otherwise be required may be postponed up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made subtracts less than one percent (1%) to the Current Warrant Price immediately prior to such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/10th of a share. (c) When Adjustment Not Required. If Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking 10 of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (d) Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, and Holder exercises this Warrant, any Additional Shares of Common Stock issuable upon exercise by reason of such adjustment shall be deemed the last shares of Common Stock for which this Warrant is exercised (notwithstanding any other provision to the contrary herein) and such shares or other property shall be held in escrow for Holder by Company to be issued to Holder upon and to the extent that the event actually takes place, upon payment of the then Current Warrant Price. Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be cancelled by Company and escrowed property returned to Company. (e) Challenge to Good Faith Determination. Whenever the Board of Directors of Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Holders and any dispute shall be resolved by an investment banking or valuation firm of recognized national standing selected by Company and acceptable to the Majority Holders. 4.4. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of Company, then each Holder shall have the right thereafter to receive, upon exercise of such Warrant, the number of shares of common stock of the successor or acquiring corporation or of Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of Company) in order to provide for adjustments which shall be as nearly equivalent as 11 practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.4, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.5. Other Action Affecting Common Stock. In case at any time or from time to time Company shall take any action in respect of its Common Stock, other than any action described in this Section 4, then, unless such action will not have a materially adverse effect upon the rights of the Holder, the Current Warrant Price thereof shall be adjusted in such manner as may be equitable in the circumstances. 5. NOTICES TO WARRANT HOLDER 5.1. Notice of Adjustments. Whenever the price at which a share of such Common Stock may be purchased upon exercise of the Warrants shall be adjusted pursuant to Section 4, Company shall forthwith prepare a certificate to be executed by the Chief Financial Officer of Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the change in the Current Warrant Price and, if such adjustment was made pursuant to Section 4.4 or 4.5, describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, after giving effect to such adjustment or change. Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 14.2. Company shall keep at its office or agency designated pursuant to Section 12 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of a Warrant designated by a Holder thereof. 5.2. Notice of Corporate Action. If at any time (a) Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) there shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of Company; 12 then, in any one or more of such cases, Company shall give to Holder (i) at least 10 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is expected to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of Company and delivered in accordance with Section 14.2. 6. NO IMPAIRMENT Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, Company will take all such action as may be necessary or appropriate in order that Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, including taking such action as is necessary for the Current Warrant Price to be not less than the par value of the shares of Common Stock issuable upon exercise of this Warrant, and use its commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable Company to perform its obligations under this Warrant. Upon the request of Holder, Company will at any times during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to Holder, the continuing validity of this Warrant and the obligations of Company hereunder. 13 7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY From and after the Closing Date, Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and fully paid and nonassessable, and not subject to preemptive rights. Before taking any action which would result in an adjustment in the Current Warrant Price, Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority or other governmental approval or filing under any federal or state law (otherwise than as provided in Section 9) before such shares may be so issued, Company will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered or such approval to be obtained or filing made. 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS In the case of all dividends or other distributions by Company to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, Company will in each such case take such a record and will take such record as of the close of business on a Business Day. Company will not at any time, except upon dissolution, liquidation or winding up of Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 9. RESTRICTIONS ON TRANSFERABILITY The Warrants and Warrant Stock shall not be transferable, other than to an Affiliate of Leucadia prior to _____________, 200_. [Three years from Closing Date.] The Warrants and the Warrant Stock shall not be transferred, hypothecated or assigned before satisfaction of the conditions specified in this Section 9, which conditions are intended to ensure compliance with the provisions of the Securities Act with respect to the Transfer of any Warrant or any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 9. 9.1. Restrictive Legend. (a) Except as otherwise provided in this Section 9, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent 14 transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities or "blue sky" laws and may not be transferred in violation of such Act or laws or the rules and regulations thereunder." (b) Except as otherwise provided in this Section 9, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Warrant and the securities represented hereby have not been registered under the Securities Act of 1933, as amended, or any state securities or "blue sky" laws and may not be transferred in violation of such Act or laws, or the rules and regulations thereunder or the provisions of this Warrant." 9.2. Notice of Proposed Transfers; Requests for Registration. Prior to or promptly following any Transfer of any Warrants or any shares of Restricted Common Stock, the holder of such Warrants or Restricted Common Stock shall give written notice (a "Transfer Notice") to Company of such Transfer. In connection with any Transfer, the holder requesting the Transfer shall provide to Company evidence reasonably satisfactory to it that the Transfer is to a "qualified institutional buyer" or an "accredited investor," as such terms are defined in Rules 144A and 501, respectively, of the Securities Act, and the Transfer is exempt from the registration requirements of the Securities Act and state securities or "blue sky" laws, or if the Transfer is to an entity or person other than a "qualified institutional buyer," Company shall be provided with an opinion of counsel reasonably satisfactory to it that the Transfer is so exempt from the registration requirements of the Securities Act and state securities laws. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(b), unless in the opinion of counsel to such holder which is reasonably acceptable to Company such legend is not required in order to ensure compliance with the Securities Act. The holders of Warrants and Warrant Stock shall have the right to request registration of such Warrant Stock pursuant to Sections 9.3 and 9.4. 9.3. Required Registration. After receipt of a written request from the holders of Warrants and/or Warrant Stock representing at least either (x) an aggregate of twenty percent (20%) of the total of (i) all shares of Warrant Stock then subject to purchase upon exercise of all Warrants and (ii) all shares of Warrant Stock then outstanding and which are Restricted Common Stock, or (y) such shares of Warrant Stock having a minimum anticipated aggregate offering price of at least $25,000,000, requesting that Company effect the registration of Warrant Stock issuable upon the exercise of such holder's 15 Warrants or of any of such holder's Warrant Stock under the Securities Act and specifying the intended method or methods of disposition thereof, Company shall promptly notify all holders of Warrants and Warrant Stock in writing of the receipt of such request and each such holder, in lieu of exercising its rights under Section 9.4, may elect (by written notice sent to Company within ten Business Days from the date of such holder's receipt of the aforementioned Company's notice) to have its shares of Warrant Stock included in such registration thereof pursuant to this Section 9.3. Thereupon Company shall, as expeditiously as is possible, use its commercially reasonable efforts to effect the registration under the Securities Act of all shares of Warrant Stock which Company has been so requested to register by such holders for sale, all to the extent required to permit the disposition (in accordance with the intended method or methods thereof, as aforesaid) of the Warrant Stock so registered; provided, however, that Company shall not be required to effect more than an aggregate of three registrations of any Warrant Stock pursuant to this Section 9.3. 9.4. Incidental Registration. If Company at any time commencing one year after the Closing Date proposes to file on its behalf and/or on behalf of any of its security holders (the "demanding security holders") a Registration Statement under the Securities Act on any form (other than a Registration Statement on Form S-4 or S-8 or any successor form for securities to be offered in a transaction of the type referred to in Rule 145 under the Securities Act or to employees of Company pursuant to any employee benefit plan, respectively) for the general registration of securities to be sold for cash with respect to its Common Stock (as defined in Section 3(a)(11) of the Exchange Act) of Company, it will give written notice to all Holders of Warrants or Holders of Warrant Stock at least 15 days before the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by Company. The notice shall offer to include in such filing the aggregate number of shares of Warrant Stock, and the number of shares of Common Stock for which this Warrant is exercisable, as such holders may request. Each Holder of any such Warrants or any such Warrant Stock desiring to have Warrant Stock registered under this Section 9.4 shall advise Company in writing within 10 days after the date of receipt of such offer from Company, setting forth the amount of such Warrant Stock for which registration is requested. Company shall thereupon include in such filing the number of shares of Warrant Stock for which registration is so requested, subject to the next sentence, provided that Company may, in its sole discretion, determine to abandon any such registration. If the managing underwriter of a proposed public offering shall advise Company in writing that, in its opinion, the distribution of the Warrant Stock requested to be included in the registration concurrently with the securities being registered by Company or such demanding security holder would materially and adversely affect the distribution of such securities by Company or such demanding security holder, then the Holders of Warrant Stock shall reduce the amount of securities each intended to distribute through such offering on a pro rata basis. Except as otherwise provided in Section 9.6, all expenses of such registration shall be borne by Company. 16 9.5. Registration Procedures. If Company is required by the provisions of this Section 9 to use its commercially reasonable efforts to effect the registration of any of its securities under the Securities Act, Company will, as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement with respect to such securities and use its commercially reasonable efforts to cause such Registration Statement to become and remain effective for a period of time required for the disposition of such securities by the holders thereof, but not to exceed 180 days; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement until the earlier of such time as all of such securities have been disposed of in a public offering or the expiration of 180 days; (c) furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request; (d) use its commercially reasonable efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each holder of such securities shall request (provided, however, that Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service or process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement; (e) furnish, at the request of any Holder requesting registration of Warrant Stock pursuant to Section 9.3, on the date that such shares of Warrant Stock are delivered to the underwriters for sale pursuant to such registration or, if such Warrant Stock is not being sold through underwriters, on the date that the Registration Statement with respect to such shares of Warrant Stock becomes effective, (1) an opinion, dated such date, of the counsel representing Company for the purposes of such registration, addressed to the underwriters, if any, and if such Warrant Stock is not being sold through underwriters, then to the holders making such request, in customary form and covering matters of the type customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the independent certified public accountants of Company, addressed to the underwriters, if any, and if such Warrant Stock is not being sold through underwriters, then to the holder making such request and, if such accountants refuse to deliver such letter to such holder, then to Company in a customary form and covering matters of the type customarily covered by such comfort letters as the underwriters or such holders shall reasonably request; 17 (f) enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such securities; and (g) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not later than 18 months after the effective date of the Registration Statement, an earnings statement covering a period of at least 12 months beginning after the effective date of such Registration Statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act. It shall be a condition precedent to the obligation of Company to take any action pursuant to this Section 9 in respect of the securities which are to be registered at the request of any holder of Warrants or Warrant Stock that such holder shall (i) furnish to Company such information regarding the securities held by such holder and the intended method of disposition thereof as Company shall reasonably request and as shall be required in connection with the action taken by Company and (ii) in connection with an underwritten offering, enter into customary agreements (including an underwriting agreement and a custody agreement, each in customary form, and a lock-up agreement with respect to such holder's equity securities of Company as may be requested by the managing underwriter). 9.6. Expenses. All expenses incurred in complying with Section 9, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for Company, the reasonable fees and expenses of one counsel for the selling security holders (selected by those holding a majority of the shares being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions pursuant to Section 9.5(d), shall be paid by Company, except that (a) all such expenses in connection with any amendment or supplement to the Registration Statement or prospectus filed more than 180 days after the effective date of such Registration Statement because any holder of Warrant Stock has not effected the disposition of the securities requested to be registered shall be paid by such holder; and (b) Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any underwriter in respect of the securities sold by such holder of Warrant Stock. 9.7. Indemnification and Contribution. (a) In the event of any registration of any of the Warrant Stock under the Securities Act pursuant to this Section 9, Company shall indemnify and hold harmless the holder of such Warrant Stock, such holder's directors and officers, and each other Person (including each underwriter) who participated in the offering of such Warrant Stock and each other Person, if any, who controls such holder or such participating Person within the meaning of 18 the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or participating Person or controlling Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such holder or such director, officer or participating Person or controlling Person for any legal or any other expenses reasonably incurred by such holder or such director, officer or participating Person or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that 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 any alleged untrue statement or alleged omission made in such Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to Company by such holder specifically for use therein or (in the case of any registration pursuant to Section 9.3) so furnished for such purposes by any underwriter. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or such director, officer or participating Person or controlling Person, and shall survive the transfer of such securities by such holder. (b) Each holder of any Warrant Stock, by acceptance thereof, agrees to indemnify and hold harmless Company, its directors and officers and each other Person, if any, who controls Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Company or any such director or officer or any such Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon information in writing provided to Company by such holder of such Warrant Stock specifically for use in, and contained on the effective date thereof in, any Registration Statement under which securities were registered under the Securities Act at the request of such holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, but in an amount not to exceed the net proceeds received by such holder in the offering. (c) If the indemnification provided for in this Section 9 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the 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 or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in 19 such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The liability of any holder of Warrant Stock hereunder shall not exceed the net proceeds received by it in the offering. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 9.8. Termination of Restrictions. Notwithstanding the foregoing provisions of Section 9, the restrictions imposed by this Section upon the transferability of the Warrants, the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon the exercise of the Warrants) and the legend requirements of Section 9.1 shall terminate as to any particular Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i) when and so long as such security shall have been effectively registered under the Securities Act and disposed of pursuant thereto or (ii) when Company shall have received an opinion of counsel reasonably satisfactory to it that such shares may be transferred without registration thereof under the Securities Act. Whenever the restrictions imposed by Section 9 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from Company, at the expense of Company, a new Warrant without the restrictive legend set forth in Section 9.1(b). Whenever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the holder thereof shall be entitled to receive from Company, at Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 9.1(a). 9.9. Listing on Securities Exchange. Company will, at its expense, list on the NYSE (or such other principal exchange on which it lists its Common Stock), maintain and, when necessary, increase such listing of, all shares of Common Stock issued or, to the extent permissible under the applicable securities exchange rules, issuable upon the exercise of this Warrant so long as any shares of Common Stock shall be so listed during any such Exercise Period. 20 9.10. Certain Limitations on Registration Rights. Notwithstanding the other provisions of Section 9: (a) Company shall not be obligated to register the Warrant Stock of any holder if, in the opinion of counsel to Company reasonably satisfactory to the holder and its counsel (or, if the holder has engaged an investment banking firm, to such investment banking firm and its counsel), the sale or other disposition of such holder's Warrant Stock, in the manner proposed by such holder (or by such investment banking firm), may be effected without registering such Warrant Stock under the Securities Act in reliance upon Rule 144(k) under the Securities Act; (b) Company shall not be obligated to register the Warrant Stock of any holder pursuant to Section 9.3, if Company has had a registration statement, under which such holder had a right to have its Warrant Stock included pursuant to Sections 9.3 or 9.4, declared effective within six months prior to the date of the request pursuant to Section 9.3; and (c) Company shall have the right to delay the filing or effectiveness of a registration statement required pursuant to Section 9.3 hereof during one or more periods aggregating not more than 180 days in any twelve-month period in the event that (i) Company would, in accordance with the advice of its counsel, be required to disclose in the prospectus information not otherwise then required by law to be publicly disclosed and (ii) in the judgment of the Company's Board of Directors, there is a reasonable likelihood that such disclosure, or any other action to be taken in connection with the prospectus, would materially and adversely affect any existing or prospective material business situation, transaction or negotiation or otherwise materially and adversely affect Company. 9.11. Selection of Managing Underwriters. The managing underwriter or underwriters for any offering of Warrant Stock to be registered pursuant to Section 9.3 shall be selected by the holders of a majority of the shares being so registered (other than any shares being registered pursuant to Section 9.4) and shall be reasonably acceptable to Company. 10. SUPPLYING INFORMATION Company shall cooperate with each Holder of a Warrant and each holder of Restricted Common Stock in supplying such information as may be reasonably necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrant or Restricted Common Stock. 11. LOSS OR MUTILATION Upon receipt by Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to it (it being understood that the written agreement of Leucadia shall be 21 sufficient indemnity), and in case of mutilation upon `surrender and cancellation hereof, Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to Company for cancellation. 12. OFFICE OF COMPANY As long as any of the Warrants remain outstanding, Company shall maintain an office or agency (which may be the principal executive offices of Company) where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. 13. LIMITATION OF LIABILITY No provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company. 14. MISCELLANEOUS 14.1. Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. If Company fails to make, when due, any payments provided for hereunder, or fails to comply with any other provision of this Warrant, Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback, addressed as follows: (a) If to any Holder or holder of Warrant Stock, at its last known address appearing on the books of Company maintained for such purpose. 22 (b) If to Company at The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: William Hallinan, Senior Vice-President, General Counsel and Secretary Facsimile No.: (480) 636-4949 with a copy (which shall not constitute notice) to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attention: Andrew E. Bogen, Esq. Facsimile No.: (213) 229-7520 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, approval, declaration, delivery or other communication. 14.3. Remedies. Each holder of Warrant and Warrant Stock, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under Section 9 of this Warrant. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of Section 9 of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 14.4. Successors and Assigns. Subject to the provisions of Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, with respect to Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or holder of Warrant Stock. 23 14.5. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of Company and the Majority Holders. 14.6. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.7. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.8. Governing Law. This Warrant shall be governed by the laws of the State of Delaware, without regard to the principles thereof relating to conflict of laws. 24 IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary. Dated: __________, 2000 THE FINOVA GROUP INC. By: ----------------------------------- Name: Title: Attest: By: --------------------------------- Name: Title: 25 EXHIBIT A SUBSCRIPTION FORM [TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of such number of shares of Common Stock of THE FINOVA GROUP INC. representing _____________ percent (___%) of the Diluted Common Stock (as defined in this Warrant), as of the date hereof, after giving effect to this exercise, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _____________ whose address is _________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. ------------------------------- (Name of Registered Owner) ------------------------------- (Signature of Registered Owner) ------------------------------- (Street Address) ------------------------------- (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. E-1 EXHIBIT B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the [PERCENTAGE OF DILUTED COMMON STOCK] set forth below: Percentage of Diluted Name and Address of Assignee Common Stock - ---------------------------- ------------ and does hereby irrevocably constitute and appoint _______________________ attorney-in-fact to register such transfer on the books of THE FINOVA GROUP INC. maintained for the purpose, with full power of substitution in the premises. Dated:__________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. E-2 EX-99 5 0005.txt 99.5 Exhibit 99.5 Exhibit C to Securities Purchase Agreement REGISTRATION RIGHTS AGREEMENT ----------------------------- Registration Rights Agreement, dated as of ____________, 2001, by and among The FINOVA Group Inc., a Delaware corporation ("Company") and Leucadia National Corporation, a New York Corporation ("Purchaser"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, Company and Purchaser have entered into that certain Securities Purchase Agreement, dated as of December 20, 2000 (the "Purchase Agreement"), pursuant to which Company has agreed to issue and sell to Purchaser, and Purchaser has agreed to purchase from Company, shares of Series B Convertible Preferred Stock, $0.01 par value per share ("Series B Preferred Stock"); and WHEREAS, pursuant to the Purchase Agreement, Purchaser has agreed to act as a standby purchaser from Company of up to four hundred thousand shares of Company's Series C Convertible Preferred Stock, $0.01 par value per share (the shares of such preferred stock so acquired by Purchaser being referred to herein as the "Series C Preferred Stock" and together with the Series B Preferred Stock, the "Convertible Preferred Stock"). WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement and to purchase or agree to purchase the shares of Convertible Preferred Stock, Company has agreed to provide registration rights with respect thereto; NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: 1. Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement are used herein as therein defined, and the following shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined): "Agreement" shall mean this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. NY2:\988842\06\L6Z%06!.DOC\76830.0246 "Conversion Shares" shall mean shares of Common Stock issued upon conversion of shares of Convertible Preferred Stock. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Holder" shall mean the holder of Conversion Shares or shares of Convertible Preferred Stock. "Majority Holders" shall mean Holders holding at the time, shares of Convertible Preferred Stock or Conversion Shares representing more than 50% of the sum of (x) all then outstanding Conversion Shares and (y) all shares of Common Stock issuable to the holders of then-outstanding Convertible Preferred Stock upon the conversion thereof. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "Registrable Securities" shall mean the shares of Convertible Preferred Stock owned by Purchaser or its permitted transferees, all Conversion Shares or shares of Convertible Preferred Stock or Common Stock hereafter acquired by Purchaser or which Purchaser hereafter obtains the right to acquire pursuant to the terms of the Purchase Agreement or otherwise. As to any particular Registrable Securities held by any Holder other than Purchaser, such securities shall cease to constitute Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with the plan of distribution contemplated by the registration statement, (B) such securities shall have been sold in satisfaction of all applicable conditions to the resale provisions of Rule 144 under the Securities Act (or any successor provision thereto), (C) all Registrable Securities held by such Holder may be sold pursuant to Rule 144(k) of the Securities Act, or (D) such securities shall have ceased to be issued and outstanding. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 2. Required Registration. After receipt of a written request from the holders of Registrable Securities requesting that Company effect a registration under the Securities Act covering at least 20% of the Registrable Securities initially outstanding or having a minimum anticipated aggregate offering price of $25,000,000, and specifying the intended method or methods of disposition thereof, Company shall promptly notify all Holders in writing of the receipt of such request and each such Holder, in lieu of exercising its rights under Section 3 may elect (by written notice sent to Company within 10 Business Days from the date of such Holder's receipt of the aforementioned Company's notice) to have Registrable Securities included in such 2 registration thereof pursuant to this Section 2. Thereupon Company shall, as expeditiously as is possible, use its commercially reasonable efforts to effect the registration under the Securities Act of all shares of Registrable Securities which Company has been so requested to register by such Holders for sale, all to the extent required to permit the disposition (in accordance with the intended method or methods thereof, as aforesaid) of the Registrable Securities so registered; provided, however, that Company shall not be required to effect more than three (3) registrations of any Registrable Securities pursuant to this Section 2. 3. Incidental Registration. If Company at any time proposes to file on its behalf and/or on behalf of any of its security holders (the "demanding security holders") a Registration Statement under the Securities Act on any form (other than a Registration Statement on Form S-4 or S-8 or any successor form for securities to be offered in a transaction of the type referred to in Rule 145 under the Securities Act or to employees of Company pursuant to any employee benefit plan, respectively) for the general registration of securities, it will give written notice to all Holders at least 15 days before the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by Company. The notice shall offer to include in such filing the aggregate number of shares of Registrable Securities as such Holders may request. Each Holder desiring to have Registrable Securities registered under this Section 3 shall advise Company in writing within 10 days after the date of receipt of such offer from Company, setting forth the amount of such Registrable Securities for which registration is requested. Company shall thereupon include in such filing the number of shares of Registrable Securities for which registration is so requested, subject to the next sentence, provided that Company may in its sole discretion determine to abandon any such registration. If the managing underwriter of a proposed public offering shall advise Company in writing that, in its opinion, the distribution of the Registrable Securities requested to be included in the registration concurrently with the securities being registered by Company or such demanding security holder would materially and adversely affect the distribution of such securities by Company or such demanding security holder, then all selling security holders (including the demanding security holder who initially requested such registration) shall reduce the amount of securities each intended to distribute through such offering on a pro rata basis. Except as otherwise provided in Section 5, all expenses of such registration shall be borne by Company. 4. Registration Procedures. If Company is required by the provisions of Section 2 or 3 to use its commercially reasonable efforts to effect the registration of any of its securities under the Securities Act, Company will, as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement with respect to such securities and use its commercially reasonable efforts to cause such Registration Statement to become and remain effective for a period of time required for the disposition of such securities by the holders thereof, but not to exceed 180 days; 3 (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement until the earlier of such time as all of such securities have been disposed of in a public offering or the expiration of 180 days; (c) furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request; (d) use its commercially reasonable efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each holder of such securities shall request (provided, however, that Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service or process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement; (e) furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the underwriters for sale pursuant to such registration or, if such Registrable Securities are not being sold through underwriters, on the date that the Registration Statement with respect to such shares of Registrable Securities becomes effective, (1) an opinion, dated such date, of the independent counsel representing Company for the purposes of such registration, addressed to the underwriters, if any, and if such Registrable Securities are not being sold through underwriters, then to the Holders making such request, in customary form and covering matters of the type customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the independent certified public accountants of Company, addressed to the underwriters, if any, and if such Registrable Securities are not being sold through underwriters, then to the Holder making such request and, if such accountants refuse to deliver such letter to such Holder, then to Company, in a customary form and covering matters of the type customarily covered by such comfort letters and as the underwriters or such Holder shall reasonably request; (f) enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and (g) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not 4 later than 18 months after the effective date of the Registration Statement, an earnings statement covering the period of at least 12 months beginning with the first full month after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. It shall be a condition precedent to the obligation of Company to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of any Holder that such Holder shall (i) furnish to Company such information regarding the securities held by such Holder and the intended method of disposition thereof as Company shall reasonably request and as shall be required in connection with the action taken by Company and (ii) in connection with an underwritten offering, enter into customary agreements (including an underwriting agreement and a custody agreement, each in customary form, and a lock-up agreement with respect to such holder's equity securities of Company as may be requested by the managing underwriter). 5. Expenses. All expenses incurred in complying with this Agreement, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for Company, the reasonable fees and expenses of counsel for the selling security holders (selected by those holding a majority of the securities being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section 4(d), shall be paid by Company, except that: (a) all such expenses in connection with any amendment or supplement to the Registration Statement or prospectus filed more than 180 days after the effective date of such Registration Statement because any Holder has not effected the disposition of the securities requested to be registered shall be paid by such Holder; and (b) Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any underwriter in respect of the securities sold by such Holder. 6. Indemnification and Contribution. (a) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, Company shall indemnify and hold harmless the holder of such Registrable Securities, such holder's directors and officers, and each other person (including each underwriter) who participated in the offering of such Registrable Securities and each other person, if any, who controls such holder or such participating person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or participating person or controlling person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out 5 of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such holder or such director, officer or participating person or controlling person for any legal or any other expenses reasonably incurred by such holder or such director, officer or participating person or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that 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 any actual or alleged untrue statement or actual or alleged omission made in such Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to Company by such holder specifically for use therein or (in the case of any registration pursuant to Section 2) so furnished for such purposes by any underwriter. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or such director, officer or participating person or controlling person, and shall survive the transfer of such securities by such holder. (b) Each Holder, by acceptance hereof, agrees to indemnify and hold harmless Company, its directors and officers and each other person, if any, who controls Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Company or any such director or officer or any such person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon information in writing provided to Company by such Holder specifically for use in the following documents and contained, on the effective date thereof, in any Registration Statement under which securities were registered under the Securities Act at the request of such holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto but in an amount not to exceed the net proceeds received by such Holder in the offering. (c) If the indemnification provided for in this Section 6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the 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 or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement 6 of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The liability of any holder of Registrable Securities hereunder shall not exceed the net proceeds received by it in the offering. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 7. Listing on Securities Exchange. Company will, at its expense, list on the NYSE (or such other principal exchange on which it lists its Common Stock), maintain and, when necessary, increase such listing of, all shares of Common Stock issued or, to the extent permissible under the applicable securities exchange rules, issuable upon the exercise of this Agreement so long as any shares of Common Stock shall be so listed. 8. Certain Limitations on Registration Rights. Notwithstanding the other provisions of this Agreement: (a) Company shall not be obligated to register the Registrable Securities of any Holder if, in the opinion of counsel to Company reasonably satisfactory to the Holder and its counsel (or, if the Holder has engaged an investment banking firm, to such investment banking firm and its counsel), the sale or other disposition of all of such Holder's Registrable Securities, in the manner proposed by such Holder (or by such investment banking firm), may be effected without registering such Registrable Securities under the Securities Act in reliance upon Rule 144(k) under the Securities Act; and (b) Company shall not be obligated to register the Registrable Securities of any Holder pursuant to Section 2 if Company has had a registration statement, under which such Holder had a right to have its Registrable Securities included pursuant to Section 2 or 3, declared effective within one year prior to the date of the request pursuant to Section 2. (c) Company shall have the right to delay the filing or effectiveness of a registration statement required pursuant to Section 2 hereof during one or more periods aggregating not more than 180 days in any twelve-month period in the event that (i) Company would, in accordance with the advice of its counsel, be required to disclose in the prospectus information not 7 otherwise then required by law to be publicly disclosed and (ii) in the judgment of Company's Board of Directors, there is a reasonable likelihood that such disclosure, or any other action to be taken in connection with the prospectus, would materially and adversely affect any existing or prospective material business situation, transaction or negotiation or otherwise materially and adversely affect Company. 9. Selection of Managing Underwriters. The managing underwriter or underwriters for any offering of Registrable Securities to be registered pursuant to Section 2 shall be selected by Purchaser and shall be reasonably acceptable to Company. 10. Miscellaneous. (a) No Inconsistent Agreements. Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders in this Agreement. (b) Remedies. Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. (c) Amendments. This Agreement and all other Agreements may be amended or modified with the written consent of Company and the Majority Holders. (d) Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Agreement shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback, addressed as follows: (i) If to any Holder, at its last known address appearing on the books of Company maintained for such purpose. (ii) If to Company, at The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: William Hallinan, Senior Vice-President, General Counsel and Secretary Facsimile No.: (480) 636-4949 8 with a copy (which shall not constitute notice) to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attention: Andrew E. Bogen, Esq. Facsimile No.: (213) 229-7520 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or three Business Days after the same shall have been deposited in the United States mail. (e) Rule 144. So long as Company is subject to the reporting requirements under the Exchange Act, it shall comply with such requirements so as to permit sales of Registrable Securities by the Holders thereof pursuant to Rule 144 under the Securities Act. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto including any person to whom Registrable Securities are transferred. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law; Jurisdiction. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without giving effect to the conflict of laws principles thereof. (i) Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (j) Entire Agreement. This Agreement, together with the Purchase Agreement, represents the complete agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. 9 This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. THE FINOVA GROUP INC. By: ------------------------------------- Name: Title: LEUCADIA NATIONAL CORPORATION By: ------------------------------------- Name: Title: 11 EX-99 6 0006.txt 99.6 Exhibit 99.6 Exhibit D to Securities Purchase Agreement MANAGEMENT SERVICES AGREEMENT MANAGEMENT SERVICES AGREEMENT, dated as of ____________, 2001, by and among The FINOVA Group Inc. ("Finova" or the "Company"), a Delaware corporation, and Leucadia National Corporation, a New York corporation ("Leucadia" or "Manager"). WHEREAS, certain management, general administrative and overhead functions have previously been performed for Finova by its own employees; and WHEREAS, Leucadia has the capability directly and through its subsidiaries and affiliates and third parties to provide those services to Finova; and WHEREAS, the directors of Finova have determined that it is in the best interests of Finova to obtain such services from Leucadia. It is hereby mutually agreed as follows: 1) Term. The term of this Management Agreement shall be five years commencing on ________, 2001 (the "Closing Date"). 2) Compensation. For a period of five years, commencing on the Closing Date, Finova shall pay annually to Leucadia a management fee of $5 million, payable in immediately available funds (the "Management Fee"). The annual Management Fee shall be payable quarterly, in advance, at the beginning of each calendar quarter; provided however that the first quarterly installment (in the amount of $1,250,000) shall be paid to Leucadia on the Closing Date; provided, further, however, that if less than 90 days are left in such calendar quarter, the amount of such first payment shall be pro rated based on the number of days remaining in the quarter. 3) Personnel. Leucadia shall provide all personnel necessary to carry out the services specified herein. The number of personnel providing services at any one time and the number of hours such personnel devote to the services specified herein shall not be fixed but shall at times be adequate to properly and promptly perform and discharge the specified services. The personnel provided by Leucadia hereunder shall for all purposes be employees of Leucadia. Leucadia shall not be entitled to receive any additional compensation other than the payment set forth in paragraph 2, above. Without limiting the generality of the foregoing, the personnel provided by Leucadia hereunder shall not be entitled to receive from Finova direct reimbursement for compensation, travel, entertainment or employee benefit costs. Nothing herein shall prevent, however, any individual provided by Leucadia hereunder from becoming an elected or appointed officer or director of Finova and enjoying the benefit of any such position. NY2:\989512\05\L7$G05!.DOC\76830.0246 4) Office Space, Equipment and Supplier, Etc. Finova shall provide to Leucadia and its personnel provided hereunder office space, secretarial services, equipment and supplies, telephone, telefax and related support facilities to the extent available at Finova's regular work locations. 5) Services. In consideration for the compensation paid to Leucadia it shall perform and competently discharge the following services as requested by Finova: (a) subject to their election by the Board of Directors: o providing the Chairman of the Company; o providing the President of the Company; and such other officers, if any, as shall be mutually determined between Leucadia and the Company; (b) providing the Treasury function of establishment and maintenance of certain banking and other similar financial relationships; (c) providing supervision of corporate wide management, sales, dispositions, acquisitions, and administration. 6) Company Expenses. Finova will continue to bear the cost and expense of its own employees, including their salary, travel, entertainment, other business and benefit expenses; rent for its normal business location(s); outside legal, audit or consulting services; stockholder expenses; dues and subscriptions for its employees; director fees and expenses, insurance and taxes; postage, messenger and freight costs; telephone and telecopier charges; printing and related expenses; and equipment, fixture, furniture, supplies and related expenses. (7) Termination by Corporation. In the event that Leucadia shall cease to beneficially own at least 20% of the equity of the Company on a fully diluted basis, either Leucadia or Finova may terminate this Agreement upon not less than 60 days prior written notice. However, such termination shall not relieve Finova of its obligation to pay to Leucadia the portion of the Management Fee, if any, that has been earned through the termination date but has not been paid to Leucadia as of the date of such termination. The remaining unpaid Management Fee shall be paid to Leucadia in one payment, in immediately available funds, upon the effective date of such termination. (8) Governing Law. This Agreement shall be governed in accordance with the laws of the State of New York. (9) Assignment. Neither party may assign this Agreement or any of its rights or duties hereunder, except that Manager may assign this Agreement to any entity that is controlled by, controlling or under common control with Leucadia. 2 (10) Notices. Services of all notices, if any, under this Agreement shall be sufficient if given personally or sent by certified, registered mail, return receipt requested, or telefax to the addresses set forth below: If to Company, at: The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: William Hallinan, Senior Vice-President, General Counsel and Secretary Facsimile No.: (480) 636-4949 with a copy (which shall not constitute notice) to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attention: Andrew E. Bogen, Esq. Facsimile No.: (213) 229-7520 If to Manager, at: Leucadia National Corporation 315 Park Avenue South New York, New York 10010 Attention: Joseph S. Steinberg, President Facsimile No.: (212) 598-4869 with a copy (which shall not constitute notice) to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Stephen E. Jacobs, Esq. Facsimile No: (212) 310-8007 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or three Business Days after the same shall have been deposited in the United States mail. 3 IN WITNESS WHEREOF, the parties hereto have caused this Management Services Agreement to be duly executed on the date first written above. THE FINOVA GROUP INC. By ---------------------------------- LEUCADIA NATIONAL CORPORATION By ---------------------------------- 4 -----END PRIVACY-ENHANCED MESSAGE-----