<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997
REGISTRATION NO.: 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
CENTRAL FINANCIAL ACCEPTANCE CORPORATION CFAC CAPITAL I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) ORGANIZATION)
95-4574983 95-4653518
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
C/O CENTRAL FINANCIAL ACCEPTANCE CORPORATION
5480 EAST FERGUSON DRIVE 5480 EAST FERGUSON DRIVE
COMMERCE, CALIFORNIA 90022 COMMERCE, CALIFORNIA 90022
(213)720-8600 (213)720-8600
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE INCLUDING AREA CODE, OF CO-REGISTRANT'S PRINCIPAL EXECUTIVE
OFFICE) OFFICE)
</TABLE>
GARY M. CYPRES
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
5480 EAST FERGUSON DRIVE
COMMERCE, CALIFORNIA 90022
(213) 720-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
WILLIAM T. QUICKSILVER, ESQ. RICHARD S. FORMAN, ESQ.
MANATT, PHELPS & PHILLIPS, LLP STROOCK & STROOCK & LAVAN LLP
11355 WEST OLYMPIC BOULEVARD 2029 CENTURY PARK EAST
LOS ANGELES, CA 90064-1614 SUITE 1800
TELEPHONE: (310)312-4210 LOS ANGELES, CA 90067
TELEPHONE: (310)556-5800
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE PER UNIT(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
% Cumulative Trust Preferred
Securities of CFAC Capital I.......... 2,012,500 shares $25 $50,312,500 $15,247
- ------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Deferrable
Interest Debentures of Central
Financial Acceptance Corporation(2)... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Central Financial Acceptance
Corporation Guarantee with respect to
% Cumulative Trust Preferred
Securities(3)......................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total(4)...................... -- -- -- $15,247
========================================================================================================================
</TABLE>
(1) Estimated solely to calculate the registration fee pursuant to Rule 457(a).
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased by
CFAC Capital I with the proceeds from the sale of the % Cumulative Trust
Preferred Securities. Such securities may later be distributed for no
additional consideration to the holders of the % Cumulative Trust
Preferred Securities of CFAC Capital I upon its dissolution and the
distribution of its assets.
(3) No separate consideration will be received for the Central Financial
Acceptance Corporation Guarantee.
(4) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of Central Financial Acceptance Corporation,
the rights of holders of Junior Subordinated Deferrable Interest Debentures
of Central Financial Acceptance Corporation under the Indenture, the rights
of holders of Trust Preferred Securities of CFAC Capital I under the Trust
Agreement, the rights of holders of the % Cumulative Trust Preferred
Securities under the Guarantee and the Expense Agreement entered into by
Central Financial Acceptance Corporation and certain backup undertakings as
described herein, which taken together, fully, irrevocably and
unconditionally guarantee all of the obligations of CFAC Capital I under
the % Cumulative Trust Preferred Securities.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
1,750,000 TRUST PREFERRED SECURITIES
CFAC CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
LOGO
FINANCIAL ACCEPTANCE CORPORATION
The % Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of CFAC Capital I, a statutory business trust formed under the
laws of the State of Delaware ("CFAC Capital"). Central Financial Acceptance
Corporation, a Delaware corporation (referred to as the "Company" when such
reference includes Central Financial Acceptance Corporation and its
subsidiaries, collectively, or "Central" when referring only to the parent
company), will be the owner of all of the beneficial interests represented by
common securities of CFAC Capital (the "Common Securities" and, collectively
with the Trust Preferred Securities, the "Trust Securities"). CFAC Capital
exists for the sole purpose of issuing the Trust Securities and investing the
proceeds thereof in an equivalent amount of % Junior Subordinated Deferrable
Interest Debentures (the "Junior Subordinated Debentures") to be issued by
Central. The Junior Subordinated Debentures will mature on , 2027
(the "Stated Maturity"), subject to redemption on earlier dates as described
below. Although Central is not currently subject to capital requirements, it is
possible that in the future it could become subject to capital requirements of
the Board of Governors of the Federal Reserve System (the "Federal Reserve") as
a result of, among other things, the acquisition of a bank or a change in law or
applicable regulations that subjects Central to such Federal Reserve
requirements. The Trust Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities, which will be
held by Central. See "Description of the Trust Preferred Securities --
Subordination of Common Securities of CFAC Capital Held by Central."
(Continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 13 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO CFAC
PUBLIC DISCOUNT(1) CAPITAL(2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Per Trust Preferred Security.......................... $ 25 (2) $ 25
- ----------------------------------------------------------------------------------------------------------
Total(3).............................................. $ 43,750,000 (2) $ 43,750,000
==========================================================================================================
</TABLE>
(1) Central and CFAC Capital have each agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) In view of the fact that all of the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated
Debentures, Central has agreed to pay the Underwriters, as compensation for
arranging the investment therein of such proceeds, $ per Trust
Preferred Security, or $ in the aggregate. See "Underwriting."
Central has also agreed to pay the expenses of the offering estimated to be
$ .
(3) CFAC Capital has granted the Underwriters an option exercisable within 30
days from the date of this Prospectus to purchase up to 262,500 additional
Trust Preferred Securities on the same terms and conditions set forth above
to cover over-allotments, if any. If all such additional Trust Preferred
Securities are purchased, the total Price to Public and Proceeds to CFAC
Capital will be $50,312,500. See "Underwriting."
The Trust Preferred Securities are being offered by the Underwriters named
herein subject to prior sale and when, as and if delivered to and accepted by
the Underwriters. It is expected that the Trust Preferred Securities will be
ready for delivery in book-entry form only through the facilities of The
Depository Trust Company in New York, New York, on or about , 1997,
against payment therefor in immediately available funds.
SUTRO & CO. INCORPORATED
, 1997
<PAGE> 3
(Continued from previous page)
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the 15th day of March, June,
September and December of each year (subject to possible deferral as described
below), commencing , 1997, at the annual rate of % of the
Liquidation Amount (as defined herein) of $25 per Trust Preferred Security
("Distributions"). The amount of each Distribution due with respect to the Trust
Preferred Securities will include amounts accrued through the date the
Distribution payment is due. Central will have the right, so long as no
Debenture Event of Default (as defined below) has occurred and is continuing, to
defer payments of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, Central may elect to begin a new Extension
Period subject to the requirements set forth herein. If interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Trust
Preferred Securities will also be deferred and Central will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to its capital stock or to make any payment with
respect to its debt securities that rank pari passu with or junior to the Junior
Subordinated Debentures. During an Extension Period, interest on the Junior
Subordinated Debentures will continue to accrue (and the amount of Distributions
to which holders of the Trust Preferred Securities are entitled will accumulate)
at the rate of % per annum, compounded quarterly, and holders of the Trust
Preferred Securities will be required to accrue income and will be required to
pay United States federal income tax on that income. See "Description of Junior
Subordinated Debentures -- Option to Defer Interest Payment Period" and "Certain
Federal Income Tax Consequences -- Interest Income and Original Issue Discount."
Central has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of CFAC Capital's obligations under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the Guarantee -- Full and Unconditional
Guarantee." Under the Guarantee, Central guarantees the payment of Distributions
by CFAC Capital and payments on liquidation of or redemption of the Trust
Preferred Securities (subordinate to the right to payment of Senior and
Subordinated Debt of Central, as defined herein) to the extent of funds held by
CFAC Capital. See "Description of Guarantee." If Central does not make required
payments on the Junior Subordinated Debentures held by CFAC Capital, CFAC
Capital will have insufficient funds to pay Distributions on the Trust Preferred
Securities. The Guarantee does not cover payment of Distributions when CFAC
Capital does not have sufficient funds to pay such Distributions. In such event,
a holder of the Trust Preferred Securities may institute a legal proceeding
directly against Central pursuant to the terms of the Indenture to enforce
payment of such Distributions to such holder. See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of the Trust
Preferred Securities." The obligations of Central under the Guarantee and the
Junior Subordinated Debentures are subordinate and junior in right of payment to
all Senior and Subordinated Debt (as defined in "Description of Junior
Subordinated Debentures -- Subordination") of Central.
The Trust Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Junior Subordinated Debentures at the
Stated Maturity or their earlier redemption in each case at a redemption price
equal to the aggregate liquidation preference of the Trust Preferred Securities
plus any accumulated and unpaid Distributions thereon to the date of redemption.
Subject to restrictions contained in any Senior and Subordinated Debt or
regulatory approval if then required under applicable regulatory policies, the
Junior Subordinated Debentures are redeemable prior to maturity at the option of
Central (i) on or after , 2002, in whole at any time or in part
from time to time, or (ii) at any time (whether occurring before or after
, 2002) in whole (but not in part), within 90 days following the
occurrence of a Tax Event, an Investment Company Event or a Capital Treatment
Event (each as defined herein), in each case at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures to
(Continued on next page)
2
<PAGE> 4
(Continued from previous page)
the date fixed for redemption, plus 100% of the principal amount thereof. See
"Description of the Trust Preferred Securities--Redemption."
Central will have the right at any time to dissolve CFAC Capital and cause
a Like Amount (as defined herein) of the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of CFAC
Capital, subject to Central having received prior approval of the primary
federal regulator of Central if then required under applicable capital
guidelines or policies of such primary regulator. See "Description of the Trust
Preferred Securities -- Liquidation Distribution Upon Dissolution."
In the event of the dissolution of CFAC Capital, after satisfaction of
liabilities to creditors of CFAC Capital as required by applicable law, the
holders of Trust Preferred Securities will be entitled to receive a liquidation
amount of $25 per Trust Preferred Security ("Liquidation Amount"), plus
accumulated and unpaid Distributions thereon to the date of payment, which may
be in the form of a Distribution of such Like Amount of Junior Subordinated
Debentures, subject to certain exceptions. See "Description of the Trust
Preferred Securities -- Liquidation Distribution Upon Dissolution."
The Junior Subordinated Debentures and Guarantee are unsecured and
subordinated in right of payment to all Senior and Subordinated Debt. The terms
of the Junior Subordinated Debentures and Guarantee place no limitation on the
amount of Senior and Subordinated Debt that Central can issue. Central has a
revolving loan agreement with several banks and Wells Fargo Bank, N.A., as agent
(the "Line of Credit") that provides for borrowings by Central of up to $100
million, subject to an allowable borrowing base. Borrowings under the Line of
Credit are guaranteed by all of the significant domestic subsidiaries of the
Company and are secured by substantially all of the assets, including the
receivables, of the Company and a pledge by Central of the stock of all of its
significant subsidiaries. All borrowings under the Line of Credit are Senior and
Subordinated Debt. As of June 30, 1997, Central had approximately $66.7 million
aggregate principal amount outstanding under the Line of Credit, including
letters of credit. On a pro forma basis after giving effect to the offering and
application of the net proceeds therefrom to temporarily reduce the balance
outstanding under the Line of Credit, Central would have had approximately $25.0
million in Senior and Subordinated Debt outstanding as of June 30, 1997. In
addition, because Central is a holding company, substantially all of Central's
assets consist of the capital stock of its subsidiaries. All obligations of
Central relating to the securities described herein will be effectively
subordinated to all existing and future liabilities of Central's subsidiaries.
Central may cause additional Trust Preferred Securities to be issued by trusts
similar to CFAC Capital in the future, and there is no limit on the amount of
such securities that may be issued. In this event, Central's obligations under
the Junior Subordinated Debentures to be issued to such other trusts and
Central's guarantees of the payments by such trusts will rank pari passu with
Central's obligations under the Junior Subordinated Debentures and the
Guarantee, respectively. See "Risk Factors -- Subordination of Central's
Obligations Under the Junior Subordinated Debentures and the Guarantee," "Risk
Factors -- Restrictions Imposed by the Line of Credit," and "Risk
Factors -- Need for Senior Credit Facility," "Description of Junior Subordinated
Debentures -- Subordination" and "Description of Guarantee -- Status of
Guarantee."
The lenders under the Line of Credit have given a preliminary indication of
their consent to the transactions contemplated by this offering and the
performance by Central and CFAC Capital of the obligations to be performed by
them under the Indenture, the Trust Agreement, the Guarantee Agreement and the
Expense Agreement (each as defined herein). The offering will not be consummated
until the consent, which is currently being documented, is executed.
Application has been made to list the Trust Preferred Securities on The
Nasdaq Stock Market's National Market (the "Nasdaq National Market"). Although
the Underwriters have indicated an intention to make a market in the Trust
Preferred Securities, the Underwriters are not obligated to do so, and any
market making may be discontinued at any time at the sole discretion of the
Underwriters. There can be no assurance that a market will develop for the Trust
Preferred Securities. See "Risk Factors -- Absence of Existing Public Market;
Market Prices" and "Underwriting."
(Continued on next page)
3
<PAGE> 5
(Continued from previous page)
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company (the
"Depositary") or its nominee. Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described herein, the Trust Preferred Securities in certificate form will not be
issued in exchange for global certificates. See "Book-Entry Issuance."
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture
dated as of , 1997, as amended and supplemented from time to time,
between Central and Wilmington Trust Company, as trustee (the "Indenture
Trustee"), under which the Junior Subordinated Debentures will be issued, (ii)
the "Trust Agreement" means the Amended and Restated Trust Agreement relating to
CFAC Capital among Central, as Depositor, Wilmington Trust Company, as Property
Trustee (the "Property Trustee"), Wilmington Trust Company, as Delaware Trustee
(the "Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Guarantee Agreement" means the Guarantee Agreement
relating to the Guarantee between Central and Wilmington Trust Company, as
Guarantee Trustee (the "Guarantee Trustee"), and (iv) the "Expense Agreement"
means the Expense Agreement between Central and CFAC Capital.
The Company will provide to the holders of the Trust Preferred Securities
quarterly reports containing unaudited financial statements and annual reports
containing financial statements audited by the Company's independent auditors.
The Company will also furnish annual reports on Form 10-K and quarterly reports
on Form 10-Q free of charge to holders of the Trust Preferred Securities who so
request in writing to the Company.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST PREFERRED
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTTING THE TRUST PREFERRED
SECURITIES AND BIDDING FOR AND PURCHASING SUCH TRUST PREFERRED SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." SUCH STABILIZING
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS CONSTITUTES
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), WHICH CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"EXPECT," "BELIEVE," "INTEND," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE
STATEMENTS IN "RISK FACTORS" OF THIS PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS
IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH
RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. For purposes of this Prospectus, unless otherwise
indicated or the context otherwise requires, (i) the "Company" refers to Central
Financial Acceptance Corporation, its predecessors and its wholly-owned
subsidiaries, collectively, (ii) "Central" refers to the parent company only and
(iii) the information herein (a) assumes that the Company has been in existence
and the Reorganization (as defined below) was consummated concurrently with the
1991 Acquisition (as defined below) and (b) assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
The Company is a specialized consumer finance company that primarily serves
the financing needs of the rapidly growing low income Hispanic population, a
market the Company believes is underserved. The Company (i) provides small,
unsecured personal loans to the Company's customers; (ii) purchases and services
consumer finance receivables generated by the Company's customers for purchases
of high quality, brand name consumer products, appliances and furniture sold by
Banner's Central Electric, Inc. ("Banner"), an affiliate of the Company, and by
independent retailers; (iii) sells airline tickets and originates and services
travel-related finance receivables; and (iv) provides insurance products and
insurance premium financing to its customers. The Company has catered to the low
income Hispanic population during its 40 years of operation by locating its
facilities primarily in Hispanic communities, advertising in Spanish, and
employing Spanish as the primary language at its locations. While the Company
operates primarily in the greater Los Angeles area and faces substantial
competition with respect to its lines of business, the Company's objective is to
become the leading provider of consumer credit and other financial services to
the low income Hispanic population in urban areas within California and
elsewhere in the United States.
The Company's customers are typically between the ages of 21 and 45, earn
less than $25,000 per year, have little or no savings, and have limited or
short-term employment histories. In addition, the Company's customers typically
have no or limited prior credit histories and are generally unable to secure
credit from traditional lending sources. The Company bases its credit decisions
on its assessment of a customer's ability to repay the obligation. In making a
credit decision, in addition to the size of the obligation, the Company
generally considers a customer's income level, type and length of employment,
stability of residence, personal references, and prior credit history with the
Company. The Company also obtains a credit bureau report and rating, if
available, and seeks to confirm other credit-related information. The Company,
however, is more susceptible to the risk that its customers will not satisfy
their repayment obligations than are less specialized consumer finance companies
or consumer finance companies that have more stringent underwriting criteria.
See "Risk Factors -- Credit Risk Associated with Customers; Lack of Collateral"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Trends -- Credit Quality" and "-- Delinquency Experience
and Allowance for Credit Losses."
Since 1950, Hispanics have been the fastest growing minority group in the
United States, increasing from 4.0 million in 1950 to approximately 27.0 million
in 1996, a compound annual growth rate of 4.3%. According to the 1996 U.S.
Bureau of the Census Current Population Report (the "1996 Report"), this trend
is expected to continue. The 1996 Report projects that the Hispanic population
will total 36.0 million by 2005. California is home to the largest Hispanic
population in the United States, and it is estimated that this population will
grow from 9.4 million in 1995 to 13.0 million by 2005, at which time Hispanics
will comprise approximately 34% of California's total population.
Recognizing these demographic trends, management's strategy has been to
identify new financial products and services that it believes could be
introduced successfully to the low income Hispanic population in urban areas
within California and to increase the number of locations through which it can
distribute its products and services. From 1991, when the Company was acquired
by its current management (the "1991 Acquisition"), until the Company's initial
public offering in June 1996, the Company grew primarily as a result of the
introduction of such financial products and services and increased pricing. See
"Management's
5
<PAGE> 7
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Trends -- Analysis of Changes in Net Interest Income."
The Company's most significant growth has occurred as a result of the
introduction of unsecured small loans in the fourth quarter of 1992, a product
which the Company believes offers significant continued growth potential. In
1995, the Company began offering company-financed sales of airline tickets and
in 1996, the Company began selling automobile insurance and offering insurance
premium financing and expanded its independent retail financing business. In
1997, the Company introduced a new financial product involving the issuance of a
card, called an "Efectiva Card", which provides customers of the Company with
the ability to access their established lines of credit with the Company by
withdrawing cash from the Company's cash dispensing machines. As of the date
hereof, the Company has installed a proprietary, non-networked, closed system of
20 such cash dispensing machines, of which 18 are in locations owned or leased
by the Company or Banner and 2 of which are in locations owned or leased by
unaffiliated parties.
To continue its growth, in 1996 the Company began to expand its
distribution network through acquisitions of businesses primarily serving the
Hispanic community. The Company also intends to develop new financial products
and services internally that the Company believes will complement or expand its
current financial products and services, or seek to acquire existing businesses
that offer such products and services. The Company also intends to expand its
consumer finance business for independent retailers. Prior to May 1996, the
Company offered its products and services through 12 locations, 11 of which were
in the greater Los Angeles area. From May 1996 to year end 1996, the Company
acquired the business of, and assumed the leasehold interests to, 80 travel
locations. In July 1996, the Company acquired the business of, and assumed the
leasehold interests in, 10 auto insurance locations in the greater Los Angeles
area. Although such transactions were not material from a financial point of
view, the Company believes that such businesses provide the Company with growth
opportunities while adding additional locations through which it can offer its
financial products and services.
As a result of internal expansions, acquisitions and consolidation of
certain of its operations, at June 30, 1997, the Company operated through 77
locations of which 54 are located in Southern California, 17 are located in
Northern California, and 6 are located outside of California. At June 30, 1997,
the Company's gross receivables portfolio was approximately $133.0 million,
consisting of $54.8 million in the portfolio of loan contracts (the "Small Loan
Portfolio"), $48.6 million in the portfolio of consumer product contracts from
sales by Banner (the "Consumer Product Portfolio"), $7.7 million in the
portfolio of consumer finance contracts from sales by independent retailers (the
"Independent Retail Finance Portfolio"), $5.6 million in the portfolio of travel
finance contracts (the "Travel Finance Portfolio"), $7.3 million in the
portfolio of insurance premium finance contracts (the "Premium Finance
Portfolio") and $9.0 million in the portfolio of automobile finance contracts
(the "Automobile Finance Portfolio"). At June 30, 1997, the range of average net
contract balances in each of the portfolios was between approximately $386 and
$648, except for the Automobile Finance Portfolio, where the average net
contract balance was approximately $5,500.
The Company's principal executive offices are located at 5480 Ferguson
Drive, Commerce, California, 90022, and its telephone number is (213) 720-8600.
CFAC CAPITAL
CFAC Capital is a statutory business trust formed under Delaware law
pursuant to (i) the Trust Agreement and (ii) the filing of a Certificate of
Trust with the Delaware Secretary of State on September 26, 1997. CFAC Capital's
business and affairs are conducted by the Property Trustee, Delaware Trustee and
three individual Administrative Trustees who are officers of the Company. CFAC
Capital exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by Central, and (iii) engaging
in only those other activities necessary, advisable or incidental thereto. The
Junior Subordinated Debentures will be the sole assets of CFAC Capital, and
payments by Central under the Junior Subordinated Debentures and the Expense
Agreement will be the sole revenues of CFAC Capital. All of the Common
Securities will be owned by Central. The Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Trust Preferred Securities,
except that upon the occurrence and during the continuance of an event of
6
<PAGE> 8
default under the Trust Agreement resulting from an event of default under the
Indenture, the rights of Central as holder of the Common Securities to payment
in respect of Distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. See "Description of the Trust Preferred
Securities -- Subordination of Common Securities of CFAC Capital Held by
Central." Central will acquire Common Securities in an aggregate liquidation
amount equal to 3% of the total capital of CFAC Capital. CFAC Capital has a term
of 31 years, but may terminate earlier as provided in the Trust Agreement.
CFAC Capital's principal offices are located at 5480 East Ferguson Drive,
Commerce, California 90022 and its telephone number is (213) 720-8600.
7
<PAGE> 9
THE OFFERING
Trust Preferred Securities
issuer................... CFAC Capital
Securities offered......... 1,750,000 Trust Preferred Securities having a
Liquidation Amount of $25 per Trust Preferred
Security. The Trust Preferred Securities represent
preferred undivided beneficial interests in CFAC
Capital's assets, which will consist solely of the
Junior Subordinated Debentures and payments
thereunder. CFAC Capital has granted the
Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up
to an additional 262,500 Trust Preferred Securities
at the initial offering price, solely to cover
over-allotments, if any.
Distributions.............. The Distributions payable on each Trust Preferred
Security will be fixed at a rate per annum of %
of the Liquidation Amount of $25 per Trust
Preferred Security, will be cumulative, will accrue
from the date of issuance of the Trust Preferred
Securities, and will be payable quarterly in
arrears on the 15th day of March, June, September
and December of each year, commencing on
, 1997 (subject to possible deferral as described
below). The amount of each Distribution due with
respect to the Trust Preferred Securities will
include amounts accrued through the date the
Distribution payment is due. See "Description of
the Trust Preferred Securities."
Extension periods.......... So long as no Debenture Event of Default (as
defined herein) has occurred and is continuing,
Central will have the right, at any time, to defer
payments of interest on the Junior Subordinated
Debentures by extending the interest payment period
thereon for a period not exceeding 20 consecutive
quarters with respect to each deferral period (each
an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures. If interest
payments are so deferred, Distributions on the
Trust Preferred Securities will also be deferred
and Central will not be permitted, subject to
certain exceptions described herein, to declare or
pay any cash distributions with respect to
Central's capital stock or debt securities that
rank pari passu with or junior to the Junior
Subordinated Debentures. During an Extension
Period, Central would have the ability to continue
to make payments on Senior and Subordinated Debt.
During an Extension Period, Distributions will
continue to accumulate with interest thereon
compounded quarterly. Because interest would
continue to accrue and compound on the Junior
Subordinated Debentures, to the extent permitted by
applicable law, holders of the Trust Preferred
Securities will be required to accrue income for
United States federal income tax purposes. See
"Description of Junior Subordinated
Debentures -- Option to Defer Interest Payment
Period" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue
Discount."
Maturity................... The Junior Subordinated Debentures will mature on
, 2027 (the "Stated Maturity"), subject
to redemption on earlier dates as described below.
Redemption................. The Trust Preferred Securities are subject to
mandatory redemption upon repayment of the Junior
Subordinated Debentures at their Stated Maturity or
their earlier redemption at a redemption price
equal to the
8
<PAGE> 10
aggregate Liquidation Amount of the Trust Preferred
Securities plus accumulated and unpaid
Distributions thereon to the date of redemption.
Subject to restrictions contained in any Senior and
Subordinated Debt and regulatory approval, if then
required under applicable regulatory policies, the
Junior Subordinated Debentures are redeemable prior
to maturity at the option of Central (i) on or
after , 2002 in whole at any time or in
part from time to time, or (ii) at any time, in
whole (but not in part), within 90 days following
the occurrence of a Tax Event, an Investment
Company Event or a Capital Treatment Event, in each
case at a redemption price equal to 100% of the
principal amount of the Junior Subordinated
Debentures so redeemed, together with any accrued
but unpaid interest to the date fixed for
redemption. See "Description of the Trust Preferred
Securities -- Redemption" and "Description of
Junior Subordinated Debentures -- Redemption."
Distribution of Junior
Subordinated
Debentures............... Central has the right at any time to dissolve CFAC
Capital, after satisfaction of creditors of CFAC
Capital as required by applicable law, and cause
the Junior Subordinated Debentures to be
distributed to holders of Trust Preferred
Securities in liquidation of CFAC Capital, subject
to Central having received prior approval of the
primary federal regulator of Central to do so if
then required under applicable capital guidelines
or policies of such primary regulator. See
"Description of the Trust Preferred
Securities -- Distribution of Junior Subordinated
Debentures."
Guarantee.................. Taken together, Central's obligations under various
documents described herein, including the Guarantee
Agreement, provide a full, irrevocable and
unconditional guarantee of payments by CFAC Capital
of Distributions and other amounts due on the Trust
Preferred Securities. Under the Guarantee
Agreement, Central guarantees the payment of
Distributions by CFAC Capital and payments on
liquidation of or redemption of the Trust Preferred
Securities (subordinate to the right to payment of
Senior and Subordinated Debt of Central, as defined
herein) to the extent of funds held by CFAC
Capital. If CFAC Capital has insufficient funds to
pay Distributions on the Trust Preferred Securities
(i.e., if Central has failed to make required
payments under the Junior Subordinated Debentures),
a holder of the Trust Preferred Securities would
have the right to institute a legal proceeding
directly against Central to enforce payment of such
Distributions to such holder. See "Description of
Junior Subordinated Debentures -- Enforcement of
Certain Rights by Holders of the Trust Preferred
Securities," "Description of Junior Subordinated
Debentures -- Debenture Events of Default" and
"Description of Guarantee."
Ranking.................... The Trust Preferred Securities will rank pari
passu, and payments thereon will be made pro rata,
with the Common Securities of CFAC Capital held by
Central, except as described under "Description of
the Trust Preferred Securities -- Subordination of
Common Securities of CFAC Capital Held by Central."
The obligations of Central under the Guarantee, the
Junior Subordinated Debentures and other documents
described herein are unsecured and rank subordinate
and junior in right of payment to all current and
future Senior and Subordinated Debt, the amount of
which is unlimited. Central has a revolving loan
agreement
9
<PAGE> 11
with several banks and Wells Fargo Bank, N.A., as
agent (the "Line of Credit") that provides for
borrowings by Central of up to $100 million,
subject to an allowable borrowing base. Borrowings
under the Line of Credit are guaranteed by all of
the significant domestic subsidiaries of the
Company and are secured by substantially all of the
assets, including the receivables, of the Company
and a pledge by Central of the stock of all of its
significant subsidiaries. All borrowings under the
Line of Credit are Senior and Subordinated Debt. At
June 30, 1997, Central had approximately $66.7
million aggregate principal amount outstanding
under the Line of Credit, including letters of
credit. As of June 30, 1997, on a pro forma basis
after giving effect to the offering and application
of the net proceeds therefrom to temporarily reduce
the balance outstanding under the Line of Credit,
Central would have approximately $25.0 million in
Senior and Subordinated Debt outstanding. In
addition, because Central is a holding company,
substantially all of Central's assets consist of
the capital stock of its subsidiaries. All
obligations of Central relating to the securities
described herein will be effectively subordinated
to all existing and future liabilities of Central's
subsidiaries. Central may cause additional Trust
Preferred Securities to be issued by trusts similar
to CFAC Capital in the future, and there is no
limit on the amount of such securities that may be
issued. In this event, Central's obligations under
the Junior Subordinated Debentures to be issued to
such other trusts and Central's guarantees of the
payments by such trusts will rank pari passu with
Central's obligations under the Junior Subordinated
Debentures and the Guarantee, respectively. See
"Description of Junior Subordinated
Debentures -- Subordination" and "Description of
Guarantee -- Status of Guarantee."
Voting rights.............. The holders of the Trust Preferred Securities will
generally have limited voting rights relating only
to the modification of the Trust Preferred
Securities, the dissolution, winding-up or
termination of CFAC Capital and certain other
matters described herein. See "Description of the
Trust Preferred Securities -- Voting Rights;
Amendment of the Trust Agreement."
ERISA considerations....... Prospective purchasers must carefully consider the
information set forth under "ERISA Considerations."
Nasdaq National Market
symbol................... Application has been made to list the Trust
Preferred Securities on the Nasdaq National Market
under the symbol CFACP.
Use of proceeds............ The proceeds to CFAC Capital from the sale of the
Trust Preferred Securities offered hereby will be
invested by CFAC Capital in the Junior Subordinated
Debentures of Central. Central intends to use the
proceeds to temporarily reduce the balance
outstanding under the Line of Credit. See "Use of
Proceeds."
10
<PAGE> 12
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's consolidated financial position as of December 31, 1995 and 1996, and
its results of operations for the years ended December 31, 1994, 1995 and 1996
has been derived from the audited consolidated financial statements of the
Company appearing elsewhere herein. This information should be read in
conjunction with such consolidated financial statements and the notes thereto.
The selected financial data with respect to the Company's consolidated financial
position as of October 31, 1993 and 1994 and December 31, 1994, its results of
operations for the two months ended December 31, 1993 and 1994 and the fiscal
years ended October 31, 1993 and 1994 all have been derived from the audited
consolidated financial statements of the Company, which are not presented
herein. The selected financial data with respect to the Company's consolidated
financial position as of October 31, 1992, and June 30, 1997 and its results of
operations for the fiscal year ended October 31, 1992, the year ended December
31, 1993, and the six months ended June 30, 1996 and 1997 has been derived from
unaudited financial statements, which in the opinion of the Company's management
reflect all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
the full fiscal year.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWO MONTHS
YEARS ENDED ENDED YEARS ENDED
OCTOBER 31, DEC. 31, DECEMBER 31,
--------------------------------- --------------------- ---------------------------------
1992 1993 1994 1993 1994 1993 1994 1995
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues:
Interest income:
Consumer Product
Portfolio............... $ 8,145 $ 9,010 $ 11,444 $ 1,714 $ 2,057 $ 9,420 $ 11,787 $ 12,508
Small Loan Portfolio...... -- 134 672 54 439 188 1,057 5,095
Automobile Finance
Portfolio............... -- -- -- -- -- -- -- 240
Other(1).................. -- -- -- -- -- -- -- 176
Total interest
income.............. 8,145 9,144 12,116 1,768 2,496 9,608 12,844 18,019
Travel services............. -- -- -- -- -- -- -- 371
Transaction fees on
contracts purchased from
related party............. 747 830 844 137 150 829 857 916
Other income(2)............. 1,253 1,457 1,756 304 416 1,445 1,868 2,857
--------- --------- --------- --------- --------- --------- --------- ---------
Total revenues........ 10,145 11,431 14,716 2,209 3,062 11,882 15,569 22,163
--------- --------- --------- --------- --------- --------- --------- ---------
Costs and Expenses:
Operating expenses.......... 3,986 4,519 5,009 864 1,025 4,461 5,170 7,288
Provision for credit
losses.................... 2,654 3,264 3,002 696 1,617 3,447 3,923 5,449
Interest expense............ 2,306 2,279 2,523 339 617 2,235 2,801 4,278
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before taxes... 1,199 1,369 4,182 310 (197) 1,739 3,675 5,148
Income tax expense
(benefit)................... 503 572 1,694 127 (74) 727 1,493 2,079
--------- --------- --------- --------- --------- --------- --------- ---------
Net income before
discontinued operations..... 696 797 2,488 183 (123) 1,012 2,182 3,069
--------- --------- --------- --------- --------- --------- --------- ---------
Discontinued operations net
income (loss)............... -- -- -- -- -- -- -- 50
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)............ $ 696 $ 797 $ 2,488 $ 183 $ (123) $ 1,012 $ 2,182 $ 3,119
========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues:
Interest income:
Consumer Product
Portfolio............... $ 12,850 $ 6,364 $ 6,036
Small Loan Portfolio...... 9,686 4,261 6,462
Automobile Finance
Portfolio............... 1,548 602 825
Other(1).................. 1,691 418 2,583
Total interest
income.............. 25,775 11,645 15,906
Travel services............. 2,449 605 3,955
Transaction fees on
contracts purchased from
related party............. 965 447 575
Other income(2)............. 7,238 2,337 5,596
--------- --------- ---------
Total revenues........ 36,427 15,034 26,032
--------- --------- ---------
Costs and Expenses:
Operating expenses.......... 12,676 4,380 12,187
Provision for credit
losses.................... 9,105 4,279 5,229
Interest expense............ 4,697 2,482 2,874
--------- --------- ---------
Income (loss) before taxes... 9,949 3,893 5,742
Income tax expense
(benefit)................... 3,979 1,559 2,210
--------- --------- ---------
Net income before
discontinued operations..... 5,970 2,334 3,532
--------- --------- ---------
Discontinued operations net
income (loss)............... (91) (22) --
--------- --------- ---------
Net income (loss)............ $ 5,879 $ 2,312 $ 3,532
========= ========= =========
PER SHARE DATA:
Net income (loss) per share
before discontinued
operations.................. $ 0.14 $ 0.15 $ 0.48 $ 0.04 $ (0.02) $ 0.20 $ 0.42 $ 0.60
Net income (loss) per share
discontinued operations..... 0 0 0 0 0 0 0 0.01
--------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) per
share....................... $ 0.14 $ 0.15 $ 0.48 $ 0.04 $ (0.02) $ 0.20 $ 0.42 $ 0.61
========= ========= ========= ========= ========= ========= ========= =========
Weighted average number of
shares outstanding.......... 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000
<CAPTION>
PER SHARE DATA:
<S> <C> <C> <C>
Net income (loss) per share
before discontinued
operations.................. $ 0.96 $ 0.45 $ 0.49
Net income (loss) per share
discontinued operations..... (0.01) -- --
--------- --------- ---------
Net income (loss) per
share....................... $ 0.95 $ 0.45 $ 0.49
========= ========= =========
Weighted average number of
shares outstanding.......... 6,213,500 5,150,000 7,277,000
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
TWO MONTHS
YEARS ENDED ENDED YEARS ENDED
OCTOBER 31, DEC. 31, DECEMBER 31,
--------------------------------- --------------------- ---------------------------------
1992 1993 1994 1993 1994 1993 1994 1995
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS:(3)
Return on average
assets(4)................... 1.52% 1.60% 4.40% 2.00% (1.10)% 1.79% 3.48% 3.55%
Return on average
stockholders' equity(5)..... 5.74 5.22 13.94 5.89 (3.47) 5.65 10.62 10.83
Ratio of earnings to fixed
charges(6).................. 1.45x 1.54x 2.47x * * 1.72x 2.17x 2.11x
Pro forma ratio of earnings
to fixed charges (6)........ 1.45x 1.54x 2.47x * * 1.72x 2.17x 2.11x
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
FINANCIAL RATIOS:(3)
Return on average
assets(4)................... 4.75% 4.42% 4.95%
Return on average
stockholders' equity(5)..... 12.38 13.41 11.19
Ratio of earnings to fixed
charges(6).................. 2.91x 2.43x 2.71x
Pro forma ratio of earnings
to fixed charges (6)........ 2.40x 2.02x 2.37x
FINANCE RECEIVABLES
RATIOS:(3)(7)
Average interest rate on
average net receivables..... 17.4% 17.3% 21.3% 19.8% 22.4% 17.9% 21.7% 22.8%
Average interest rate on
average interest bearing
liabilities................. 7.0 6.3 6.5 5.9 8.3 6.2 6.9 8.2
Net interest spread.......... 10.4 11.0 14.8 13.9 14.1 11.7 14.8 14.6
Provision for credit losses
as a percentage of average
net receivables............. 5.7 6.2 5.3 7.8 14.5 6.4 6.6 7.0
Net write-offs as a
percentage of average net
receivables................. 3.6 5.4 5.2 5.9 5.9 5.4 5.2 5.4
Allowance for credit losses
as a percentage of net
receivables (end of
period)..................... 4.8 5.4 4.6 5.1 5.0 5.1 5.0 5.1
Accounts with payments 31
days or more past due as a
percentage of gross
receivables (end of
period)..................... 5.4 5.1 5.9 4.5 6.0 4.5 6.0 5.2
<CAPTION>
Pro forma ratio of earnings
FINANCE RECEIVABLES
RATIOS:(3)(7)
Average interest rate on
average net receivables..... 24.0% 23.4% 25.7%
Average interest rate on
average interest bearing
liabilities................. 8.0 8.0 8.3
Net interest spread.......... 16.0 15.4 17.4
Provision for credit losses
as a percentage of average
net receivables............. 9.1 9.1 9.4
Net write-offs as a
percentage of average net
receivables................. 7.2 6.3 8.4
Allowance for credit losses
as a percentage of net
receivables (end of
period)..................... 5.8 6.4 7.0
Accounts with payments 31
days or more past due as a
percentage of gross
receivables (end of
period)..................... 6.4 5.5 8.5
<CAPTION>
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
OCTOBER 31, DECEMBER 31, JUNE 30,
------------------------------- --------------------------------- ----------
1992 1993 1994 1994 1995 1996 1997
------- ------- ------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash...................................... $ -- $ 931 $ 1,886 $ 215 $ 57 $ 5,848 $ 6,388
Finance receivables, net(6)............... 45,094 47,626 56,662 70,328 90,471 109,699 97,575
Automobile finance receivables............ -- -- -- -- 4,203 8,728 7,375
Premium finance receivables, net.......... -- -- -- -- -- 1,964 6,903
Total assets.............................. 48,158 51,567 61,597 73,942 101,730 145,887 139,747
Total debt................................ 34,250 33,700 42,287 48,845 64,817 74,874 65,450
Stockholders' equity...................... 13,399 17,146 18,560 23,951 33,632 61,353 64,885
</TABLE>
- ---------------
(1) Other interest income includes interest earned on the Travel Finance
Portfolio, the Independent Retail Finance Portfolio and the Premium Finance
Portfolio.
(2) Other income includes administrative fees charged on certain small loan
contracts, late charges and revenue from the sale of insurance products.
(3) The Company's performance ratios are based on monthly averages (the average
of the beginning and end of the month balances) and are annualized where
appropriate.
(4) Net income (loss) divided by average total assets.
(5) Net income (loss) divided by average stockholders' equity.
(6) For purposes of calculating the ratio and pro forma ratio of earnings to
fixed charges, earnings consist of income before income taxes, plus fixed
charges. Fixed charges consist of the interest on all indebtedness and the
estimated representative interest factor of rental expense.
(7) Finance receivables include receivables in the Company's Consumer Product,
Small Loan, Travel Finance and Independent Retail Finance Portfolios.
* Not meaningful.
12
<PAGE> 14
RISK FACTORS
Prospective investors should consider, among other things, the following
factors in connection with a decision to purchase the Trust Preferred
Securities.
SUBORDINATION OF CENTRAL'S OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE
All obligations of Central under the Guarantee, the Junior Subordinated
Debentures and other documents described herein are unsecured and rank
subordinate and junior in right of payment to all current and future Senior and
Subordinated Debt, the amount of which is unlimited. Central has a Line of
Credit that provides for borrowings by Central of up to $100 million, subject to
an allowable borrowing base. Borrowings under the Line of Credit are guaranteed
by all of the significant domestic subsidiaries of the Company and are secured
by substantially all of the assets, including the receivables, of the Company
and a pledge by Central of the stock of all of its significant subsidiaries. All
borrowings under the Line of Credit are Senior and Subordinated Debt. At June
30, 1997, Central had approximately $66.7 million aggregate principal amount
outstanding under the Line of Credit, including letters of credit. As of June
30, 1997, on a pro forma basis after giving effect to the offering and
application of the net proceeds therefrom to temporarily reduce the balance
outstanding under the Line of Credit, Central would have approximately $25.0
million in Senior and Subordinated Debt outstanding. In addition, because
Central is a holding company, substantially all of Central's assets consist of
the capital stock of its subsidiaries. All obligations of Central relating to
the securities described herein will be effectively subordinated to all existing
and future liabilities of Central's subsidiaries. As a holding company, the
right of Central to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Trust Preferred Securities to benefit indirectly from
such distribution) is subject to the prior claims of creditors of that
subsidiary, except to the extent that Central may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures and
all obligations of Central relating to the Trust Preferred Securities will be
effectively subordinated to all existing and future liabilities of the Company,
and holders of the Trust Preferred Securities should look only to the assets of
Central, and not of its subsidiaries, for principal and interest payments on the
Junior Subordinated Debentures. Due to the subordination of the Junior
Subordinated Debentures and the Guarantee, in the event of insolvency,
bankruptcy, liquidation, reorganization, dissolution or winding up of the
business of Central, or upon a default in payment with respect to any Senior and
Subordinated Debt or an event of default with respect to such indebtedness
resulting from an acceleration thereof, the assets of Central will be available
to pay amounts due on the Junior Subordinated Debentures and the Guarantee only
after all Senior and Subordinated Debt has been paid in full. None of the
Indenture, the Guarantee, the Guarantee Agreement or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior and
Subordinated Debt, that may be incurred by Central or its subsidiaries. Further,
there is no limitation on Central's ability to issue additional Junior
Subordinated Debentures in connection with any further offerings of Trust
Preferred Securities, and such additional debentures would rank pari passu with
the Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Subordination" and "Description of Guarantee -- Status of the
Guarantee."
RESTRICTIONS IMPOSED BY THE LINE OF CREDIT
The Line of Credit requires, among other things, the Company to maintain
specific financial ratios and to satisfy certain financial tests. The Company's
ability to meet these financial ratios and financial tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet these tests. The Line of Credit also restricts, among other things, the
Company's ability to (i) incur additional indebtedness, (ii) pay indebtedness
prior to the date when due, (iii) pay dividends, make certain other restricted
payments or consummate certain asset sales, (iv) merge or consolidate with any
other person, (v) enter into certain transactions with affiliates, (vi) incur
indebtedness that is subordinate in priority and right of payment to amounts
outstanding under the Line of Credit, and (vii) make future acquisitions in
excess of an aggregate amount. The breach of any of these covenants could result
in a default under the Line of Credit. In the event of a default under the Line
of Credit, the lenders could seek to declare all amounts
13
<PAGE> 15
outstanding under the Line of Credit, together with accrued and unpaid interest,
to be immediately due and payable. If the Company were unable to repay the
amounts, the lenders under the Line of Credit could proceed against the
collateral granted to them to secure the indebtedness, which is substantially
all of the assets of Central and its subsidiaries. If the indebtedness under the
Line of Credit were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company, all of which rank senior in right of payment
to the Junior Subordinated Debentures and the Guarantee. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Junior
Subordinated Debentures -- Subordination."
NEED FOR SENIOR CREDIT FACILITY
The Company requires substantial capital to finance its business.
Consequently, the Company's ability to maintain its current level of operations
and to expand its operations will be affected by the availability of financing
and the terms thereof.
Currently, the Company funds its business activities under the Line of
Credit which expires June 12, 2000. The Company intends, after consummation of
this offering, to enter into negotiations with the lenders under the Line of
Credit or another group of lenders to restructure the Company's senior credit
facilities upon terms and conditions more favorable to the Company. No
assurances can be given, however, that Central will be successful in
restructuring the Line of Credit or obtaining replacement senior credit
facilities, or that if obtained any such restructured Line of Credit or
replacement senior credit facility will be on terms more favorable to the
Company. In addition, no assurances can be given that any such restructured Line
of Credit or replacement senior credit facility will not contain terms and
conditions in addition to those already contained in the Junior Subordinated
Debentures which might cause Central under certain circumstances to exercise its
existing right under the Junior Subordinated Debentures to defer the payment of
interest on the Junior Subordinated Debentures or otherwise restrict the ability
of Central to pay interest on the Junior Subordinated Debentures and
consequently CFAC Capital's ability to pay Distributions on the Trust Preferred
Securities. See "-- Option to Defer Interest Payment Period; Tax Consequences of
a Deferral of Interest Payments" below and "Description of Junior Subordinated
Debentures -- Subordination."
In addition, the inability of the Company at any time to renew or replace
its Line of Credit or other senior credit facilities on acceptable terms could
have a material adverse effect on the Company's results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
OPTION TO DEFER INTEREST PAYMENT PERIOD; TAX CONSEQUENCES OF A DEFERRAL OF
INTEREST PAYMENTS
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, Central has the right under the Indenture to defer payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Junior Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Trust Preferred Securities by CFAC
Capital will be deferred (and the amount of Distributions to which holders of
the Trust Preferred Securities are entitled will accumulate additional amounts
thereon at the rate of % per annum, compounded quarterly, from the relevant
payment date for such Distributions, to the extent permitted by applicable law)
during any such Extension Period. Neither the default by Central on any Senior
and Subordinated Debt nor a default with respect to Senior and Subordinated Debt
resulting in the acceleration of a maturity thereof constitutes a Debenture
Event of Default. During any such Extension Period, Central will be prohibited
from making certain payments or distributions with respect to Central's capital
stock (including dividends on or redemptions of common or preferred stock) and
from making certain payments with respect to any debt securities of Central that
rank pari passu with or junior in interest to the Junior Subordinated
Debentures; however, Central will not be restricted from (a) paying dividends or
distributions in common stock of Central, (b) redeeming rights or taking certain
other actions under a shareholders' rights plan, (c) making payments under the
Guarantee or (d) making purchases of common stock related to the issuance
14
<PAGE> 16
of common stock or rights under any of Central's benefit plans for its
directors, officers or employees. Further, during an Extension Period, Central
would have the ability to continue to make payments on Senior and Subordinated
Debt. Prior to the termination of any Extension Period, Central may further
extend such Extension Period provided that such extension does not cause such
Extension Period to exceed 20 consecutive quarters or to extend beyond the
Stated Maturity. Upon the termination of any Extension Period and the payment of
all interest then accrued and unpaid (together with interest thereon at the
annual rate of %, compounded quarterly, to the extent permitted by
applicable law), Central may elect to begin a new Extension Period subject to
the above requirements. There is no limitation on the number of times that
Central may elect to begin an Extension Period. See "Description of the Trust
Preferred Securities -- Distributions" and "Description of Junior Subordinated
Debentures -- Option to Defer Interest Payment Period" and "Description of
Junior Subordinated Debentures -- Debenture Events of Default."
Central has no current plan to exercise its option to defer payments of
interest and considers the likelihood of exercising the option to be a remote
contingency as of the issue date of the Junior Subordinated Debentures.
Therefore, it is Central's position that the Junior Subordinated Debentures will
be treated as issued without "original issue discount" for United States federal
income tax purposes. As a result, holders of Trust Preferred Securities will
include interest in taxable income under their own methods of accounting (i.e.,
cash or accrual). If Central exercises its right to defer payments of interest,
the holders of Trust Preferred Securities will be required to include their pro
rata share of original issue discount in gross income as it accrues for United
States federal income tax (and possibly other) purposes in advance of the
receipt of cash. If the tax authorities successfully asserted that, as of the
issue date of the Junior Subordinated Debentures, exercise of the option is not
a remote or incidental contingency, interest would be reportable under the
contingent payment debt rules of the Treasury Regulations as of the issue date.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount." Central has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Junior Subordinated Debentures. However, should Central elect to exercise its
right to defer payments of interest in the future, the market price of the Trust
Preferred Securities is likely to be adversely affected. A holder that disposes
of such holder's Trust Preferred Securities during an Extension Period,
therefore, might not receive the same return on such holder's investment as a
holder that continues to hold the Trust Preferred Securities.
REDEMPTION PRIOR TO STATED MATURITY
Central may, at its option, on or after , 2002, redeem the
Junior Subordinated Debentures in whole at any time or in part from time to time
at 100% of the principal amount together with accrued but unpaid interest to the
date fixed for redemption and therefore cause a mandatory redemption of the
Trust Securities.
In addition, upon the occurrence and during the continuation of a Tax
Event, an Investment Company Event or a Capital Treatment Event (whether
occurring before or after , 2002), Central has the right to redeem
the Junior Subordinated Debentures in whole (but not in part) at 100% of the
principal amount together with accrued but unpaid interest to the date fixed for
redemption within 90 days following the occurrence of such Tax Event, Investment
Company Event or Capital Treatment Event and therefore cause a mandatory
redemption of the Trust Securities. See "Description of the Trust Preferred
Securities -- Redemption."
A "Tax Event" means the receipt by Central and CFAC Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
original issuance of the Trust Preferred Securities, there is more than an
insubstantial risk that (i) CFAC Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, (ii)
interest payable by Central on the Junior Subordinated Debentures is not, or
within 90 days of such opinion, will not be, deductible by Central, in whole or
in part, for United States federal income tax purposes, or (iii) CFAC Capital
is, or will be within 90 days of
15
<PAGE> 17
the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges. See "-- Possible Tax Law Changes
Affecting the Trust Preferred Securities" below for a discussion of certain
legislative proposals that, if adopted, could give rise to a Tax Event, which
may permit Central to cause a redemption of the Junior Subordinated Debentures
(and therefore the Trust Preferred Securities) prior to , 2002.
An "Investment Company Event" means the receipt by Central and CFAC Capital
of an opinion of counsel experienced in such matters to the effect that, as a
result of any change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, CFAC Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, which change becomes effective on or after the original
issuance of the Trust Preferred Securities.
A "Capital Treatment Event" means, in the event the Company becomes subject
to capital adequacy guidelines, the reasonable determination by Central that, as
a result of any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement, or decision is announced on or after the
date of issuance of the Trust Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk of impairment of Central's ability to
treat an amount equal to the Liquidation Amount of the Trust Preferred
Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the primary federal regulator of Central, as
then in effect and applicable to Central.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
Congress and the Clinton Administration have recently considered proposals
that would deny an issuer a deduction for United States income tax purposes for
the payment of interest on instruments with characteristics similar to the
Junior Subordinated Debentures. While no such adverse legislation has been
enacted, there can be no assurance that similar legislation enacted after the
date hereof would not adversely affect the tax treatment of the Junior
Subordinated Debentures. Such a change would give rise to a Tax Event which may
permit Central to cause a redemption of the Trust Preferred Securities by
electing to prepay the Junior Subordinated Debentures. See "Description of the
Trust Preferred Securities -- Redemption"; "Description of Junior Subordinated
Debentures -- Redemption"; and "Certain Federal Income Tax Consequences."
POSSIBLE DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST
PREFERRED SECURITIES
Central will have the right at any time to terminate CFAC Capital and,
after satisfaction of liabilities to creditors of CFAC Capital as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of CFAC Capital.
Because holders of the Trust Preferred Securities may receive Junior
Subordinated Debentures in liquidation of CFAC Capital and because Distributions
are otherwise limited to payments on the Junior Subordinated Debentures,
prospective purchasers of the Trust Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution" and "Description of
Junior Subordinated Debentures."
Under current United States federal income tax law and interpretations and
assuming, as expected, CFAC Capital is classified as a grantor trust for such
purposes, a distribution of the Junior Subordinated Debentures upon a
liquidation of CFAC Capital should not be a taxable event to holders of the
Trust Preferred Securities. However, if a Tax Event were to occur which would
cause CFAC Capital to be subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures, a
distribution of the Junior Subordinated Debentures by CFAC Capital could be a
taxable event to CFAC Capital and the holders of the Trust Preferred Securities.
See "Certain Federal Income Tax Consequences -- Distribution of Junior
Subordinated Debentures to Holders of Trust Preferred Securities."
16
<PAGE> 18
LIMITATIONS ON DIRECT ACTIONS AGAINST CENTRAL AND ON RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by CFAC Capital: (i) any
accumulated and unpaid Distributions required to be paid on the Trust Preferred
Securities, to the extent that CFAC Capital has funds on hand available therefor
at such time, (ii) the redemption price with respect to any Trust Preferred
Securities called for redemption, to the extent that CFAC Capital has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of CFAC Capital (unless the Junior
Subordinated Debentures are distributed to holders of the Trust Preferred
Securities), the lesser of (a) the aggregate of the Liquidation Amount and all
accumulated and unpaid Distributions to the date of payment to the extent that
CFAC Capital has funds on hand available therefor at such time (the "Liquidation
Distribution") and (b) the amount of assets of CFAC Capital remaining available
for distribution to holders of the Trust Preferred Securities after satisfaction
of liabilities to creditors of CFAC Capital as required by applicable law. The
holders of not less than a majority in aggregate liquidation amount of the Trust
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee Agreement. Any holder of the
Trust Preferred Securities may institute a legal proceeding directly against
Central to enforce its rights under the Guarantee without first instituting a
legal proceeding against CFAC Capital, the Guarantee Trustee or any other person
or entity. If Central were to default on its obligation to pay amounts payable
under the Junior Subordinated Debentures, CFAC Capital would lack funds for the
payment of Distributions or amounts payable on redemption of the Trust Preferred
Securities or otherwise, and, in such event, holders of the Trust Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have occurred
and be continuing and such event is attributable to the failure of Central to
pay interest on or principal of the Junior Subordinated Debentures on the
payment date on which such payment is due and payable, then a holder of Trust
Preferred Securities may institute a legal proceeding directly against Central
for enforcement of payment to such holder of the principal of or interest on
such Junior Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Trust Preferred Securities of such holder (a
"Direct Action"). In connection with such Direct Action, Central will have a
right of set-off under the Indenture to the extent of any payment made by
Central to such holder of Trust Preferred Securities in the Direct Action.
Except as described herein, holders of Trust Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Junior Subordinated Debentures or assert directly any other rights in respect of
the Junior Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Enforcement of Certain Rights by Holders of Trust Preferred
Securities" and "Description of Guarantee." The Trust Agreement provides that
each holder of Trust Preferred Securities by acceptance thereof agrees to the
subordination and other provisions of the Guarantee Agreement and the Indenture.
ABILITY TO MAKE PAYMENTS ON THE TRUST PREFERRED SECURITIES AND JUNIOR
SUBORDINATED DEBENTURES
Substantially all of the assets of Central consist of the capital stock of
its subsidiaries. Central is a legal entity separate and distinct from its
subsidiaries. The ability of CFAC Capital to pay amounts due on the Trust
Preferred Securities is solely dependent upon Central making payments on the
Junior Subordinated Debentures as and when required. Central's ability to pay
interest on the Junior Subordinated Debentures to CFAC Capital (and
consequently, CFAC Capital's ability to pay distributions on the Trust Preferred
Securities and Central's ability to pay its obligations under the Guarantee)
depends primarily on cash and liquid investments of Central and upon cash
dividends and interest payments Central may receive in the future from its
subsidiaries. Payment of dividends by subsidiaries is subject to the
subsidiaries' profitability, financial condition, capital expenditure and other
cash flow requirements and restrictions contained in any credit facilities or
securities of the subsidiary. Under the Line of Credit, all indebtedness of a
subsidiary to Central in an amount of $250,000 or more is required to be pledged
to collateralize outstanding indebtedness under the Line of Credit. At June 30,
1997, Central had only $50,000 of cash or liquid investments, as substantially
all available cash was held by the Company's subsidiaries. See "Use of
Proceeds."
17
<PAGE> 19
LIMITED COVENANTS; ABSENCE OF SINKING FUND
The covenants in the Indenture are limited. The Company is not required
under the Indenture to meet any financial tests that measure the Company's
working capital, interest coverage, or net worth in order to comply with the
terms of the Indenture. There are no covenants relating to Central in the Trust
Agreement. As a result, neither the Indenture nor the Trust Agreement protects
holders of Junior Subordinated Debentures, or Trust Preferred Securities,
respectively, in the event of a material adverse change in Central's or the
Company's financial condition or results of operations or limits the ability of
Central or any subsidiary to incur additional indebtedness. Therefore, the
provisions of these governing instruments should not be considered a significant
factor in evaluating whether Central will be able to comply with its obligations
under the Junior Subordinated Debentures or the Guarantee. Further, the Junior
Subordinated Debentures do not have the benefit of any sinking fund payments by
Central.
LIMITED VOTING RIGHTS
Holders of Trust Preferred Securities will generally have limited voting
rights relating only to the modification of the Trust Preferred Securities, the
dissolution, winding-up or liquidation of CFAC Capital, and the exercise of CFAC
Capital's rights as holder of Junior Subordinated Debentures. Holders of Trust
Preferred Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, and such voting rights are vested
exclusively in the holder of the Common Securities except upon the occurrence of
certain events described herein. In no event will the holders of the Trust
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Common Securities. The Property Trustee, the Administrative Trustees and
Central may amend the Trust Agreement without the consent of holders of Trust
Preferred Securities to ensure that CFAC Capital will be classified for United
States federal income tax purposes as a grantor trust or to ensure that CFAC
Capital will not be required to register as an "investment company," even if
such action adversely affects the interests of such holders. See "Description of
Trust Preferred Securities -- Voting Rights; Amendment of the Trust Agreement"
and "-- Removal of Trustees."
ABSENCE OF EXISTING PUBLIC MARKET; MARKET PRICES
There is no existing market for the Trust Preferred Securities. Application
has been made to list the Trust Preferred Securities on the Nasdaq National
Market. There can be no assurance that an active and liquid trading market for
the Trust Preferred Securities will develop or that a continued listing of the
Trust Preferred Securities will be available on the Nasdaq National Market.
Although the Underwriters have informed CFAC Capital and the Company that the
Underwriters intend to make a market in the Trust Preferred Securities offered
hereby, the Underwriters are not obligated to do so and any such market making
activity may be terminated at any time without notice to the holders of the
Trust Preferred Securities. Future trading prices of the Trust Preferred
Securities will depend on many factors including, among other things, prevailing
interest rates, the operating results and financial condition of the Company,
and the market for similar securities. As a result of the existence of Central's
right to defer interest payments on or shorten the Stated Maturity of the Junior
Subordinated Debentures, the market price of the Trust Preferred Securities may
be more volatile than the market prices of debt securities that are not subject
to such optional deferrals or reduction in maturity. There can be no assurance
as to the market prices for the Trust Preferred Securities or the Junior
Subordinated Debentures that may be distributed in exchange for the Trust
Preferred Securities if Central exercises its right to terminate CFAC Capital.
Accordingly, the Trust Preferred Securities that an investor may purchase, or
the Junior Subordinated Debentures that a holder of the Trust Preferred
Securities may receive in liquidation of CFAC Capital, may trade at a discount
from the price that the investor paid to purchase the Trust Preferred Securities
offered hereby.
CREDIT RISK ASSOCIATED WITH CUSTOMERS; LACK OF COLLATERAL
The Company's customers are typically between the ages of 21 and 45, earn
less than $25,000 per year, have little or no savings, and have limited or
short-term employment histories. In addition, the Company's customers typically
have no prior credit histories and are unable to secure credit from traditional
lending sources. The Company bases its credit decisions primarily on its
assessment of a customer's ability to repay the
18
<PAGE> 20
obligation. In making a credit decision, in addition to the size of the
obligation, the Company generally considers a customer's income level, type and
length of employment, stability of residence, personal references and prior
credit history with the Company. The Company, however, is more susceptible to
the risk that its customers will not satisfy their repayment obligations than
are less specialized consumer finance companies or consumer finance companies
that have more stringent underwriting criteria.
Because the Company relies on the creditworthiness of its customers for
repayment and does not rely on collateral securing the debt, the Company
experiences actual rates of losses higher than lenders who have collateral which
they can repossess in the event of a borrower's default. At June 30, 1997, the
Company had net finance receivables (comprised of all receivables except those
in the Automobile Finance and Premium Finance Portfolios) of $97.6 million, or
87% of the Company's total net receivables. At June 30, 1997, the finance
receivables had accounts with payments 31 days or more past due as a percentage
of end of period gross receivables of 8.5%, as compared to 6.4% and 5.2%, at
year-end 1996 and 1995, respectively. During the six months ended June 30, 1997,
the portfolios comprising the finance receivables had net write-offs of $4.7
million, as compared to $3.0 million during the six months ended June 30, 1996.
The provision for credit losses for such portfolios as a percentage of average
net finance receivables was 9.4% for the six months ended June 30, 1997, as
compared to 9.1% and 7.0% during 1996 and 1995, respectively. There can be no
assurance that the Company will not continue to experience increases in
delinquencies and net write-offs which would require additional increases in the
provisions for credit losses. Such increases would adversely affect results of
operations if the Company were not able to increase the rate charged on
receivables to reflect the additional risks in its portfolios. Since the Company
presently charges the maximum allowable interest rates on its various loan
products, further increases in delinquencies and write-offs will adversely
affect results of operations. For information concerning the Company's credit
quality experience, see "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Financial Trends -- Credit Quality" and
"-- Delinquency Experience and Allowance for Credit Losses."
GENERAL ECONOMIC RISK
The risks associated with the Company's business become more significant in
an economic slowdown or recession. During periods of economic slowdown or
recession, the Company has experienced and may again experience a decreased
demand for its financial products and services and an increase in rates of
delinquencies and the frequency and severity of losses. The Company's actual
rates of delinquencies and frequency and severity of losses have been in the
past and may be in the future higher under adverse economic conditions than
those generally experienced in the consumer finance industry. Any sustained
period of economic slowdown or recession could materially adversely affect
Central's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Trends -- Portfolio," "-- Credit Quality" and
"-- Delinquency Experience and Allowances for Credit Losses."
DEPENDENCE ON CALIFORNIA MARKET
Substantially all of the Company's facilities are located, and
substantially all of the Company's revenues are generated in California. To
date, substantially all of the Company's operations have been in Southern
California. Therefore, the Company's performance depends upon economic
conditions in California, and in Southern California in particular, and may be
adversely affected by social factors or natural disasters in California. During
the early 1990's, California experienced adverse economic conditions. A decline
in the California economy could have a material adverse effect on the Company's
results of operations and financial condition.
DEPENDENCE OF CONSUMER PRODUCT PORTFOLIO ON BANNER
The Consumer Product Portfolio consists of consumer finance receivables
generated from products sold by Banner. The performance of the Consumer Product
Portfolio therefore depends substantially upon the success of Banner's stores.
The Consumer Product Portfolio accounted for 36.6% of the Company's gross
receivables portfolio as of June 30, 1997. Although as part of its business
strategy, the Company has begun to
19
<PAGE> 21
expand its installment credit business to independent retailers, and acquire and
utilize new distribution centers, including the Company's travel locations,
through which it may offer its products and services to a larger pool of
customers, the installment credit business will, for the foreseeable future,
continue to depend on Banner's stores and customers. There can be no assurance
that the Company will be able to successfully further expand its installment
credit finance business to other retailers or its distribution network.
SEASONAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company experiences the highest demand for its financial products and
services between October and December, and experiences the lowest demand for its
financial products and services between January and March. These significant
seasonal fluctuations in its business directly impact the Company's operating
results and cash needs.
INTEREST RATE RISK
The net interest spread, which is the difference between the average
interest rate on average net receivables and the average interest rate on
average interest bearing liabilities (the "Net Interest Spread"), partially
determines the Company's profitability. Because the Company pays a floating
interest rate on borrowings under its Line of Credit, increases in such rate
have at times decreased, and in the future may decrease, the Company's Net
Interest Spread and have a material adverse effect on the Company's results of
operations and financial condition. The interest rate the Company is allowed to
charge its customers on its small loans is limited under California law. The
Company presently charges the maximum interest rate permitted in California.
There is no corresponding interest rate limitation on installment credit sales.
Increases in the interest rate the Company charges its customers could reduce
demand for the Company's financial products and services which, in turn, could
decrease the Company's net income. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation" and "Business -- Regulation."
ABILITY OF THE COMPANY TO EXECUTE ITS BUSINESS STRATEGY
The financial performance of the Company will depend, in part, on the
Company's ability (i) to integrate new locations into the Company's operations,
(ii) to generate satisfactory performance or enhance performance at such
locations, (iii) to open and/or acquire additional locations on favorable terms,
(iv) to integrate new financial products and services into the Company's
operations; and (v) to enter into arrangements with additional independent
retailers. As a result of acquisitions during 1996, the Company acquired 84 new
locations, several of which have been closed, from which to distribute both new
and established products and services, including 33 locations in new geographic
regions. There can be no assurance that any of such acquired locations and
operations will be effectively and profitably integrated into the Company's
existing operations. Such acquisitions may negatively impact the Company's
operating results, particularly during the periods immediately following an
acquisition. In addition, there can be no assurance that the Company will be
able to profitably implement its business strategy in new geographic areas.
Furthermore, the Company may compete for expansion and acquisition opportunities
with companies that have significantly greater financial and other resources
than the Company. There can be no assurance that the Company will be able to
locate suitable new locations or acquisition candidates, or that any operations
that the Company opens or acquires will be effectively and profitably integrated
into the Company's existing operations.
The Company's financial performance also depends, in part, on the Company's
ability to manage its various portfolios and the Company's ability to
successfully introduce additional financial products and services. There can be
no assurance that additional financial products and services will be introduced
or, if introduced, that such financial products and services will be successful.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
COMPETITION
Each of the Company's businesses operate in highly competitive industries.
The Company competes against a large number of national and regional firms
engaged in such businesses, many of which have substantially greater resources
than the Company. There can be no assurance that the Company's present
competitors or companies that choose to enter the marketplace in the future will
not exert significant
20
<PAGE> 22
competitive pressures on the Company which could have a material adverse effect
on the Company's results of operations and financial condition. See
"Business -- Competition."
IMPACT OF GOVERNMENT REGULATION
The operations of the Company are regulated by federal, state and local
government authorities and are subject to various laws and judicial and
administrative decisions imposing various requirements and restrictions
including, among other things, regulating credit granting activities,
establishing maximum interest rates and charges, requiring disclosures to
customers, governing secured transactions and setting collection, repossession
and claims handling procedures, regulating insurance claims practices and
procedures, and other trade practices. Although the Company believes that it is
in compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future which may make
compliance more difficult or expensive, restrict the Company's ability to
purchase or finance installment sales or small loans, further limit or restrict
the amount of interest and other charges imposed in installment sales or small
loans originated by retailers or the Company, or otherwise materially adversely
affect the business or prospects of the Company. See "Business -- Regulation."
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends substantially on certain members of its
senior management, in particular Mr. Cypres, the Company's Chairman of the
Board, Chief Executive Officer, President and Chief Financial Officer. The
Company's business and financial condition could be materially adversely
affected by the loss of the services of Mr. Cypres. The Company does not
maintain key man life insurance. See "Management -- Board of Directors and
Executive Officers" and "-- Certain Relationships and Related Transactions."
CONCENTRATION OF VOTING CONTROL
Banner beneficially owns or otherwise controls an aggregate of
approximately 70.8% of the outstanding common stock of Central. Consequently,
Banner is able to elect the entire Board of Directors, adopt amendments to
Central's Certificate of Incorporation or effect a merger, sale of assets, or
other fundamental corporate transaction without the approval of Central's other
stockholders. Banner is able to control the direction and future operations of
Central, including decisions regarding the issuance of additional shares of
common stock and other securities. As long as Banner is a majority stockholder
of Central, it will be impossible for third parties to obtain control of Central
through purchases of common stock not beneficially owned or otherwise controlled
by Banner. See "-- Relationships with Holdings, Banner and Affiliates; Potential
Conflicts of Interest" below, "Management," and "Security Ownership of Certain
Beneficial Owners and Management."
RELATIONSHIPS WITH HOLDINGS, BANNER AND AFFILIATES; POTENTIAL CONFLICTS OF
INTEREST
Gary M. Cypres, the Company's Chairman of the Board, Chief Executive
Officer, President and Chief Financial Officer, is the Chairman of the Board,
Chief Executive Officer, Chief Financial Officer and President of Banner and
Banner Holdings, Inc. ("Holdings") which owns 100% of the capital stock of
Banner. West Coast Private Equity Partners, L.P. ("West Coast"), of which Mr.
Cypres is the managing general partner, controls Holdings. Mr. Cypres controls
the Company, through West Coast, Holdings and Banner. Consequently, West Coast
and Mr. Cypres may have conflicts of interest with respect to transactions
concerning the Company and its affiliates. Additionally, West Coast, through
Holdings, controls two companies other than the Company, Banner and Central
Rents Holdings, Inc., all of which may have interests which are divergent from
one another and the Company. Banner owns and operates six installment credit
stores in the greater Los Angeles area and one installment credit store in San
Francisco. Central Rents Holdings, Inc., and its wholly-owned subsidiary,
Central Rents, Inc. ("Central Rents"), owns and operates 168 rental-purchase
stores in 20 states which rent a broad range of consumer products, including
electronics, appliances and furniture. Central Rents operates 20 rental-purchase
stores in Southern California and 25 rental-purchase stores in Northern
California.
21
<PAGE> 23
Central, Banner and Holdings have entered into certain agreements setting
forth the ongoing relationships among them. None of these agreements is the
result of arm's-length negotiations. Therefore, there can be no assurance that
any of these agreements has been effected on terms comparable to those that
would have resulted from negotiations among independent parties. Furthermore,
Central, Banner and Holdings and their respective subsidiaries may enter into
additional or modified agreements, arrangements and transactions in the future.
Any such future agreements, arrangements or transactions will be determined
through negotiations between Central, Banner and Holdings or their respective
subsidiaries, as the case may be. See "-- Concentration of Voting Control" above
and "Management -- Certain Relationships and Related Transactions."
Prior to Central's initial public offering of its common stock, Mr. Cypres
rendered services to the Company through a consulting agreement between Holdings
and G.M. Cypres & Co., Inc., a Delaware corporation wholly-owned by Mr. Cypres
("G.M. Cypres & Co."). In June 1996, Mr. Cypres entered into a five year
employment agreement with the Company pursuant to which Mr. Cypres serves as
Chairman of the Board, Chief Executive Officer and President of the Company. In
such capacities, Mr. Cypres spends that portion of his business time as is
required to oversee the operations of the Company and to formulate and direct
the implementation of the Company's business strategies. Mr. Cypres continues to
spend a portion of his business time as the managing general partner of West
Coast, as Chairman of the Board, Chief Executive Officer, Chief Financial
Officer and President of Holdings, as Chairman of the Board, Chief Executive
Officer, Chief Financial Officer and President of Banner, and as Chairman of the
Board, Chief Executive Officer and President of Central Rents. See
"-- Concentration of Voting Control" above, and "Management."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "may," "will," "expect," "believe,"
"anticipate," "intend," "estimate," "continue" or the negative thereof or other
variations thereon or words of similar import, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economics and business conditions in those areas in which the
Company operates; demographic changes; competition; fluctuations in interest
rates; changes in business strategy or development plans; changes in
governmental regulation; credit quality; the availability of capital to fund the
expansion of the Company's business; and other factors referenced in this
Prospectus including, without limitation, under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
results of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments.
USE OF PROCEEDS
All of the proceeds from the sale of Trust Preferred Securities will be
invested by CFAC Capital in the Junior Subordinated Debentures. The net proceeds
to Central from the sale of the Junior Subordinated Debentures are estimated to
be $ ($ if the Underwriters' over-allotment option is
exercised in full), net of estimated underwriting commissions and other
estimated offering expenses. Central intends to use the net proceeds to reduce
amounts outstanding under the Line of Credit, which was approximately $66.7
million at June 30, 1997, including letters of credit, and is expected to be
approximately $66.7 million immediately prior to the closing of the offering.
Such amounts will then become available under the Line of Credit for reborrowing
by the Company to fund the Company's receivables and operations. The Line of
Credit, which expires June 12, 2000, bears interest, at the option of Central,
at a rate equal to either (a) 87.5 basis points above the higher of the prime
rate announced by Wells Fargo Bank or the federal funds rate plus 50 basis
points or (b) 225 basis points above the interest rate per annum at which
deposits in dollars are
22
<PAGE> 24
offered by Wells Fargo Bank to prime banks in the London Eurodollar market. The
aggregate amount of indebtedness outstanding under the Line of Credit at June
30, 1997 bore interest at the rate of 7.9%. For additional information
concerning the Line of Credit, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Line of Credit was entered into on June 13, 1997. The initial
borrowings under the Line of Credit were used to repay amounts which were then
outstanding under the Company's $60 million credit facility with Bank of
American National Trust and Savings Association and $50 million line of credit
with Wells Fargo Bank (the "Prior Lines of Credit"). Borrowings under the Prior
Lines of Credit were used and additional borrowings under the Line of Credit
were and will be used to fund the Company's receivables and operations.
ACCOUNTING TREATMENT
For financial reporting purposes, CFAC Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of CFAC Capital will be
included in the consolidated financial statements of the Company. The Trust
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company under the caption "Company Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures," and appropriate disclosures about the Trust
Preferred Securities, the Guarantee and the Junior Subordinated Debentures will
be included in the notes to consolidated financial statements. For financial
reporting purposes, the Company will record Distributions payable on the Trust
Preferred Securities as an interest expense in the consolidated statements of
operations.
Future reports of the Company filed under the Exchange Act, will include a
footnote to the financial statements stating that (i) CFAC Capital is wholly
owned, (ii) the sole assets of CFAC Capital are the Junior Subordinated
Debentures (specifying the principal amount, interest rate and maturity date of
such Junior Subordinated Debentures), and (iii) the back up obligations, in the
aggregate, constitute a full and unconditional guarantee by the Company of the
obligations of CFAC Capital under the Trust Preferred Securities. CFAC Capital
will not provide separate reports under the Exchange Act.
23
<PAGE> 25
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997 and as adjusted to give effect to the issuance of the
Trust Preferred Securities offered by CFAC Capital and receipt by Central of the
proceeds, net of estimated underwriting commissions and other estimated offering
expenses, from the corresponding sale of the Junior Subordinated Debentures to
CFAC Capital and application thereof to reduce outstanding amounts under the
Line of Credit.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
DEBT:
Line of Credit(2)...................................................... $ 64,600 $ 22,900
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated debentures(1).... 0 43,750
Long-term debt......................................................... 850 850
-------- --------
Total debt........................................................ $ 65,450 $ 67,500
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value: 5,000,000 shares authorized, none
issued............................................................... $ -- $ --
Common stock, $.01 par value: 20,000,000 shares authorized, 7,277,000
outstanding.......................................................... 73 73
Paid in capital........................................................ 47,903 47,903
Retained earnings...................................................... 16,909 16,909
-------- --------
Total stockholders' equity........................................ $ 64,885 $ 64,885
-------- --------
Total capitalization................................................. $130,335 $132,385
======== ========
</TABLE>
- ---------------
(1) The subsidiary trust is CFAC Capital, which will hold the Junior
Subordinated Debentures as its sole asset. The Trust Preferred Securities
are issued by CFAC Capital. The sole assets of CFAC Capital consist of the
Junior Subordinated Debentures issued by the Company to CFAC Capital. The
Junior Subordinated Debentures will bear interest at the rate of % per
annum and will mature on , 2027. The Junior Subordinated
Debentures are redeemable prior to maturity at the option of the Company,
subject to restrictions contained in any Senior and Subordinated Debt and
the Company having received prior approval of the primary federal regulator
of the Company if then required under applicable capital guidelines or
policies of such primary regulator, (i) on or after , 2002, in
whole at any time or in part from time to time, or (ii) at any time, in
whole (but not in part), within 90 days following the occurrence and
continuation of a Tax Event, an Investment Company Event or a Capital
Treatment Event (each as defined herein). See "Description of Junior
Subordinated Debentures -- Redemption." The Company owns all of the Common
Securities of CFAC Capital.
(2) Does not include letters of credit of $2.1 million.
24
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's consolidated financial position as of December 31, 1995 and 1996, and
its results of operations for the years ended December 31, 1994, 1995 and 1996
has been derived from the audited consolidated financial statements of the
Company appearing elsewhere herein. This information should be read in
conjunction with such consolidated financial statements and the notes thereto.
The selected financial data with respect to the Company's consolidated financial
position as of October 31, 1993 and 1994 and December 31, 1994, its results of
operations for the two months ended December 31, 1993 and 1994 and the fiscal
years ended October 31, 1993 and 1994 has been derived from the audited
consolidated financial statements of the Company, which are not presented
herein. The selected financial data with respect to the Company's consolidated
financial position as of October 31, 1992 and June 30, 1997 and its results of
operations for the fiscal year-ended October 31, 1992, the year-ended December
31, 1993 and the six months ended June 30, 1996 and 1997 has been derived from
unaudited financial statements, which in the opinion of the Company's management
reflect all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
the full fiscal year.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWO MONTHS
YEARS ENDED ENDED YEARS ENDED
OCTOBER 31, DEC. 31, DECEMBER 31,
------------------------------- ------------------ -------------------------------------------
1992 1993 1994 1993 1994 1993 1994 1995 1996
------- ------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
DATA:
Revenues:
Interest income:
Consumer Product
Portfolio.............. $ 8,145 $ 9,010 $11,444 $1,714 $ 2,057 $ 9,420 $11,787 $12,508 $12,850
Small Loan Portfolio..... -- 134 672 54 439 188 1,057 5,095 9,686
Automobile Finance
Portfolio.............. -- -- -- -- -- -- -- 240 1,548
Other(1)................. -- -- -- -- -- -- -- 176 1,691
------- ------- ------- ------ ------ ------- ------- ------- -------
Total interest income.... 8,145 9,144 12,116 1,768 2,496 9,608 12,844 18,019 25,775
------- ------- ------- ------ ------ ------- ------- ------- -------
Travel services.......... -- -- -- -- -- -- -- 371 2,449
Transaction fees on
contracts purchased
from related party..... 747 830 844 137 150 829 857 916 965
Other income(2)........ 1,253 1,457 1,756 304 416 1,445 1,868 2,857 7,238
------- ------- ------- ------ ------ ------- ------- ------- -------
Total revenues....... 10,145 11,431 14,716 2,209 3,062 11,882 15,569 22,163 36,427
------- ------- ------- ------ ------ ------- ------- ------- -------
Costs and Expenses:
Operating expenses....... 3,986 4,519 5,009 864 1,025 4,461 5,170 7,288 12,676
Provision for credit
losses............... 2,654 3,264 3,002 696 1,617 3,447 3,923 5,449 9,105
Interest expense....... 2,306 2,279 2,523 339 617 2,235 2,801 4,278 4,697
------- ------- ------- ------ ------ ------- ------- ------- -------
Income (loss) before
taxes.................. 1,199 1,369 4,182 310 (197) 1,739 3,675 5,148 9,949
Income tax expense
(benefit).............. 503 572 1,694 127 (74) 727 1,493 2,079 3,979
------- ------- ------- ------ ------ ------- ------- ------- -------
Net income before
discontinued
operations............. 696 797 2,488 183 (123) 1,012 2,182 3,069 5,970
------- ------- ------- ------ ------ ------- ------- ------- -------
Discontinued operations
net income (loss)...... -- -- -- -- -- -- -- 50 (91)
------- ------- ------- ------ ------ ------- ------- ------- -------
Net income (loss)........ $ 696 $ 797 $ 2,488 $ 183 $ (123) $ 2,182 $ 3,119 $ 5,879
======= ======= ======= ====== ====== ======= ======= ======= =======
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
STATEMENTS OF INCOME
DATA:
Revenues:
Interest income:
Consumer Product
Portfolio.............. $ 6,364 $ 6,036
Small Loan Portfolio..... 4,261 6,462
Automobile Finance
Portfolio.............. 602 825
Other(1)................. 418 2,583
------- -------
Total interest income.... 11,645 15,906
------- -------
Travel services.......... 605 3,955
Transaction fees on
contracts purchased
from related party..... 447 575
Other income(2)........ 2,337 5,596
------- -------
Total revenues....... 15,034 26,032
------- -------
Costs and Expenses:
Operating expenses....... 4,380 12,187
Provision for credit
losses............... 4,279 5,229
Interest expense....... 2,482 2,874
------- -------
Income (loss) before
taxes.................. 3,893 5,742
Income tax expense
(benefit).............. 1,559 2,210
------- -------
Net income before
discontinued
operations............. 2,334 3,532
------- -------
Discontinued operations
net income (loss)...... (22) --
------- -------
Net income (loss)........ $ 2,312 $ 3,532
======= =======
PER SHARE DATA:
Net income (loss) per
share before
discontinued
operations............. $ 0.14 $ 0.15 $ 0.48 $ 0.04 $ (0.02) $ 0.20 $ 0.42 $ 0.60 $ 0.96
Net income (loss) per
share discontinued
operations............. 0 0 0 0 0 0 0 0.01 (0.01)
------- ------- ------- ------ ------ ------- ------- ------- -------
Net income (loss) per
share.................. $ 0.14 $ 0.15 $ 0.48 $ 0.04 $ (0.02) $ 0.20 $ 0.42 $ 0.61 $ 0.95
======= ======= ======= ====== ====== ======= ======= ======= =======
<CAPTION>
PER SHARE DATA:
<S> <C> <C>
Net income (loss) per
share before
discontinued
operations............. $ 0.45 $ 0.49
Net income (loss) per
share discontinued
operations............. -- --
------- -------
Net income (loss) per
share.................. $ 0.45 $ 0.49
======= =======
Weighted average number
of shares
outstanding............ 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 5,150,000 6,213,500
<CAPTION>
Weighted average number
outstanding............ 5,150,000 7,277,000
<CAPTION>
of shares
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
AS OF
AS OF OCTOBER 31, AS OF DECEMBER 31, JUNE 30,
----------------------------- ------------------------------- -----------
1992 1993 1994 1994 1995 1996 1997
------- ------- ------- ------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash........................................... $ -- $ 931 $ 1,886 $ 215 $ 57 $ 5,848 $ 6,388
Finance receivables, net(3).................... 45,094 47,026 50,626 70,328 90,471 109,699 97,575
Automobile finance receivables................. -- -- -- -- 4,203 8,728 7,375
Premium finance receivables, net............... -- -- -- -- -- 1,964 6,903
Total assets................................... 48,158 51,567 61,597 73,942 101,730 145,887 139,747
Total debt..................................... 34,250 33,700 42,287 48,845 64,817 74,874 65,450
Stockholders' equity........................... 13,399 17,146 18,560 23,951 33,632 61,353 64,885
</TABLE>
- ---------------
(1) Other interest income includes interest earned on the Travel Finance
Portfolio, the Independent Retail Finance Portfolio and the Premium Finance
Portfolio.
(2) Other income includes administrative fees charged on certain small loan
contracts, late charges and revenue from the sale of insurance products.
(3) Finance receivables include receivables in the Company's Consumer Product,
Small Loan, Travel Finance and Independent Retail Finance Portfolios.
SUPPLEMENTAL FINANCIAL DATA
The following table sets forth certain unaudited consolidated operating
results for each of the periods presented. This information has been prepared on
the same basis as the audited consolidated financial statements and includes all
adjustments (which consist solely of normal recurring adjustments) considered
necessary to present fairly the financial information of such periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997
--------- -------- ------------- ------------ --------- -------- ------------- ------------ --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Interest
income:
Consumer
Product
Portfolio.. $2,955 $3,118 $3,348 $3,087 $3,205 $3,159 $3,163 $ 3,323 $ 3,165 $ 2,871
Small
Loan
Portfolio.. 1,009 1,126 1,295 1,665 2,093 2,168 2,503 2,922 3,199 3,263
Automobile
Finance
Portfolio. -- -- 32 208 260 342 461 485 416 409
Other(1)... -- -- 48 128 181 237 441 832 1,219 1,364
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Total
interest
income... 3,964 4,244 4,723 5,088 5,739 5,906 6,568 7,562 7,999 7,907
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Travel
services... -- 21 157 193 221 384 807 1,039 1,755 2,200
Transaction
fees on
contracts
purchased
from
related
party.. 229 227 226 234 227 220 239 279 280 295
Other
income(2).. 654 686 635 882 1,045 1,292 2,057 2,844 2,623 2,973
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Total
revenues.. 4,847 5,178 5,741 6,397 7,232 7,802 9,671 11,722 12,657 13,375
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Operating
expenses... 1,522 1,667 1,879 2,220 2,019 2,361 3,520 4,776 5,811 6,376
Provision
for
credit
losses... 1,106 1,309 1,293 1,741 2,154 2,125 2,189 2,637 2,411 2,818
Interest
expense... 1,075 1,097 1,038 1,068 1,241 1,241 1,001 1,214 1,423 1,451
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Income
before
taxes... 1,144 1,105 1,531 1,368 1,818 2,075 2,961 3,095 3,012 2,730
Income
tax
expense... 465 447 609 558 727 832 1,182 1,238 1,205 1,005
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Net
income
before
discontinued
operations.. $ 679 $ 658 $ 922 $ 810 $1,091 $1,243 $1,779 $ 1,857 $ 1,807 $ 1,725
Discontinued
operations
net
income
(loss)... -- 19 122 (91) 12 (34) (69) -- -- --
------ ------ ------ ------ ------ ------ ------ ------- ------- -------
Net
income... $ 679 $ 677 $1,044 $ 719 $1,103 $1,209 $1,710 $ 1,857 $ 1,807 $ 1,725
====== ====== ====== ====== ====== ====== ====== ======= ======= =======
</TABLE>
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information
under "Selected Consolidated Financial Data" and the Company's consolidated
financial statements and notes thereto and other financial data, included
elsewhere in this Prospectus. Certain statements under this caption constitute
"forward-looking statements" under Section 27A of the Securities Act and Section
21E of the Exchange Act which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in such
forward-looking statements. Factors that might cause such a difference, include
but are not limited to, credit quality, economic conditions, competition in the
geographic and business areas in which the Company conducts its operations,
fluctuations in interest rates and government regulation. For additional
information concerning these factors, see "Risk Factors."
OVERVIEW
In pursuit of the Company's business strategy, since 1992 the Company has
expanded its financing business by offering consumer financing through
additional installment credit stores opened by Banner, by increasing the number
and type of products and services financed, and by offering new financial
products and services. In 1992, the Company began offering small unsecured loans
generally ranging from $300 to $1,500 with average loan terms of 12 months, and
began offering installment credit finance to Banner's customers at three
additional installment credit stores in the greater Los Angeles area and one
additional installment credit store in San Francisco that were opened or
acquired by Banner in 1994. In 1995, the Company opened two finance centers
offering small loans and travel finance and one automobile sales location in the
greater Los Angeles area, and began offering consumer product finance to
Banner's customers at one additional installment credit store in the greater Los
Angeles area that was opened by Banner in 1995. In 1995, the Company also began
offering financing for the sale of used automobiles, which was discontinued in
May 1997. Beginning in late 1995, the Company expanded its indirect consumer
financing business by offering financing to consumers for the purchase of
products and services sold by independent retailers. At present, the Company has
retail installment financing arrangements with approximately 100 independent
retailers in the greater Los Angeles area. In 1996, the Company expanded its
travel business by acquiring 25 travel locations in June and 55 locations in
December. The Company presently has 77 travel locations, of which 71 are located
in California. In addition, the Company commenced its automobile insurance
business in 1996 through 12 locations in the greater Los Angeles area and also
began offering insurance premium financing to its customers. As a result of this
rapid growth, results of operations are not readily comparable from year to year
or from period to period, and are not necessarily indicative of future operating
results.
27
<PAGE> 29
FINANCIAL TRENDS
Portfolios
The following sets forth certain information relating to the Company's
portfolios for the periods indicated.
CONSUMER PRODUCT PORTFOLIO
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE NET CONTRACT BALANCE)
<TABLE>
<CAPTION>
TWO MONTHS SIX MONTHS
YEARS ENDED ENDED YEARS ENDED ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
----------------- ----------------- ------------------------------------- -----------------
1992 1993 1993 1994 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross receivables (at end of
period).................... $54,038 $57,250 $60,590 $67,514 $60,590 $67,514 $67,811 $61,848 $62,611 $48,618
Deferred interest (at end of
period).................... 6,354 7,028 7,657 7,603 7,657 7,603 7,796 7,132 7,217 4,871
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net receivables (at end of
period).................... 47,684 50,222 52,933 59,911 52,933 59,911 60,015 54,716 55,394 43,747
Deferred insurance revenues
(at end of period)......... 294 536 529 405 529 405 401 270 314 166
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net carrying value before
allowance for credit
losses..................... $47,390 $49,686 $52,404 $59,506 $52,404 $59,506 $59,614 $54,446 $55,080 $43,581
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Average net receivables...... $46,690 $51,907 $51,473 $56,335 $52,456 $53,656 $57,276 $55,742 $56,762 $48,868
Number of contracts (at end
of period)................. N/A N/A 66,353 76,984 66,353 76,984 84,555 81,361 81,912 73,501
Average net contract
balance.................... N/A N/A $ 798 $ 778 $ 798 $ 778 $ 710 $ 673 $ 676 $ 595
Average interest bearing
liabilities(1)............. 32,736 36,404 34,275 38,573 36,163 37,549 39,284 33,489 37,873 28,420
Total interest income(2)..... 8,145 9,010 1,714 2,057 9,420 11,787 12,508 12,850 6,364 6,036
Total interest expense(1).... 2,306 2,279 335 534 2,231 2,579 3,242 2,688 1,521 1,221
Net interest income before
provision for credit
losses..................... 5,839 6,731 1,379 1,523 7,189 9,208 9,266 10,162 4,843 4,815
Net provision for credit
losses..................... 2,654 3,198 655 1,229 3,340 3,332 3,852 4,955 2,443 1,964
Net write-offs............... 1,688 2,834 529 625 2,897 2,949 3,310 4,257 1,919 1,573
Average interest rate on
average net receivables.... 17.4% 17.4% 20.0% 21.9% 18.0% 22.0% 21.8% 23.1% 22.4% 24.7%
Average interest rate on
interest bearing
liabilities................ 7.0% 6.3% 5.9% 8.3% 6.2% 6.9% 8.3% 8.0% 8.0% 8.6%
Net interest spread.......... 10.4% 11.1% 14.1% 13.6% 11.8% 15.1% 13.5% 15.1% 14.4% 16.1%
</TABLE>
- ---------------
(1) Amounts represent borrowings and related interest expense on the Company's
lines of credit for the Consumer Product Portfolio, excluding amounts
related to the Company's other borrowings.
(2) Amounts represent interest income on installment contracts, excluding
administrative fees, late charges and other charges, which are included in
other income in the Consolidated Statements of Income appearing elsewhere
herein.
28
<PAGE> 30
SMALL LOAN PORTFOLIO
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE NET CONTRACT BALANCE)
<TABLE>
<CAPTION>
TWO MONTHS ENDED SIX MONTHS ENDED
YEAR YEARS ENDED
ENDED DECEMBER 31, DECEMBER 31, JUNE 30,
OCTOBER 31, ----------------- ------------------------------------- -----------------
1993(1) 1993 1994 1993 1994 1995 1996 1996 1997
----------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross receivables (at end of
period).......................... $ 705 $ 4,314 $16,735 $ 4,314 $16,735 $37,868 $57,671 $41,331 $54,757
Deferred interest (at end of
period).......................... 26 241 1,809 241 1,809 4,187 6,041 4,186 4,636
Deferred administrative fees and insurance
revenues (at end of period)...... 13 166 392 166 392 576 978 733 707
------ ------- ------- ------- ------- ------- ------- ------- -------
Net carrying value before allowance
for credit losses................ $ 666 $ 3,907 $18,290 $ 3,907 $18,290 $33,105 $50,652 $36,412 $49,414
====== ======= ======= ======= ======= ======= ======= ======= =======
Average net receivables............ $ 850 $ 2,009 $10,509 $ 1,131 $ 5,662 $20,219 $38,847 $34,099 $50,502
Number of contracts (at end of
period).......................... 3,127 10,616 26,166 10,616 26,166 55,241 79,819 63,996 89,538
Average net contract balance....... $ 217 $ 384 $ 570 $ 384 $ 570 $ 610 $ 647 $ 580 $ 560
Average interest bearing
liabilities(2)................... -- 400 5,887 67 3,165 12,902 25,204 24,265 40,959
Total administrative fee income.... 52 13 145 65 458 1,133 1,897 869 1,005
Total interest income(3)........... 134 54 439 188 1,057 5,095 9,686 4,261 6,462
Total interest expense(2).......... -- 4 83 4 222 1,036 2,009 961 1,653
Net interest income before
provision for credit losses...... 134 50 356 184 835 4,059 7,677 3,300 4,809
Net provision for credit losses.... 66 41 388 107 591 1,547 3,349 1,632 2,224
Net write-offs..................... -- -- 35 -- 155 896 2,606 986 2,012
Average interest rate on average
net receivables.................. 15.8% 16.1% 25.1% 16.6% 18.7% 25.2% 24.9% 25.0% 25.6%
Average interest rate on interest
bearing liabilities.............. N/A 6.0% 8.5% 6.0% 7.0% 8.0% 8.0% 7.9% 8.1%
Net interest spread................ 15.8% 10.1% 16.6% 10.6% 11.7% 17.2% 17.0% 17.1% 17.5%
</TABLE>
- ---------------
(1) The Company commenced its small loan business in December 1992.
(2) Amounts represent borrowings and related interest expense on the Company's
lines of credit for the Small Loan Portfolio, excluding amounts related to
the Company's other borrowings.
(3) Amounts represent interest income on installment contracts, excluding
administrative fees, late charges and other charges, which are included in
other income in the Consolidated Statements of Income appearing elsewhere
herein.
Travel Finance Portfolio
The Company also began offering Company-financed sales of airline tickets
in mid-1995. At December 31, 1995 and 1996 and June 30, 1997, the gross
receivables of the Travel Finance Portfolio was $3.0 million, $5.6 million and
$5.6 million, respectively, and the net receivables before allowance for credit
losses was $2.7 million, $5.2 million and $5.2 million, respectively. In
addition, the number of contracts outstanding at December 31, 1995 and 1996, and
June 30, 1997 was 5,811, 11,772 and 13,116, respectively with an average net
contract balance of approximately $466, $438 and $395, respectively. At December
31, 1995 and 1996 and June 30, 1997, the average interest rate on the average
portfolio was approximately 23.7%, 25.0% and 25.3%, respectively.
Independent Retail Finance Portfolio
The Company began purchasing and servicing consumer finance receivables
generated by independent retailers in 1996. At December 31, 1996 and June 30,
1997, the gross receivables of the Independent Retail Finance Portfolio was $7.2
million, and $7.7 million, respectively, and the net receivables before
allowance for credit losses was $6.2 million and $6.8 million, respectively. In
addition, the number of contracts outstanding at December 31, 1996 and June 30,
1997, was 12,053 and 17,493, respectively, with an average net contract balance
of approximately $518 and $386, respectively. At December 31, 1996 and June 30,
1997, the average interest rate on the average portfolio was approximately 31.5%
and 33.2%, respectively.
29
<PAGE> 31
Premium Finance Portfolio
The Company began offering insurance premium financing in late 1996. At
December 31, 1996 and June 30, 1997, the gross receivables of the Premium
Finance Portfolio was $2.1 million and $7.4 million, respectively, and the net
receivables, before allowance for credit losses was $2.0 million and $6.9
million, respectively. In addition, the number of contracts outstanding at
December 31, 1996 and June 30, 1997 was 2,615 and 10,649, respectively, with an
average net contract balance of approximately $751 and $648, respectively. At
December 31, 1996 and June 30, 1997, the average interest rate on the average
portfolio was approximately 29.2% and 30.6%, respectively.
Automobile Finance Portfolio
The Company began offering Company-financed sales of used automobiles in
mid-1995. In August 1996, the Company sold the used car sales business to Banner
pursuant to an Agreement to Transfer Business Operations among Banner, Central
Consumer Finance Company, Central Auto Sales, Inc. and Central (the "Automobile
Financing Agreement") which granted the Company the exclusive right to finance
Banner's sales of automobiles or purchase automobile finance contracts generated
by Banner. The Company's decision to sell the used car sales business was due to
capital considerations and the Company's determination that such business did
not presently fit well into the Company's overall business strategy. At December
31, 1995 and 1996 and June 30, 1997, the gross receivables of the Automobile
Finance Portfolio was approximately $5.5 million, $11.0 million and $9.0
million, respectively, and the net receivables of the portfolio was $4.2
million, $8.7 million and $7.4 million, respectively. In addition, the number of
contracts outstanding at December 31, 1995 and 1996 and June 30, 1997 was 624,
1,376 and 1,330, respectively, with an average net contract balance of
approximately $6,700, $8,000 and $5,500, respectively. The average interest rate
on the average portfolio was 21% at both December 31, 1995 and 1996, and 20% at
June 30, 1997. Pursuant to the Automobile Financing Agreement, all purchases of
automobile finance receivables were made with full recourse to Banner in the
event of default by the customer. Accordingly, the Company maintains no
allowance for credit losses with respect to the Automobile Finance Portfolio.
Banner ceased selling used automobiles in May 1997 and, therefore, the Company
is not currently engaged in financing sales of used automobiles.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table segregates the changes in net interest income between
changes in average balances ("Volume") and average rates ("Rate") for both
average net receivables and average interest bearing liabilities of the Consumer
Product Portfolio and the Small Loan Portfolio (dollars in thousands) for the
periods presented.
<TABLE>
<CAPTION>
YEARS ENDED YEARS ENDED YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
VERSUS VERSUS VERSUS VERSUS
DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995 JUNE 30, 1996
---------------------- ---------------------- -------------------- --------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ------ ------ ------ ------ ------ ------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest
income:
Consumer Product Portfolio....... $215 $2,152 $2,367 $ 795 $ (74) $ 721 $(354) $696 $ 342 $(975) $647 $ (328)
Small Loan Portfolio............. 753 116 869 2,718 1,320 4,038 4,645 (54) 4,591 2,099 102 2,201
---- ------ ------ ------ ------ ------ ------ ---- ------ ------ ---- ------
968 2,268 3,236 3,513 1,246 4,759 4,291 642 4,933 1,124 749 1,873
---- ------ ------ ------ ------ ------ ------ ---- ------ ------ ---- ------
Increase (decrease) in interest
expense:
Bank of America Line of Credit... 86 262 348 119 544 663 (465) (87) (552) (406) 106 (300)
Wells Fargo Line of Credit....... 185 33 218 683 131 814 980 (7) 973 674 18 692
---- ------ ------ ------ ------ ------ ------ ---- ------ ------ ---- ------
271 295 566 802 675 1,477 515 (94) 421 268 124 392
---- ------ ------ ------ ------ ------ ------ ---- ------ ------ ---- ------
Increase in net interest income.... $697 $1,973 $2,670 $2,711 $ 571 $3,282 $3,776 $736 $4,512 $ 856 $625 $1,481
==== ====== ====== ====== ====== ====== ====== ==== ====== ====== ==== ======
</TABLE>
CREDIT QUALITY
The Company makes provision for credit losses in the Consumer Product and
Travel Finance Portfolios at the time that the contract is purchased or the
retail sale is made. The provision for credit losses in the Small Loan and
Independent Retail Finance Portfolios is made following the origination of the
loans over the period
30
<PAGE> 32
that the events giving rise to the credit losses are estimated to occur. The
Company's portfolios comprise smaller-balance, homogeneous loans that are
evaluated collectively to determine an appropriate allowance for credit losses.
The allowance for credit losses is maintained at a level considered adequate to
cover losses in the existing portfolios. Collection of past due accounts is
pursued by the Company, and when the characteristics of an individual account
indicates that collection is unlikely, the account is charged off and turned
over to a collection agency. Accounts are generally charged off when they are
between 91 and 150 days past due.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs, net of recoveries. Management's periodic evaluation of
the adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolios, adverse situations that
may affect the borrower's ability to repay and current economic conditions.
The following sets forth certain information concerning the Company's
provisions for credit losses and chargeoff experience in the Consumer Product
and Small Loan Portfolios, its two largest portfolios. The Company does not
believe that its credit quality experience can be readily compared to less
specialized consumer finance companies due to the Hispanic orientation and
uniform credit profile of its customers.
CONSUMER PRODUCT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWO MONTHS SIX MONTHS
YEARS ENDED ENDED YEARS ENDED ENDED
OCTOBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
----------------- ----------------- ------------------------------------- -----------------
1992 1993 1993 1994 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average net receivables...... $46,690 $51,907 $51,473 $56,335 $52,456 $53,656 $57,276 $55,742 $56,762 $48,868
Net provision for credit
losses..................... $ 2,654 $ 3,198 $ 655 $ 1,229 $ 3,340 $ 3,332 $ 3,852 $ 4,955 $ 2,443 $ 1,964
Net write-offs............... $ 1,688 $ 2,834 $ 529 $ 625 $ 2,897 $ 2,949 $ 3,310 $ 4,257 $ 1,919 $ 1,573
Provision for credit losses
as a percentage of average
net receivables............ 5.7% 6.2% 7.6% 13.1% 6.4% 6.2% 6.7% 8.9% 8.6% 8.0%
Net write-offs as a
percentage of average net
receivables................ 3.6% 5.5% 6.2% 6.7% 5.5% 5.5% 5.8% 7.6% 6.8% 6.4%
</TABLE>
SMALL LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWO MONTHS
ENDED SIX MONTHS
YEAR ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, ENDED
OCTOBER 31, ---------------- ----------------------------------- -----------------
1993(1) 1993 1994 1993 1994 1995 1996 1996 1997
----------- ------ ------- ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average net receivables............... $ 850 $2,009 $10,509 $1,131 $5,662 $20,219 $38,847 $34,099 $50,502
Net provision for credit losses....... $ 66 $ 41 $ 388 $ 107 $ 591 $ 1,547 $ 3,349 $ 1,632 $ 2,224
Net write-offs........................ $ 0 $ 0 $ 35 $ 0 $ 155 $ 896 $ 2,606 $ 986 $ 2,012
Provision for credit losses as a
percentage of average net
receivables......................... 8.5% 12.2% 22.2% 9.5% 10.4% 7.7% 8.6% 9.6% 8.8%
Net write-offs as a percentage of
average net receivables............. 0.0% 0.0% 2.0% 0.0% 2.7% 4.4% 6.7% 5.8% 8.0%
</TABLE>
- ---------------
(1) The Company commenced its small loan business in December 1992.
DELINQUENCY EXPERIENCE AND ALLOWANCE FOR CREDIT LOSSES
Borrowers under the Company's contracts are required to make monthly
payments. The following sets forth the Company's delinquency experience for
accounts with payments 31 days or more past due and allowance for credit losses
for its finance receivables.
31
<PAGE> 33
FINANCE RECEIVABLES(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31, JUNE 30,
--------------- --------------------------------- ---------------
1992 1993 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Past due accounts (gross
receivables):
31-60 days.................... $1,485 $1,463 $1,325 $2,340 $2,482 $4,115 $2,534 $3,274
61 days or more............... 1,412 1,510 1,612 2,715 3,162 4,332 3,466 6,690
Accounts with payments 31 days
or more past due as a
percentage of end of period
gross receivables............. 5.4% 5.1% 4.5% 6.0% 5.2% 6.4% 5.5% 8.5%
Allowance for credit losses..... $2,296 $2,726 $2,893 $3,712 $4,955 $6,786 $6,244 $7,360
Allowance for credit losses as a
percentage of net
receivables................... 4.8% 5.4% 5.1% 5.0% 5.1% 5.7% 6.4% 7.0%
</TABLE>
- ---------------
(1) Includes receivables in the Company's Consumer Product, Small Loan, Travel
Finance and Independent Retailer Portfolios.
In 1996, delinquencies and net write-offs in the Consumer Product Portfolio
increased to levels which were substantially higher than those historically
experienced by the Company in such portfolio. These trends have continued during
1997. The increases occurred primarily with respect to the Company's existing
customers, rather than new credit customers. Management believes such increases
were a result of excessive credit burdens for some customers, due to an
aggregate overextension of credit in the marketplace, coupled with uncertainty
over proposed legislative reforms potentially impacting the Company's customers
and their extended families. Although the Company also experienced increases in
delinquencies and net write-offs in its other portfolios, such increases were
consistent with management's expectations.
Because of the Company's growth and expected continued growth, in late 1996
the Company took a number of steps to improve collections and credit quality.
The Company hired two senior executives in the credit and collections fields. In
December 1996, the Company installed an autodialer to assist its collections
personnel in successfully contacting past due borrowers. Finally, the Company
has hired CCN, Inc. to develop a proprietary credit scoring system for the
Company, which it expects to implement during 1998. Notwithstanding these
measures, there can be no assurance that the trend in increased delinquencies
and net write-offs will not continue.
The Financing Agreement among the Company, Banner and Holdings permits the
Company to return to Banner during each of 1996 and 1997 up to $1.5 million of
contracts purchased from or contributed by Banner. Banner repurchased $1.5
million of delinquent receivables during the second half of 1996 and repurchased
$1.4 million of delinquent receivables during the first six months of 1997. As a
result of increasing delinquencies in the Consumer Product Portfolio, the
Company anticipates that the Financing Agreement will be amended to increase the
aggregate amount of receivables which can be returned to Banner during 1997 to
in excess of $1.5 million. See "Management -- Certain Relationships and Related
Transactions -- Financing Agreement."
In addition, as a result of the increasing level of delinquencies, the
Company has requested, and the lenders under the Line of Credit have given a
preliminary indication of their consent, to an amendment to the Line of Credit
to increase the Past Due Receivables Ratio (as defined in the Line of Credit)
permitted under the Line of Credit as of the end of each month from no more than
0.06 to 1 to 0.08 to 1. The offering will not be consummated until the
amendment, which is currently being documented, is executed.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1996
Total revenues in the six months ended June 30, 1997 increased to $26.0
million from $15.0 million in the six months ended June 30, 1996, an increase of
$11.0 million or 73.2%.
32
<PAGE> 34
Consumer Product Portfolio interest income in the six months ended June 30,
1997 decreased to $6.0 million from $6.4 million in the six months ended June
30, 1996. This decrease was primarily attributable to a decrease in the
portfolio which averaged $48.9 million in the six months ended June 30, 1997,
compared to $56.8 million in the six months ended June 30, 1996. The average
interest rate the Company charged on this portfolio increased to 24.7% for the
six months ended June 30, 1997, compared to 22.4% for the six months ended June
30, 1996.
Small Loan Portfolio interest income in the six months ended June 30, 1997
increased to $6.5 million from $4.3 million in the six months ended June 30,
1996. The increase was primarily attributable to an increase in the portfolio
which averaged $50.5 million in the six months ended June 30, 1997, compared to
$34.1 million in the six months ended June 30, 1996. The average interest rate
the Company charged on this portfolio was 25.6% for the six months ended June
30, 1997, compared to 25.0% for the six months ended June 30, 1996.
Interest income on the Automobile Finance Portfolio in the six months ended
June 30, 1997 increased to $0.8 million from $0.6 million in the six months
ended June 30, 1996. This increase was due to an increase in the automobile
finance receivables which averaged $8.2 million in the six months ended June 30,
1997, compared to $6.0 million in the six months ended June 30, 1996. On May 30,
1997, Banner ceased the sale of used automobiles and, therefore, the Company is
not financing used automobile sales.
Other interest income in the six months ended June 30, 1997 increased to
$2.6 million from $0.4 million in the six months ended June 30, 1996, an
increase of $2.2 million. Of this increase, $1.2 million was attributed to an
increase in interest income earned on the Company's Independent Retail Finance
Portfolio, $0.2 million was attributed to an increase in interest income earned
on the Company's Travel Finance Portfolio, and $0.8 million was attributed to an
increase in interest income earned on the Premium Finance Portfolio, which
averaged $5.1 million for the six months ended June 30, 1997. The Company did
not have a Premium Finance Portfolio during the six months ended June 30, 1996.
Revenues earned on the sales of travel services increased to $4.0 million for
the six months ended June 30, 1997 compared to $0.6 million for the six months
ended June 30, 1996, an increase of 3.4 million. This increase was primarily
attributable to the 80 travel locations acquired by the Company during the
period from May 1996 through December 1996.
Other income for the six months ended June 30, 1997 increased to $5.6
million from $2.3 million in the six months ended June 30, 1996, an increase of
$3.3 million. Other income primarily includes administrative fees earned on the
Company's Small Loan Portfolio, late and extension charge income transaction
fees charged on consumer product installment contracts and income earned on the
sale of insurance products. Other income in the six months ended June 30, 1997
includes an increase of $0.1 million in administrative fee income earned on
small loans, a $0.4 million increase in late and extension charges, and an
increase of $2.8 million in insurance product revenues.
Operating expenses in the six months ended June 30, 1997 increased to $12.2
million from $4.4 million in the six months ended June 30, 1996, an increase of
$7.8 million . Of this increase, $3.5 million is attributable to operating costs
and expenses incurred in connection with the sale of airline tickets and $1.6
million incurred in connection with the sale of auto insurance, which business
commenced in July 1996. The remaining increase of $2.7 million was primarily due
to the expansion of the small loan business and unaffiliated retailer business,
including an increase in the number of employees and related payroll expenses.
The provision for credit losses in the six months ended June 30, 1997
increased to $5.2 million from $4.3 million in the six months ended June 30,
1996, an increase of $0.9 million or 22.2%. This increase was primarily due to
the growth experienced by the Company in its unaffiliated third party retailers
receivable portfolio and to higher levels of delinquencies and write-off's. See
"-- Financial Trends -- Delinquency Experience and Allowance for Credit Losses"
above.
Interest expense in the six months ended June 30, 1997 increased to $2.9
million from $2.5 million in the six months ended June 30, 1996. This increase
was due to an increase in the amounts borrowed under the lines of credit which
averaged $69.4 million in the six months ended June 30, 1997, compared to $62.6
million in the six months ended June 30, 1996.
33
<PAGE> 35
As a result of the foregoing factors, net income in the six months ended
June 30, 1997 increased to $3.5 million from $2.3 million in the six months
ended June 30, 1996, an increase of $1.2 million or 52.8%.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Total revenues in the year ended December 31, 1996 increased to $36.4
million from $22.2 million in the year ended December 31, 1995, an increase of
$14.2 million or 64.4%.
Consumer Product Portfolio interest income in the year ended December 31,
1996 increased to $12.9 million from $12.5 million in the year ended December
31, 1995, an increase of $0.4 million. Of this increase, $0.7 million was
attributable to a 1.3% increase in the average interest rate earned on this
portfolio in the year ended December 31, 1996 compared to the year ended
December 31, 1995, offset by a $0.3 million decrease in interest income as a
result of a decrease of $1.5 million in the size of the average Consumer Product
Portfolio for the year ended December 31, 1996 compared to the year ended
December 31, 1995.
Small Loan Portfolio interest income in the year ended December 31, 1996
increased to $9.7 million from $5.1 million in the year ended December 31, 1995,
an increase of $4.6 million or 90.1%. Substantially all of this increase was
attributable to an increase in the size of the Small Loan Portfolio, which
averaged $38.8 million in the year ended December 31, 1996 compared to $20.2
million in the year ended December 31, 1995. For the year ended December 31,
1996, the Company earned an average interest rate of 24.9% compared to 25.2% in
the year ended December 31, 1995. The Company currently charges the maximum
interest rate permitted under California law on its small loans.
Automobile Finance Portfolio interest income in the year ended December 31,
1996 increased to $1.5 million from $0.2 million in the year ended December 31,
1995, an increase of $1.3 million. Substantially all of this increase was
attributable to an increase in the size of the Automobile Finance Portfolio,
which averaged $7.2 million in the year ended December 31, 1996 compared to $1.1
million in the year ended December 31, 1995. The Company commenced its business
of financing automobiles in July 1995.
Other interest income in the year ended December 31, 1996 increased to $1.7
million from $0.2 million in the year ended December 31, 1995, an increase of
$1.5 million. Of this increase, $0.8 million was attributed to an increase in
interest income earned on the Company's Travel Finance Portfolio, and $0.6
million was attributable to interest income earned on the Company's financing of
installment receivables generated from the sale of consumer products sold to
customers of independent retailers. The Company commenced this business in early
1996.
For the year ended December 31, 1996, the Company's Travel Finance
Portfolio averaged $4.9 million compared to $2.7 million in the year ended
December 31, 1995. The average interest rate earned on this portfolio was 25.0%
in the year ended December 31, 1996 compared to 23.7% in the year ended December
31, 1995.
Revenues earned on the sales of travel services increased to $2.4 million
in the year ended December 31, 1996 compared to $0.4 million in the year ended
December 31, 1995, an increase of $2.0 million. The Company commenced its travel
business in June 1995, and substantially expanded its operation through the
acquisition of 25 travel locations in May and June of 1996. In December 1996,
the Company acquired an additional 55 travel locations. However, such
acquisition did not materially contribute to 1996 revenues.
Other income for the year ended December 31, 1996 increased to $7.2 million
from $2.9 million in the year ended December 31, 1995, an increase of $4.3
million or 153.3%. Other income primarily includes administrative fees earned on
the Company's Small Loan Portfolio, late and extension charge income and income
earned on the sale of insurance products. For the year ended December 31, 1996,
administrative fee income increased to $1.9 million compared to $1.1 million in
the year ended December 31, 1995, an increase of $0.8 million. For the year
ended December 31, 1996, late and extension charge income increased to $2.6
million from $1.0 million in the year ended December 31, 1995, an increase of
$1.6 million. This increase was primarily attributable to the State of
California increasing the late charges the Company may charge coupled with an
increase in the size of the Company's combined receivable portfolios. For the
year ended December 31, 1996, income from the sale of credit life insurance,
credit accident and health insurance, and
34
<PAGE> 36
credit property insurance increased to $2.8 million from $0.8 million in the
year ended December 31, 1995, an increase of $2.0 million. This increase was
primarily attributable to the Company's commencing the sale of its insurance
products on its small loan portfolio in November 1995.
Operating expenses in the year ended December 31, 1996 increased to $12.7
million from $7.3 million in the year ended December 31, 1995, an increase of
$5.4 million or 74.0%. Of this increase, $1.7 million and $0.9 million are
attributable to operating costs and expenses incurred in connection with the
sale of travel services, which business commenced in June 1995, and was expanded
through acquisitions in 1996, and the commencement of the Company's automobile
insurance business. Of the remaining increase of $2.8 million, approximately
$0.6 million was attributable to increased costs of selling the Company's
insurance products with substantially all of the remaining increase attributable
to increased costs, including the number of employees and related payroll to
accommodate the increased number of outstanding contracts associated with the
expansion of the Company's businesses.
The provision for credit losses in the year ended December 31, 1996
increased to $9.1 million from $5.5 million in the year ended December 31, 1995,
an increase of $3.6 million or 67.1%. This increase was primarily due to the
growth experienced by the Company in the Small Loan Portfolio, which generated a
provision of $3.3 million in the year ended December 31, 1996 compared to $1.5
million in the comparable period of 1995. The remaining increase of $1.8 million
was primarily attributable to an increase of $1.1 million in the provision for
credit losses on the Company's Consumer Product Portfolio, as a result of
increased write-offs and delinquencies in such portfolio, and a $0.4 million
provision for credit losses provided on the Company's Independent Retail Finance
Portfolio. "-- Financial Trends -- Credit Quality" above and "-- Delinquency
Experience and Allowance for Credit Losses" above.
Interest expense in the year ended December 31, 1996 increased to $4.7
million from $4.3 million, an increase of $0.4 million or 9.8%. This increase
was primarily due to a higher level of borrowings under the Prior Lines of
Credit used to support the growth in the Company's Small Loan Portfolio and
Travel Finance Portfolio.
As a result of the foregoing factors, net income in the year ended December
31, 1996 increased to $5.9 million from $3.1 million in the year ended December
31, 1995, an increase of $2.8 million or 88.5%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total revenues in the year ended December 31, 1995 increased to $22.2
million from $15.6 million in the year ended December 31, 1994, an increase of
$6.6 million or 42.4%.
Consumer Product Portfolio interest income in the year ended December 31,
1995 increased to $12.5 million from $11.8 million in the year ended December
31, 1994, an increase of $0.7 million or 6.1%. Of this increase, $0.8 million
was attributable to an increase in the size of the Consumer Product Portfolio,
which averaged $57.3 million in the year ended December 31, 1995 compared to
$53.7 million in the year ended December 31, 1994. For the year ended December
31, 1995, the number of active contracts outstanding in the Consumer Product
Portfolio increased to 84,600, an increase of 9.8% over the comparable period in
1994. For the year ended December 31, 1995, the average balance in such
portfolio decreased to $710 from $778 in the year ended December 31, 1994, a
decrease of 8.7%. The average interest rate the Company earned on its Consumer
Product Portfolio in the year ended December 31, 1995 decreased to 21.8% from
22.0% in the year ended December 31, 1994.
Small Loan Portfolio interest income in the year ended December 31, 1995
increased to $5.1 million from $1.1 million in the year ended December 31, 1994,
an increase of $4.0 million or 382.0%. Of this increase, $2.7 million was
attributable to an increase in loan demand and $1.3 million was attributable to
an increase in the average interest rate the Company earned on the average Small
Loan Portfolio. The average interest rate increased to 25.2% for the year ended
December 31, 1995 from 18.7% for the year ended December 31, 1994. The Company
currently charges the maximum interest rate permitted under California law on
its small loans. The average size of the Small Loan Portfolio increased to $20.2
million in the year ended December 31, 1995 from $5.7 million in the year ended
December 31, 1994, an increase of $14.6 million.
35
<PAGE> 37
In the year ended December 31, 1995, revenues include $0.4 million
generated from the sale of travel services, which business commenced in June
1995, and $0.4 million of interest income earned on the Travel Finance and
Automobile Finance Portfolios.
Other income in the year ended December 31, 1995 increased to $2.9 million
from $1.9 million in the year ended December 31, 1994, an increase of $1.0
million or 52.9%. The remaining increase in other income was primarily due to an
increase of $0.7 million in administrative fee income earned on the Small Loan
Portfolio and $0.3 million from increases in late charges and sales of insurance
products.
Operating expenses in the year ended December 31, 1995 increased to $7.3
million from $5.2 million in the year ended December 31, 1994, an increase of
$2.1 million or 40.9%. Of this increase, $0.3 million is attributable to
operating expenses and costs incurred in connection with the sale of airline
tickets, which began in the year ended December 31, 1995. The remaining increase
of $1.8 million was primarily due to the expansion of the small loan business,
including an increase in the number of employees and related payroll expenses of
$0.9 million, and to an increase in advertising expenses of $0.3 million.
The provision for credit losses in the year ended December 31, 1995
increased to $5.5 million from $3.9 million in the year ended December 31, 1994,
an increase of $1.6 million or 38.9%. This increase was primarily due to the
growth experienced by the Company in its Small Loan Portfolio, which generated a
provision of $1.5 million for the year ended December 31, 1995 compared to $0.6
million in the comparable period of 1994. The Travel Finance Portfolio accounted
for $0.1 million of the provision for credit losses during 1995. The remaining
increase was attributable to growth in the Company's Consumer Product Portfolio
and a higher provision level on this portfolio in 1995 as compared to 1994.
Interest expense in the year ended December 31, 1995 increased to $4.3
million from $2.8 million in the year ended December 31, 1994, an increase of
$1.5 million or 52.7%. This increase was primarily due to a higher level of
borrowings under the Prior Lines of Credit used to support the growth in the
Company's Consumer Product Portfolio and Small Loan Portfolio, and to a higher
level of interest charged by the lenders under the respective Prior Lines of
Credit, as a result of increases in their borrowing rates.
As a result of the foregoing factors, net income in the year ended December
31, 1995 increased to $3.1 million from $2.2 million for the year ended December
31, 1994, an increase of $0.9 million or 42.9%.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Total revenues in the year ended December 31, 1994 increased to $15.6
million from $11.9 million in the year ended December 31, 1993, an increase of
$3.7 million or 31.0%.
Consumer Product Portfolio interest income in the year ended December 31,
1994 increased to $11.8 million from $9.4 million in the year ended December 31,
1993, an increase of $2.4 million or 25.1%. Of this increase, $2.2 million was
attributable to an increase in the average interest rate the Company earned on
the Consumer Product Portfolio, which increased to 22.0% in the year ended
December 31, 1994 from 18.0% in the year ended December 31, 1993. The remaining
increase of $0.2 million was attributable to an increase in the size of the
Consumer Product Portfolio, which averaged $53.7 million in the year ended
December 31, 1994 compared to $52.5 million in the year ended December 31, 1993.
Small Loan Portfolio interest income in the year ended December 31, 1994
increased to $1.1 million from $0.2 million in the year ended December 31, 1993,
an increase of $0.9 million or 462.2%. Of this increase, $0.8 million was
attributable to an increase in loan demand and $0.1 million was attributable to
an increase in the average interest rate the Company earned on the average Small
Loan Portfolio. The average interest rate increased to 18.7% for the year ended
December 31, 1994 from 16.6% for the year ended December 31, 1993. The average
size of the Small Loan Portfolio increased to $5.7 million in the year ended
December 31, 1994 from $1.1 million in the year ended December 31, 1993, an
increase of $4.5 million.
Other income in the year ended December 31, 1994 increased to $1.9 million
from $1.4 million in the year ended December 31, 1993, an increase of $0.4
million or 29.3%. This increase was primarily due to an increase in
administrative fee income and to increased late fee income.
36
<PAGE> 38
Operating expenses in the year ended December 31, 1994 increased to $5.2
million from $4.5 million in the year ended December 31, 1993, an increase of
$0.7 million or 15.9%. This increase was primarily due to increased expenses in
connection with the Company's development of its small loan business, which
include an increase in the number of employees and related payroll necessary to
accommodate the increased number of contracts associated with the expansion of
this business.
The provision for credit losses in the year ended December 31, 1994
increased to $3.9 million from $3.4 million in the year ended December 31, 1993,
an increase of $0.5 million, or 13.8%. This increase was attributable to the
growth in the Company's Small Loan Portfolio. The Company's provision for credit
losses on its Consumer Product Portfolio was $3.3 million for both of the years
ended December 31, 1994 and 1993. The provision for credit losses as a
percentage of the average Consumer Product Portfolio was 6.2% in the year ended
December 31, 1994 compared to 6.4% in the year ended December 31, 1993.
Interest expense in the year ended December 31, 1994 increased to $2.8
million from $2.2 million during the year ended December 31, 1993, an increase
of $0.6 million or 25.3%. This increase was due to a higher level of bank
borrowings used to support the growth on the Company's receivables and to higher
interest rates on the Company's Prior Lines of Credit.
As a result of the foregoing factors, net income in the year ended December
31, 1994 increased to $2.2 million compared to $1.0 million in the year ended
December 31, 1993, an increase of $1.2 million or 115.6%.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering in June 1996, the Company historically
financed its operations through the cash flow generated from operations,
borrowings under its lines of credit, and from periodic contributions to capital
made by Holdings and related entities.
Net cash provided from operations totaled $6.7 million, $9.2 million and
$17.6 million for the years ended December 31, 1994, 1995 and 1996,
respectively, and $8.2 million for the six months ended June 30, 1997. During
these periods, the primary source of net cash provided from operations was net
income before non-cash charges, principally the provision for credit losses.
Net cash flow generated from operations was insufficient to fund the
Company's outlays for capital expenditures and the significant growth it
experienced in its receivables in each of 1994, 1995 and 1996 and the
acquisitions completed in 1996. Net cash used in such investing activities was
$20.8 million, $31.9 million and $43.7 million in the years ended December 31,
1994, 1995 and 1996, respectively. To fund its expenditures and support the
growth in its combined receivables portfolio, the Company relied on capital
contributions from Holdings, the proceeds from the initial public offering and
bank borrowings made under its credit facilities. Capital contributions amounted
to $1.6 million and $6.6 million in the years ended December 31, 1994 and 1995,
respectively. Prior to the initial public offering, the Company made a return of
capital of $615,000 to Banner. Net proceeds from the initial public offering
were $22.5 million during 1996. Bank borrowings provided cash of $12.2 million,
$15.1 million and $10.1 million in the years ended December 31, 1994, 1995 and
1996, respectively.
During the six months ended June 30, 1997, net cash provided by investing
activities was $1.8 million as the Company experienced a decline in its
receivables. In addition, the Company paid down $9.4 million of bank borrowings
during the six months ended June 30, 1997.
The Company requires substantial capital to finance its business.
Consequently, the Company's ability to maintain its current level of operations
and to expand its operations will be affected by the availability of financing
and the terms thereof. Currently, the Company funds its financing activities and
operations with borrowings under the Line of Credit which expires June 12, 2000.
Holdings and all of the Company's significant domestic subsidiaries are
guarantors under the Line of Credit. In addition, borrowings under the Line of
Credit are secured by substantially all of the assets, including the
receivables, of the Company and a pledge by Central of the stock of all of its
significant subsidiaries. The amount of credit available at any one time under
the Line of Credit is limited to 75% of eligible contracts. As of June 30, 1997,
the total amount
37
<PAGE> 39
available to the Company under the Line of Credit was $80.4 million, of which
approximately $66.7 million was outstanding, including letters of credit.
Interest on amounts outstanding under the Line of Credit is, at the option
of Central, equal to either (a) 87.5 basis points above the higher of the prime
rate announced by Wells Fargo Bank or the federal funds rate plus 50 basis
points or (b) 225 basis points above the interest rate per annum at which
deposits in dollars are offered by Wells Fargo Bank to prime banks in the London
Eurodollar market. The aggregate amount of indebtedness outstanding under the
Line of Credit at June 30, 1997 bore interest at the rate of 7.9%. The Company
is required to maintain interest rate hedging arrangements for at least 50% of
the Senior Funded Debt (as defined in the Line of Credit) of the Company.
However, this percentage may be reduced by the amount (expressed as a
percentage) of the ratio of any permitted fixed rate indebtedness issued by
Central to the total Senior Funded Debt (as defined in the Line of Credit).
The Line of Credit restricts, among other things, the Company's ability to
(i) incur additional indebtedness, (ii) pay indebtedness prior to the date when
due, (iii) pay dividends, make certain other restricted payments or consummate
certain asset sales, (iv) merge or consolidate with any other person, (v) enter
into certain transactions with affiliates, (vi) incur indebtedness that is
subordinate in priority and right of payment to amounts outstanding under the
Line of Credit, and (vii) make future acquisitions in excess of an aggregate
amount.
The Line of Credit also contains certain restrictive covenants that
require, among other things, the Company to maintain specific financial ratios
and to satisfy certain financial tests. These include: (a) Past Due Receivables
Ratio (as defined in the Line of Credit) as of the end of each month of no more
than 0.06 to 1.00, (b) Credit Loss Allowance Ratio (as defined in the Line of
Credit) as of the end of each month of not more than 0.05 to 1.00, (c) Interest
Coverage Ratio (as defined in the Line of Credit) as of the end of each quarter
of not less than 1.85 to 1.00, (d) Credit Loss/Net Chargeoff Percentage (as
defined in the Line of credit) as of the end of each month of not less than the
Minimum Credit Loss/Chargeoff Percentage (as defined in the Line of Credit) as
of such date, (e) Leverage Ratio (as defined in the Line of Credit) as of the
end of each quarter of no more than 2.00 to 1.00. The principal outstanding
amount of the Junior Subordinated Debentures or any other debt subordinated to
the Line of Credit would not be included in the calculation of the Leverage
Ratio. The Company has requested the lenders to modify the Past Due Receivables
ratio to be no more than 0.08 to 1.00 as of the end of each month. The lenders
under the Line of Credit have given a preliminary indication of their consent to
such increase in the Past Due Receivables Ratio. The offering will not be
consummated until the amendment, which is currently being documented, is
executed. The Company is also required to maintain a Tangible Net Worth (as
defined in the Line of Credit) as of the end of each quarter of not less than
$50 million, plus an amount equal to 75% of Net Income (as defined in the Line
of Credit) earned in each quarter (with no deduction for a net loss in a
quarter), plus an amount equal to 75% of the aggregate increases in
stockholders' equity as a result of the sale of capital stock of the Company.
The breach of any of these covenants or other terms of the Line of Credit could
result in a default under the Line of Credit, in which event the lenders could
seek to declare all amounts outstanding under the Line of Credit, together with
accrued and unpaid interest, to be immediately due and payable.
The Company intends, after consummation of this offering, to enter into
negotiations with the lenders under the Line of Credit or another group of
lenders to restructure the Company's senior credit facilities upon terms and
conditions more favorable to the Company. No assurances can be given, however,
that Central will be successful in restructuring the Line of Credit or obtaining
replacement senior credit facilities, or that if obtained any such restructured
Line of Credit or replacement senior credit facility will be on terms more
favorable to the Company. In addition, no assurances can be given that any such
restructured Line of Credit or replacement senior credit facility will not
contain terms and conditions in addition to those already contained in the
Junior Subordinated Debentures which might cause Central under certain
circumstances to exercise its existing right under the Junior Subordinated
Debentures to defer the payment of interest on the Junior Subordinated
Debentures or otherwise restrict the ability of Central to pay interest on the
Junior Subordinated Debentures and consequently CFAC Capital's ability to pay
Distributions on the Trust Preferred Securities.
38
<PAGE> 40
In addition, the inability of the Company at any time to renew or replace
its Line of Credit or other senior credit facilities on acceptable terms could
have a material adverse effect on the Company's results of operations and
financial condition. See "Risk Factors -- Subordination of Central's Obligations
Under the Junior Subordinated Debentures and the Guarantee", "Risk
Factors -- Restrictions Imposed by the Line of Credit", and "Risk
Factors -- Need for Senior Credit Facility."
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards Number 128 (Earnings per Share) [SFAS 128], Statement of
Financial Accounting Standards Number 130 (Reporting Comprehensive Income) [SFAS
130] and Statement of Financial Accounting Standards Number 131 (Disclosures
About Segments of an Enterprise and Related Information) [SFAS 131]. The Company
will be required to adopt SFAS 128, SFAS 130 and SFAS 131 in fiscal year 1997.
The Company does not expect that the adoption of SFAS 128, SFAS 130 and SFAS 131
will have a material effect on its financial position or its results of
operations in 1997.
39
<PAGE> 41
BUSINESS
In addition to the historical information contained herein, certain
statements under this caption constitute "forward-looking statements" under
Section 27A of the Securities Act and 21E of the Exchange Act which involve
risks and uncertainties. The Company's actual results may differ significantly
from those discussed herein. Factors that might cause such a difference include,
but are not limited to, those discussed under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as those discussed elsewhere in this Prospectus.
COMPANY OVERVIEW
The Company is a specialized consumer finance company that primarily serves
the financing needs of the rapidly growing low income Hispanic population, a
market the Company believes is underserved. The Company (i) provides small,
unsecured personal loans to the Company's customers; (ii) purchases and services
consumer finance receivables generated by the Company's customers for purchases
of high quality brand name consumer products, appliances and furniture sold by
Banner, an affiliate of the Company, and by independent retailers; (iii) sells
airline tickets and originates and services travel-related finance receivables;
and (iv) provides insurance products and insurance premium financing to its
customers. The Company has catered to the low income Hispanic population during
its 40 years of operation by locating its facilities primarily in Hispanic
communities, advertising in Spanish, and employing Spanish as the primary
language at its locations. While the Company operates primarily in the greater
Los Angeles area and faces substantial competition with respect to its lines of
business, the Company's objective is to become the leading provider of consumer
credit and other financial services to the low income Hispanic population in
urban areas within California and elsewhere in the United States.
The Company's customers are typically between the ages of 21 and 45, earn
less than $25,000 per year, have little or no savings, and have limited or
short-term employment histories. In addition, the Company's customers typically
have no or limited prior credit histories and are generally unable to secure
credit from traditional lending sources. The Company bases its credit decisions
on its assessment of a customer's ability to repay the obligation. In making a
credit decision, in addition to the size of the obligation, the Company
generally considers a customer's income level, type and length of employment,
stability of residence, personal references, and prior credit history with the
Company. The Company also obtains a credit bureau report and rating, if
available, and seeks to confirm other credit-related information. The Company,
however, is more susceptible to the risk that its customers will not satisfy
their repayment obligations than are less specialized consumer finance companies
or consumer finance companies that have more stringent underwriting criteria.
See "Risk Factors -- Credit Risk Associated with Customers; Lack of Collateral"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Trends -- Credit Quality" and "-- Delinquency Experience
and Allowance for Credit Losses."
DEMOGRAPHIC TRENDS AND MARKET OPPORTUNITY
Since 1950 Hispanics have been the fastest growing minority group in the
United States, increasing from 4.0 million in 1950 to approximately 27.0 million
in 1996, a compound annual growth rate of 4.3%. According to the 1996 U.S.
Bureau of the Census Current Population Report (the "1996 Report"), this trend
is expected to continue. The 1996 Report projects that the Hispanic population
will total 36.0 million by 2005. California is home to the largest Hispanic
population in the United States and this population is estimated to grow from
9.4 million in 1995 to 13.0 million by 2005, at which time it will comprise
approximately 34% of California's total population. The Company believes that,
despite the current size and projected population growth of the Hispanic
population in the United States, this segment of the population will continue to
have limited access to traditional sources of credit.
The Company has identified certain metropolitan markets in which the
Company believes it can successfully introduce its financial products and
services. Specifically, the Company has determined that there exist significant
opportunities in markets having large Hispanic populations but in which such
populations account for less than 30% of such area's total population. The
Company believes that Hispanic consumers in
40
<PAGE> 42
these markets are more likely to be underserved than Hispanics in locations in
which they comprise a greater proportion of an area's total population.
BUSINESS STRATEGY
Recognizing these demographic trends, management's strategy has been to
identify new financial products and services that it believes could be
introduced successfully to the low income Hispanic population in urban areas
within California and increase the number of locations through which it can
distribute its products and services. From the 1991 Acquisition until the
Company's initial public offering in June 1996, the Company grew primarily as a
result of the introduction of such financial products and services and increased
pricing. The Company's most significant growth has occurred as a result of the
introduction of unsecured small loans in the fourth quarter of 1992, a product
which the Company believes offers significant continued growth potential. In
1995, the Company began offering company-financed sales of airline tickets and
in 1996, the Company began selling automobile insurance and offering insurance
premium financing and expanded its independent retail financing business. In
1997, the Company introduced a new financial product involving the issuance of a
card, called an "Efectiva Card", which provides customers of the Company with
the ability to access their established lines of credit with the Company by
withdrawing cash from the Company's cash dispensing machines. As of the date
hereof, the Company has installed a proprietary, non-networked closed system of
20 cash dispensing machines, of which 18 are in locations owned or leased by the
Company or Banner and 2 of which are in locations owned or leased by
unaffiliated parties.
To continue its growth, in 1996 the Company began to expand its
distribution network through acquisitions of businesses primarily serving the
Hispanic community. The Company also intends to develop new financial products
and services internally that the Company believes will complement or expand its
current financial products and services, or seek to acquire existing businesses
that offer such products and services. The Company also intends to expand its
consumer finance business for independent retailers. Prior to May 1996, the
Company offered its products and services through 12 locations, 11 of which were
in the greater Los Angeles area. In May 1996, the Company acquired the business
of, and assumed the leasehold interests to, six travel locations in the greater
Los Angeles area. In June 1996, the Company acquired the business of, and
assumed the leasehold interests to, 19 travel locations of which 14 are in the
greater Los Angeles area, two locations are in Chicago and one location is in
each of Dallas, Las Vegas and San Diego. In December 1996, the Company acquired
the assets of, and assumed the leasehold interests in, 55 travel locations in
California. In July 1996, the Company acquired the business of, and assumed the
leasehold interests in, 10 auto insurance locations in the greater Los Angeles
area. Although such transactions were not material from a financial point of
view, the Company believes that such businesses provide the Company with growth
opportunities while adding additional locations through which it can offer its
financial products and services.
BUSINESS ACTIVITIES
At June 30, 1997, the Company's gross receivables portfolio was
approximately $133.0 million, consisting of the Small Loan Portfolio, the
Consumer Product Portfolio, the Independent Retail Finance Portfolio, the Travel
Finance Portfolio, the Premium Finance Portfolio, and the Automobile Finance
Portfolio.
Installment Credit and Related Businesses
The Company provides credit to low income consumers who desire to purchase
consumer products and services on credit. By granting credit, the Company
provides such consumers with an increased number of purchasing options. The
Company purchases and services consumer finance receivables generated through
sales of brand name consumer products by Banner. The Company also purchases and
services consumer finance receivables generated by independent retailers and
originates and services consumer finance receivables generated through Company
sales of airline tickets and insurance products. From 1995 through May 30, 1997,
the Company also financed the sale of used automobiles.
Consumer Product Finance. The Company purchases and services consumer
finance receivables generated through sales of brand name consumer products by
Banner through six stores in the greater Los
41
<PAGE> 43
Angeles area and one store in San Francisco. Consumer products financed by the
Company include televisions, stereos, refrigerators, washers and dryers, ovens,
freezers, furniture, household accessories and special order items.
Independent Retail Installment Finance. The Company also provides financing
to consumers for the purchase of products and services sold by independent
retailers. At present, the Company has independent retail installment financing
arrangements with approximately 100 retailers in the greater Los Angeles area,
most with one or two locations. The Company regularly considers and evaluates
additional independent retail installment financing arrangements.
Travel Sales and Finance. As a complementary business line, the Company in
mid-1995 commenced its travel business, offering sales of airline tickets, as
well as the financing of such purchases. As a result of its recent acquisitions,
the Company believes that it is currently the largest provider of travel
services to the low income Hispanic population in California. Substantially all
of the Company's ticket sales are for international travel, which generally
provides a higher commission structure than does domestic travel. Prior to its
initial public offering, the Company was conducting this business at five of
Banner's installment credit stores in the greater Los Angeles area and two
finance centers offering small loans and travel finance in the greater Los
Angeles area that were opened in December 1995. At June 30, 1997, the Company
operated through 77 locations, of which 54 are located in Southern California,
17 are located in Northern California and 6 are located outside of California.
See "Business -- Business Strategy." The Company believes that both its small
loan and travel product lines can be offered out of 1,000 - 1,500 square foot
locations, and that such locations can efficiently offer additional financial
products and services which the Company anticipates it will make available in
the future.
Automobile Finance. From mid 1995 to May 30, 1997, the Company also
provided financing to consumers for the purchase of automobiles sold by Banner.
Banner offered used automobiles for prices ranging from $6,500 to $8,500. The
Company offered financing terms on sales of automobiles of up to 42 months. All
financing extended by the Company on automobiles sold by Banner is with full
recourse back to Banner in the event of default by the customer.
Small Loan Business
In December 1992, the Company began offering unsecured, closed-end, small
loans generally ranging from $350 to $1,500 for personal, family or household
purposes at Banner's flagship installment credit store. Prior to commencing this
business, the Company determined that there was a significant demand for small
loans, and that financial institutions in its geographic market were not making
loans of less than $1,500 and did not have adequate underwriting experience to
serve the low income Hispanic population. Commencing in May 1997, the Company
began offering unsecured open-end small loans which can be accessed through the
Efectiva Card. At June 30, 1997, the Company's small loan business was operating
through 19 facilities, six of which were at Banner locations and 13 of which
were finance centers.
Other Business Activities
The Company acts as an intermediary for an independent insurance carrier
with respect to the sale of credit life and credit accident and health insurance
to its customers and, as such, sells policies within limitations established by
agency contracts with that insurer. Credit life insurance provides for the
payment in full of the borrower's credit obligation to the lender in the event
of the borrower's death. Credit accident and health insurance provides for
repayment of loan installments to the lender during the insured's period of
involuntary unemployment resulting from disability, illness or injury. Premiums
for such credit insurance are at the maximum authorized rates and are stated
separately in the Company's disclosure to customers, as required by the
Truth-in-Lending Act and applicable state statutes. The Company does not act as
an intermediary with respect to the sale of credit insurance to non-borrowers.
The Company earns a commission from the insurance carrier on the sale of credit
insurance which is based in part on the claims experience on policies sold by
the insurance carrier through the Company. Commencing in mid-1996, the
independent insurance carrier reinsured the credit life and credit accident and
health risk with a newly formed subsidiary of
42
<PAGE> 44
the Company. As a result of this reinsurance arrangement, the credit risk
remains with the Company. In 1996, the Company also commenced its automobile
insurance and insurance premium financing businesses.
COMPANY OPERATIONS
Credit Procedures
Because of the Company's growth and expected continued growth, in late
1996, the Company took a number of steps to improve collections and credit
quality. The Company hired two senior executives in the credit and collections
fields. In December 1996, the Company installed an autodialer to assist its
collections personnel in successfully contacting past due borrowers. Finally,
the Company hired CCN, Inc. to develop a proprietary credit scoring system for
the Company, which it expects to implement during 1998.
The Company has developed uniform guidelines and procedures for evaluating
credit applications for installment credit sales and small loans. Credit
applications are taken at all of the Company's locations and at each of Banner's
stores and are generally transmitted electronically through the Company's
computer system to the Company's credit processing facility, where all credit
approval and verification is centralized. Credit applications are also taken at
each of the independent retail locations for which the Company provides
financing, and are generally transmitted to the Company's credit processing
facility via facsimile. The Company believes that its underwriting policies and
procedures allow it to respond quickly to credit requests. The Company typically
responds to credit applicants within one hour. Management believes that because
of its prompt response, many customers prefer to deal with the Company instead
of its competitors.
The Company's credit managers and credit approvers make their decisions on
a case by case basis and are influenced by, among other things, whether an
applicant is a new or existing customer. New applicants complete standardized
credit applications which contain information concerning income level,
employment history, stability of residence, driver's license or state
identification card, social security number, capacity to pay and personal
references. The Company also obtains a credit bureau report and rating, if
available, and seeks to confirm other credit-related information. For an
established customer, in all instances the credit process currently includes a
review of the customer's credit and payment history with the Company. Because
the Company offers multiple lines of credit, a review is made with respect to
the aggregate amount owed by a customer. In cases where a customer makes a
request for a material increase in his or her aggregate outstanding balance, the
Company will obtain a credit bureau report and will seek to confirm employment.
In instances where the applicant has no or limited credit history, the Company
may require a co-signer with appropriate credit status to sign the contract and
may, in the installment credit business, also require a down payment. Depending
on the size of the transaction and other relevant factors, the applicant's
employment and residence may also be verified by the Company's credit verifiers.
See "Risk Factors -- Credit Risk Associated with Customers; Lack of Collateral."
Payment and Collections
Industry studies estimate that more than 25% of the adult population in the
United States does not maintain a checking account, which is a standard
prerequisite for obtaining a consumer loan, credit card or other form of credit
from most consumer credit sources. The Company's customers are required to make
their monthly payments using a payment schedule provided to them by the Company.
The vast majority of the Company's customers make their payments in cash at the
Company's locations or at the Company's payment facilities in Banner's stores.
For the Company's customers who are paid their wages by check but who do not
maintain checking accounts, the Company cashes such checks at no charge in order
to facilitate account payments.
Payments are considered past due if a borrower fails to make any payment in
full on or before its due date, as specified in the installment credit or small
loan contract signed by the customer. The Company currently attempts to contact
borrowers whose payments are not received by the due date within 10 days after
such due date. Such contacts are made by the Company by both letter and
telephone. In December 1996, the Company installed an autodialer which makes up
to 500 telephone calls per hour to assist its collections
43
<PAGE> 45
personnel in successfully contacting past due borrowers. If no payment is
remitted to the Company after the initial contact, additional contacts are made
every seven days, and, after a loan becomes 31 days delinquent, the account is
generally turned over to the Company's credit collectors. Under the Company's
guidelines, an account is generally charged off and turned over to a collection
agency when the account is deemed uncollectible by the Company, which is
typically when the account is between 91 and 150 days past due.
Finance Contracts
The Company utilizes different types of financing contracts, depending on
the dollar amount of the financing and the product financed. Each of the
contracts is in Spanish and English and requires monthly financing payments.
Many of the terms, conditions and disclosures in the finance contracts are
governed by state and federal regulations. See "Business -- Regulation." When a
qualifying customer with an open account balance increases the amount
outstanding with an additional purchase or loan, the customer executes a new
contract for the new aggregate balance and, with the proceeds, pays off the
original contract.
Insurance
The Company maintains various insurance policies of the type, and in the
amounts, which are usual for its business. The Company maintains coverage for
business interruptions, including interruptions resulting from computer failure.
The Company believes that its insurance coverage is adequate.
Management Information Systems
Pursuant to an Operating Agreement dated June 24, 1996 among the Company,
Banner and Holdings, the Company utilizes Banner's management information
systems and has been granted a license to use Banner's management information
systems' software. Banner has invested significant resources to develop a
proprietary system that integrates all major aspects of the businesses of the
Company and Banner. The computer system utilizes a high-range IBM AS-400 as the
Company server, which provides on-line, real-time information processing
services to terminals located in each of Banner's locations and in the Company's
centralized credit processing facility. The system allows for complete
processing of the Company's consumer product finance, automobile finance, travel
finance and small loan businesses, including application processing and
credit-approval, acquisition of credit bureau reports, accessing the payment
history of all active accounts, preparation of contracts, payment posting, and
all other collection-monitoring activities. In addition, the system provides
customized reports to analyze each of the Company's portfolios on a daily,
weekly and monthly basis. The Company believes that the computer system is
sufficient to permit significant growth in each of the Company's business lines
and portfolios without the need for a material additional investment in
management information systems. Banner has adopted procedures designed to
minimize the effect of systems failures and other types of potential problems,
including routine backup and off-site storage of computer tapes, as well as
redundancy and "mirroring" of certain computer processes.
COMPETITION
The installment credit business is highly competitive. The Company, through
its relationship with Banner and other retailers, competes with those department
stores, discount stores and other retail outlets which also provide credit to
low income consumers. The largest national and regional competitors have
significantly greater resources than the Company. Competition may arise from new
sources having the expertise and resources to enter the Company's markets either
through expansion of operations or acquisitions.
The small loan consumer finance industry is a highly fragmented segment of
the consumer finance industry. There are numerous small-loan consumer finance
companies operating in the United States. Many of these companies have
substantially greater resources than the Company, and the entry or expansion of
any such company within the Company's markets could have a material adverse
effect on the Company's business strategy and results of operations and
financial condition. The Company does not believe it competes with commercial
banks, savings and loans and most other consumer finance lenders, because these
institutions typically do not make loans of less than $1,500 with maturities of
one year or less.
44
<PAGE> 46
Each of the Company's other businesses, including travel sales and
automobile insurance sales, operate in highly competitive industries. The
Company competes against a large number of national and regional firms engaged
in such businesses, many of which have substantially greater financial,
marketing and sales resources than the Company. There can be no assurance that
the Company's present competitors or companies that choose to enter the
marketplace in the future will not exert significant competitive pressures on
the Company.
REGULATION
General
As a consumer finance company, the Company is subject to extensive
regulation. Violation of statutes and regulations applicable to the Company may
result in actions for damages, claims for refunds of payments made, certain
fines and penalties, injunctions against certain practices and the potential
forfeiture of rights to repayment of loans. The Company may be affected by
changes in state and federal statutes and regulations. The Company, in
conjunction with industry associations, actively participates in lobbying
efforts in the states in which it operates. Although the Company is not aware of
any pending or proposed legislation that could have a material adverse effect on
the Company's business, there can be no assurance that future regulatory changes
will not adversely affect the Company's lending practices, operations,
profitability or prospects.
State Regulation
Consumer Product and Travel Finance. The Company's consumer product finance
and travel finance businesses are regulated in California by the California
Retail Installment Sales Act (the "Unruh Act"). The Unruh Act requires the
Company to disclose to its customers, among other matters, the conditions under
which the Company may impose a finance charge, the method of determining the
balance which is subject to a finance charge, the method used to determine the
amount of the finance charge, and the minimum periodic payment required. In
addition, the Unruh Act provides consumer protection against unfair or deceptive
business practices by regulating the contents of retail installment sales
contracts, setting forth the respective rights and obligations of buyers and
sellers, and regulating the maximum legal finance rate or charge on installment
credit sales.
Small Loan Business. Small loan consumer finance companies are subject to
extensive regulation, supervision and licensing under various federal and state
statutes, ordinances and regulations. In general, these statutes establish
maximum loan amounts and interest rates and the types and maximum amounts of
fees and other costs that may be charged. In addition, state laws regulate
collection procedures, the keeping of books and records and other aspects of the
operation of small-loan consumer finance companies. State agency approval
generally is required to open new branch offices. Accordingly, the ability of
the Company to expand by acquiring existing offices and opening new offices will
depend in part on obtaining the necessary regulatory approvals.
Each facility that offers small loans must be separately licensed under the
laws of California. Licenses granted by the regulatory agencies are subject to
renewal every year and may be revoked for failure to comply with applicable
state and federal laws and regulations. In California, licenses may be revoked
only after an administrative hearing.
Insurance Premium Finance. The Company's insurance premium finance business
is regulated by the State of California Department of Financial Institutions. In
general, state law and regulations set forth requirements and procedures for the
cancellation of policies and collection of unearned premiums, regulating the
form and content of premium finance agreements, limiting the amount of finance,
delinquency, cancellation and other fees the Company may charge, and prescribing
notice periods for the cancellation of policies for nonpayment.
Insurance Businesses. The Company's insurance businesses are regulated in
California by the State of California Department of Insurance. In general,
regulations issued by this agency require the Company to, among other things,
maintain fiduciary fund and trust accounts and follow specific market, general
business and claims practices.
45
<PAGE> 47
Automobile Finance. The Rees-Levering Motor Vehicle Sales and Financing Act
(the "Rees-Levering Act") governs the Company's automobile finance business in
California. The Rees-Levering Act requires the Company to provide its customers
with information such as an itemization of the amount financed, including items
such as document preparation fees, taxes imposed on the sale, and the amount
charged for a service contract. The Rees-Levering Act also requires that the
Company's sales contracts comply with the disclosure requirements of the federal
Truth-in-Lending Act and Regulation Z issued thereunder. In addition, the Rees-
Levering Act protects consumers against unfair or deceptive sales practices by
setting forth the respective rights and obligations of buyers and sellers of
motor vehicles, and regulating the maximum legal finance rate or charge for
motor vehicle sales.
Federal Regulation
The Company is subject to extensive federal regulation as well, including
the Truth-in-Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act and the regulations thereunder and the Federal Trade Commission's
Credit Practices Rule. These laws require the Company to provide complete
disclosure of the principal terms of each loan to every prospective borrower,
prohibit misleading advertising, protect against discriminatory lending
practices and proscribe unfair credit practices. Among the principal disclosure
items under the Truth-in-Lending Act are the terms of repayment, the total
finance charge and the annual rate of finance charge or "Annual Percentage Rate"
on each loan. The Equal Credit Opportunity Act prohibits creditors from
discriminating against loan applicants on the basis of race, color, sex, age or
marital status. Pursuant to Regulation B promulgated under the Equal Credit
Opportunity Act, creditors are required to make certain disclosures regarding
consumer rights and advise consumers whose credit applications are not approved
of the reasons for the rejection. The Fair Credit Reporting Act requires the
Company to provide certain information to consumers whose credit applications
are not approved on the basis of a report obtained from a consumer reporting
agency. The Credit Practices Rule limits the types of property a creditor may
accept as collateral to secure a consumer loan.
Travel Agency Regulation
Each of the Company's travel locations are travel agencies which are
regulated by the Airline Reporting Corporation ("ARC"). The ARC represents the
major scheduled air carriers and sets the operating rules for travel agencies.
The Company is required to submit weekly reports to the ARC and to meet certain
procedural, funding and bonding requirements set by the ARC.
ADVERTISING
The Company actively advertises primarily on Hispanic television and
through direct mail, targeting both its present and former customers and
potential customers who have used other sources of consumer credit. The Company
believes that its advertising contributes significantly to its ability to
compete effectively with other providers of consumer credit.
EMPLOYEES
At June 30, 1997, the Company had 399 hourly employees, 70 salaried
employees and 110 commissioned employees. None of the Company's employees is
covered by a collective bargaining agreement. The Company believes its relations
with its employees are good.
PROPERTIES
The Company's executive and administrative offices occupy approximately
17,000 square feet of a building owned by Holdings that is located at 5480 East
Ferguson Drive, California 90022. The Company believes that its executive and
administrative offices are adequate for current needs and that additional space
in its headquarters is available for future expansion. The Company's payment
centers located in Banner's stores are adequate for the Company's present and
anticipated needs. The Company owns an 86,000 square
46
<PAGE> 48
foot property in Los Angeles on which the Company built a 10,000 square foot
loan center. All of the Company's other finance centers are leased pursuant to
short-term leases.
LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings arising in the normal
course of its business. Management does not believe the outcome of these matters
will have a material adverse effect on the Company.
47
<PAGE> 49
MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company, their ages (at June 30, 1997) and their
positions and offices with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- ------------------------------------------------------
<S> <C> <C>
Gary M. Cypres 53 Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer
Anthony Fortunato 48 Executive Vice President of Operations
Gerard T. McMahon 49 Executive Vice President of Credit and Collections
Ed Valdez 45 Senior Vice President of Credit
Salvatore J. Caltagirone 55 Director
Jose de Jesus Legaspi 45 Director
William R. Sweet 60 Director
</TABLE>
Members of the Board of Directors are elected for one-year terms expiring
at the next annual meeting of shareholders and hold office until their
successors are duly elected and qualified. All officers are appointed by and
serve at the discretion of the Board of Directors.
Gary M. Cypres has been Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer of the Company since its formation. Mr.
Cypres has been Chairman of the Board, Chief Executive Officer, President and
Chief Financial Officer of Holdings and Banner since February 1991, Chairman of
the Board and Chief Executive Officer of Central Rents since June 1994 and
managing general partner of West Coast since March 1990. Prior to that, Mr.
Cypres was a general partner of SC Partners, a private investment banking and
consulting firm. From 1983 to 1985, Mr. Cypres was Chief Financial Officer of
The Signal Companies. From 1973 to 1983 Mr. Cypres was Senior Vice President of
Finance at Wheelabrator-Frye Inc. Mr. Cypres was a member of the Board of
Trustees and a faculty member of The Amos Tuck School of Business at Dartmouth
College.
Mr. Cypres spends that portion of his business time as is required to
oversee the operations of the Company and to direct or implement the Company's
business strategies. Mr. Cypres continues to spend a portion of his business
time as the managing general partner of West Coast, as Chairman of the Board,
Chief Executive Officer, President and Chief Financial Officer of Holdings, as
Chairman of the Board, Chief Executive Officer, President and Chief Financial
Officer of Banner, and as Chairman of the Board and Chief Executive Officer of
Central Rents.
Anthony Fortunato has been Executive Vice President of Operations of the
Company since October 18, 1996. Prior to joining the Company, Mr. Fortunato was
Executive Vice President of Citibank, F.S.B. California from November 1993 to
October 1996, and Vice President of Citibank, N.A./Citicorp from September 1976
to November 1993.
Gerard T. McMahon has been Executive Vice President of Credit and
Collections of the Company since September 23, 1996. Prior to joining the
Company, Mr. McMahon was Vice President of Credit and Collections at Barry's
Jewelers from 1991 to 1996 and Divisional Vice President of Credit and
Collections at Kay Jewelers from 1987 to 1991. From 1981 to 1987, Mr. McMahon
was Divisional Vice President of Credit Administration at The Broadway.
Ed Valdez has been Senior Vice President of Credit of the Company since its
formation, Senior Credit Manager of the Company's consumer product finance
business since 1986 and Senior Credit Manager of the Company's small loan
business since November 1992. Mr. Valdez has been working for the Company for
over 28 years.
48
<PAGE> 50
Salvatore J. Caltagirone has been a director of the Company since September
1997. Mr. Caltagirone has been retired since October 1994. From the Fall of 1990
to October 1994, he was an employee of G.M. Cypres & Company. From March 1987 to
June 1990 he was employed as the Managing Director of Henley Group.
Jose De Jesus Legaspi has been a director of the Company since June 1996.
Since 1980, Mr. Legaspi has been a principal of and broker at The Legaspi
Company, a full service commercial real estate brokerage firm. In addition,
since 1992, Mr. Legaspi has been a principal of the FINCA Property Management
Company, a residential and commercial real estate management company. Mr.
Legaspi is also a Commissioner of the Los Angeles Department of Water and Power.
William R. Sweet has been a director of the Company since September 1997.
In July 1996, Mr. Sweet retired from his position of Executive Vice
President -- Wholesale Banking of Union Bank of California, N.A., a position he
had held since July 1985. Mr. Sweet currently serves as a trustee of Berkeley
Capital Management Funds.
Set forth below are brief summaries of the background and business
experience of certain other significant employees of the Company.
Ran Birkins, 48, has been Senior Vice President of Credit and Collections
of the Company since its formation and Vice President of Credit of the Company's
consumer product finance business and small loan business since September 1994.
From November 1992 to September 1994, Mr. Birkins was Director of Credit of the
Company's small loan business. From December 1989 to September 1994, Mr. Birkins
was Director of Credit of the Company's consumer product finance business.
Angel Lopez, 50, has been Vice President of the Company since May 1996.
From 1995 until joining the Company, Mr. Lopez was Vice President of Marketing
and Business Development at the Sacred Heart Hospital in Chicago, Illinois. From
1992 to 1995, Mr. Lopez was the Director of Ethnic Marketing for Sears
Merchandise Group in Hoffman Estates, Illinois. From 1990 to 1992, Mr. Lopez was
the General Manager for the Latin American Buying Office of Sears in Mexico
City, Mexico.
Alan E. Scheneman, 45, has been Senior Vice President of the Company since
its formation. Mr. Scheneman joined the Company's consumer product finance
business in 1992 as Vice President of Management Information Services. From 1988
to 1992, Mr. Scheneman was the director of Product Development at JDA Software
Services where, in 1989, he managed the implementation of the Company's
management information system.
Marvin A. Torres, 35, has been President of the Company's travel finance
business since December 1995. From April 1995 to December 1995, Mr. Torres was
Vice President of Operations for the Company's travel finance business. From
1984 to 1995, Mr. Torres was Vice President of Operations and General Manager at
Solano Travel Service and Costa Rica Holiday Tours in Los Angeles, California.
49
<PAGE> 51
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary of Cash and Certain Other Compensation
The following table summarizes the compensation paid or accrued by the
Company to or on behalf of the Company's named executive officers (the "Named
Executives") for the years ended December 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) -----------------------------
----------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- ------------------------------------ ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gary M. Cypres(2)................... 1996 $175,000 $30,000 100,000 $ 77,000(5)
Chairman of the Board, Chief 1995 $175,000 -- --
Executive Officer, President and
Chief Financial Officer --
Anthony Fortunato(3)................ 1996 $ 46,154 -- 100,000 --
Executive Vice President of 1995 -- -- --
Operations --
Gerard T. McMahon(4)................ 1996 $ 43,692 -- 30,000 --
Executive Vice President of Credit 1995 -- -- --
and Collections --
Ed Valdez........................... 1996 $ 95,000 $14,000 30,000 $ 1,327(6)
Senior Vice President of Credit 1995 $ 84,615 $10,000 -- $ 1,815(6)
</TABLE>
- ---------------
(1) Certain of the Company's executive officers receive benefits in addition to
salary and cash bonuses. The aggregate amount of such benefits, however, do
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
of such Named Executive.
(2) Prior to July 2, 1996, Mr. Cypres' compensation was paid to G.M. Cypres &
Co. by Holdings for services rendered to it.
(3) Mr. Fortunato joined the Company in October 1996.
(4) Mr. McMahon joined the Company in September 1996.
(5) Represents amount accrued under the Supplemental Executive Retirement Plan
for Mr. Cypres.
(6) Represents amounts contributed under the Banner's, a California Corporation
dba Central Electric Profit Sharing Plan (the "Profit Sharing Plan") for Mr.
Valdez.
Stock Options
The following table shows certain information concerning stock options
granted during 1996 to the Named Executives.
FISCAL YEAR 1996 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL
OPTIONS REALIZABLE VALUE(2)
OPTIONS GRANTED TO EXERCISE EXPIRATION --------------------------
NAME GRANTED EMPLOYEES PRICE(1) DATE @5%(3) @10%(4)
- --------------------------------- ------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Cypres................... 75,000(5) 18.7% $12.00 6/26/06 $566,250 $1,434,000
25,000(6) 6.3% 18.25 12/16/06 287,000 727,250
Anthony Fortunato................ 100,000(6) 25.0% 18.25 12/16/06 1,148,000 2,909,000
Gerard T. McMahon................ 30,000(6) 7.5% 18.25 12/16/06 344,400 872,700
Ed Valdez........................ 30,000(5) 7.5% 12.00 6/26/06 226,500 573,600
</TABLE>
- ---------------
(1) The exercise price may be paid in cash or, at the discretion of the
Compensation Committee, by tendering shares of Company common stock, or the
delivery of an irrevocable direction to a securities
50
<PAGE> 52
broker to sell shares and deliver the sales proceeds to the Company in
payment of all or part of the exercise price, instead of cash.
(2) The potential realizable value is calculated pursuant to Securities and
Exchange Commission regulations by assuming the indicated annual rates of
stock price appreciation for the option term from the date of the grant when
the exercise price of the option was determined. Actual realized value will
depend on the actual annual rate of stock price appreciation for the option
term.
(3) The assumed stock price at the end of the option term is $19.55 for options
granted on June 26, 1996, and $29.73 for options granted on December 16,
1996.
(4) The assumed stock price at the end of the option term is $31.12 for options
granted on June 26, 1996 and $47.34 for options granted on December 16,
1996.
(5) The options granted are exercisable 20% per year beginning March 30, 1997
and on each of the first four anniversary dates thereafter, subject to
certain performance standards.
(6) The options granted are exercisable 20% per year beginning on each of the
first five anniversary dates of the grant, subject to certain performance
standards.
Option Exercises and Holdings
The following table provides information with respect to the Named
Executives concerning the number and value of specified unexercised options held
by the Named Executives as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary M. Cypres............................... 15,000 85,000 $ 120,000 $ 523,750
Anthony Fortunato............................ -- 100,000 -- 175,000
Gerard T. McMahon............................ -- 30,000 -- 52,500
Ed Valdez.................................... 6,000 24,000 48,000 192,000
</TABLE>
- ---------------
(1) The value of the Unexercised In-The-Money Options is based upon the $20.00
per share closing price of the Company's common stock on the Nasdaq National
Market on December 31, 1996.
Employment Agreements
Gary M. Cypres. In June 1996, the Company entered into an employment
agreement with Mr. Cypres. Under the employment agreement, Mr. Cypres will serve
as the Company's Chairman of the Board for a period of five years at a base
salary of $175,000 per year and is eligible to participate in the Company's
executive compensation plans. Mr. Cypres also agreed to serve as the Company's
President and Chief Executive Officer until December 31, 1997. If the Company
has not named a new President and Chief Executive Officer by December 31, 1997,
Mr. Cypres will continue in this capacity for a period of up to three additional
years and will receive an adjustment of his compensation as determined by the
Board of Directors. The employment agreement also provides that Mr. Cypres will
participate in the Company's defined benefit Supplemental Executive Retirement
Plan (the "SERP Plan") and be credited with eight and one-half years of service
for his contribution to the Company since the 1991 Acquisition and for entering
into the employment agreement. In addition, on December 31, 1997 Mr. Cypres will
be treated as satisfying his post-adoption service requirement under the SERP
Plan.
If Mr. Cypres is terminated "for cause," which definition generally
includes termination by the Company due to the executive's willful failure to
perform his duties under the employment agreement, Mr. Cypres's personal
dishonesty or breach of his fiduciary duties or the employment agreement, then
the Company will be obligated to pay him only his base salary up to the date
upon which the Company notifies him of his
51
<PAGE> 53
termination "for cause." If Mr. Cypres is terminated without "cause," becomes
disabled or dies, then the Company will be obligated to pay him or his estate,
commencing immediately, a lump sum payment equal to his base salary for the
remaining term of the employment agreement and to pay him under the SERP Plan as
if he had worked to his Normal Retirement Date, which the employment agreement
provides is December 31, 2000.
Mr. Cypres has agreed not to solicit employees of or compete with the
Company in any manner following his resignation or termination from the Company
for any period for which a lump sum has been paid by the Company in accordance
with the employment agreement, which period shall be no less than 12 months.
Anthony Fortunato. In October 1996, the Company entered into an employment
agreement with Mr. Fortunato. Under the employment agreement, Mr. Fortunato will
serve as the Company's Executive Vice President of Operations for a period of
three years at a base salary of $225,000, $250,000 and $275,000 per year,
respectively, and is eligible to receive an annual discretionary bonus and
participate in the Company's executive compensation plans. In addition, Mr.
Fortunato was awarded an initial grant of options to acquire 100,000 shares of
Common Stock pursuant to the 1996 Plan. Vesting of such options accrue over a
five-year period.
If Mr. Fortunato is terminated "for cause," which definition generally
includes termination by the Company due to the executive's willful failure to
perform his duties under the employment agreement, Mr. Fortunato's personal
dishonesty or breach of his fiduciary duties or the employment agreement, then
the Company will be obligated to pay him only his base salary up to the date
upon which the Company notifies him of his termination "for cause." If Mr.
Fortunato is terminated without "cause," then the Company will be obligated to
pay him, commencing immediately, a lump sum payment equal to his base salary for
the remaining term of the employment agreement in addition to any other
compensation and/or benefits provided for by the employment agreement.
Mr. Fortunato has agreed not to solicit employees of or compete with the
Company in any manner following his resignation or termination from the Company
for any period for which a lump sum has been paid by the Company in accordance
with the employment agreement, which period shall be no less than 12 months.
Gerard T. McMahon. In August 1996, the Company entered into an employment
agreement with Mr. McMahon. Under the employment agreement, Mr. McMahon will
serve as the Company's Executive Vice President of Credit and Collections at a
base salary of $160,000 per year and is eligible to receive an annual
discretionary bonus of up to 20% of his base salary and participate in the
Company's executive compensation plans. In addition, Mr. McMahon was awarded an
initial grant of options to acquire 30,000 shares of Common Stock pursuant to
the 1996 Plan. Vesting of such options accrue over a five-year period.
Except as described above, the Company has not entered into employment
agreements with any other of its executive officers or other members of
management.
Supplemental Executive Retirement Plan
In June 1996, the Company adopted the SERP Plan, which provides
supplemental retirement benefits to certain key management employees.
To vest in the SERP Plan, an employee must have at least 10 years of
service with the Company, including five years subsequent to the adoption of the
plan. Upon completion of the Company's initial public offering, Mr. Cypres was
credited with ten years of service with the Company and will be treated as
having fulfilled his post-adoption service on December 31, 1997 by acting as the
Company's President and Chief Executive Officer until such date. Participation
in the SERP Plan is determined by the Board of Directors. The SERP Plan benefits
are a function of length of service with the Company and Final Average
Compensation (average monthly compensation during the 36 consecutive months of
the last 60 months of the participant's employment that produces the highest
average compensation, including salary and bonus).
Benefits are equal to a targeted percentage of Final Average Compensation
as determined by the Board of Directors upon selection of the employee to
participate in the SERP Plan. In no case will the rate exceed fifty
52
<PAGE> 54
percent (50%) of the Final Average Compensation as of the date of the
participant's retirement or termination of employment, multiplied by the ratio
of the actual years of service as of the applicable event to the participant's
years of service projected to the participant's Normal Retirement Date (the
first day of the month after the participant attains age 60). A vested
participant who terminates employment at or after his Normal Retirement Date
will receive the full targeted percentage of his Final Average Compensation. The
SERP Plan benefit is reduced, however, by the annuity value of the participant's
benefit under the Profit Sharing Plan. At December 31, 1996, only Mr. Cypres was
a participant in the SERP Plan.
The following table shows the estimated annual retirement benefits that
would be payable under the SERP Plan upon a participant's Normal Retirement Date
on a straight life annuity basis, before any applicable offset for benefits
received under the Profit Sharing Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 10 15 20 25 30 OR MORE
- ------------------------------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$175,000............................ $ 87,500 $ 87,500 $ 87,500 $ 87,500 $ 87,500
200,000............................ 100,000 100,000 100,000 100,000 100,000
225,000............................ 112,500 112,500 112,500 112,500 112,500
250,000............................ 125,000 125,000 125,000 125,000 125,000
</TABLE>
- ---------------
As of December 31, 1996, Mr. Cypres was credited with 10 years of service under
the SERP Plan.
Compensation Committee Interlocks and Insider Participation
The Company has established a Compensation Committee. The Compensation
Committee consists of Messrs. Sweet, Caltagirone and Legaspi. Prior to the
establishment of the Compensation Committee, decisions concerning the
compensation of executive officers were made by Mr. Cypres, the Company's
Chairman of the Board, Chief Executive Officer and President. None of the
executive officers of the Company currently serves as a director or member of
the compensation committee of another entity or of any other committee of the
board of directors of another entity performing similar functions.
Director Compensation
In 1996, non-employee directors of the Company received an annual fee of
$15,000 for Board and Committee meetings. Mr. Cypres, the President and Chief
Executive Officer of the Company, received no fees for serving as a director of
the Company. The aggregate amount of directors' fees paid in 1996 was $15,000.
Mr. Legaspi received options to purchase 7,000 shares of the Company's common
stock at an exercise price of $12.00 per share under the Company's 1996 Stock
Option Plan. It is expected that Messrs. Caltagirone and Sweet will be granted
options to purchase 7,000 shares of the Company's common stock at 100% of the
fair market value of the Common Stock on the date of the grant. All options
granted to the Non-Employee Directors vest in equal annual installments over 5
year periods beginning on the date of grant, subject to continued service on the
Board of Directors; however, no option can be exercised until at least six
months after the date of grant. The Company has entered into agreements with all
directors pursuant to which the Company has agreed to indemnify them against
certain claims arising out of their services as directors. Directors are also
entitled to the protection of certain indemnification provisions in Central's
Certificate of Incorporation and Bylaws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Central was formed on April 11, 1996. Central, Banner and Holdings, on June
24, 1996, entered into an agreement, which was subsequently amended (the
"Reorganization Agreement") pursuant to which Holdings contributed to Banner its
investments in its subsidiaries that operate the small loan, travel, automobile
sales, and related businesses (the "Holdings Subsidiaries"), and Banner
contributed to Central its investments in the Holdings Subsidiaries and in its
subsidiary that holds the Consumer Product Portfolio (collectively, the
53
<PAGE> 55
"Subsidiaries") and cash in such amount so as to leave the Company with $500,000
on hand upon consummation of such transaction (the "Reorganization"). Pursuant
to the Reorganization Agreement, the intercompany accounts between the Company,
Banner and Holdings were forgiven, except with respect to income taxes. As a
result, the Company had $500,000 of cash on hand upon the Reorganization.
In connection with the Reorganization and pursuant to the Reorganization
Agreement, the Company, Banner and Holdings entered into various agreements for
the purpose of defining the ongoing relationships among them. Because Holdings
controls the Company and Banner (see "Beneficial Ownership of Principal
Stockholders and Management"), these agreements were not the result of
arm's-length negotiations. The Company believes, however, that these agreements
are at least as favorable to the Company as those that could have been obtained
from independent third parties.
Financing Agreement
The Company, Banner and Holdings have entered into an agreement, which was
subsequently amended (the "Financing Agreement") pursuant to which Banner
granted the Company the exclusive right, at the Company's option, (i) to
purchase consumer finance receivables originated by Banner for sales of
merchandise at Banner stores in operation on the date of the Financing Agreement
and for all stores which Banner may determine to open in the future during the
term of the Financing Agreement (and any extension thereof), or (ii) to provide
financing directly to Banner's customers at all of such locations. The Company
is not obligated to provide financing to any particular Banner customer, or to
offer financing at any Banner location or locations. The Financing Agreement has
a term of 15 years commencing on June 24, 1996. The Company may terminate the
Financing Agreement at any time upon one year's prior written notice to Banner.
During the term of the Financing Agreement, as long as Banner originates
its consumer finance receivables, the Company will have the right to purchase
consumer finance receivables at face value less a transaction fee which is
currently set at 2.5% and is subject to renegotiation at six month intervals to
reflect costs associated with the Company providing financing under the
Financing Agreement. If the Company originates such receivables, Banner will be
obligated to pay the Company a transaction fee in an amount to be initially
established by the parties and subject to renegotiation at six month intervals.
Under the Financing Agreement, the Company may also return to Banner up to $1.5
million of contracts purchased or contributed during each of 1996 and 1997. As a
result of increasing delinquencies in the Consumer Product Portfolio, the
Company anticipates that the Financing Agreement will be amended to increase the
aggregate amount of receivables which can be returned to Banner during 1997 to
in excess of $1.5 million. Recognizing the value to Banner of the Company
continuing to provide certain financial products and services, including check
cashing, travel and small loans, in Banner's retail locations, the space the
Company occupies in Banner's locations is provided by Banner at no cost or
charge to the Company.
Automobile Financing Agreement
In August 1996, the Company and Banner entered into the Automobile
Financing Agreement, under which the Company sold its used car sales business to
Banner for approximately its net book value, or $865,000. Under the provisions
of the Automobile Financing Agreement, Banner would operate the used car sales
business while the Company would have the exclusive right for a fifteen year
period to provide financing for all cars that Banner sells or to purchase
automobile finance contracts generated by Banner. In addition, all financing
extended by the Company on automobiles sold by Banner would be with full
recourse back to Banner in the event of default by the customer. Accordingly,
Banner would not provide any dealers discount for cars sold pursuant to this
Agreement. On May 30, 1997, Banner discontinued the used car sales business.
Option Agreement
The Company, Banner and Holdings have entered into an agreement (the
"Option Agreement") pursuant to which Holdings granted the Company an option to
purchase all of the outstanding capital stock of Banner (the "Option") from
Holdings at any time during the period which commenced on June 24, 1997 and will
end on June 24, 1999 (the "Option Termination Date"). The exercise price of the
Option will be equal to
54
<PAGE> 56
the net book value of Banner as reflected on Banner's balance sheet for the
month ended immediately preceding the exercise of the Option; such balance sheet
shall have been prepared in accordance with generally accepted accounting
principles on a basis consistent with prior periods. If the Company exercises
the Option, the exercise price is payable in cash or in shares of the Company's
common stock valued at the average last sale price of the Company's common stock
during the ten trading-day period preceding the date on which the Company
delivers to Holdings its written notice of exercise. Until the Option
Termination Date, Holdings may not, without the Company's prior written consent,
sell, offer or agree to sell, grant any option for the sale of, or otherwise
dispose of any of the capital stock of Banner (or any securities convertible
into, exercisable for or exchangeable for capital stock of Banner) nor will
Banner sell substantially all of its assets.
Operating Agreement
The Company, Banner and Holdings have entered into an agreement (the
"Operating Agreement") setting forth certain rights and obligations of the
parties following the Reorganization. The Operating Agreement covers the
following matters:
Allocation of Business Opportunities. Due to the potential conflicts
of interest resulting from the relationships among the Company, Banner and
Holdings, the Operating Agreement provides that Holdings and its
subsidiaries (other than the Company and its subsidiaries) will not,
without the prior written consent of the Company, directly or indirectly
engage in or enter into any business competing with the Company and
involving the financing of consumer products, travel products, small loans,
automobiles or insurance (the "Restricted Businesses"). If Holdings shall
acquire a company engaged in a Restricted Business or shall otherwise
directly or indirectly engage in a Restricted Business, Holdings shall be
obligated to sell, at the election of the Company, such Restricted Business
to the Company at a purchase price equal to the fair market value of such
Restricted Business, as determined through an independent appraisal
process. The foregoing restriction shall terminate on December 31, 2002,
or, if earlier, on the date on which Holdings ceases to own, directly or
indirectly, at least 25% of the outstanding voting stock of the Company.
Management and Other Services. The Operating Agreement provides that
Banner, Holdings or their affiliates are obligated to provide to the
Company, and the Company is obligated to utilize, certain services,
including accounting, management information systems and employee benefits.
Except for management information systems, these arrangements will continue
until terminated by the Company, Banner, Holdings or such affiliate upon
one-year's prior written notice. Termination may be made on a
service-by-service basis or in its entirety. To the extent that such
services directly relate to the finance portion of the consumer products
business contributed by Banner to the Company, or to the extent that other
costs are incurred by Banner, Holdings or their affiliates that directly
relate to the Company, the Company is obligated to pay Banner's, Holdings'
or their affiliates' actual cost of providing such services or incurring
such costs. Employee benefit expenses are allocated to the Company based on
the ratio of actual payroll expenses of employees in the consumer products
business contributed by Banner to the Company compared to total actual
payroll expenses of Banner before such allocation. Accounting expenses are
allocated 50% to the Company. The operating costs of Banner's management
information systems function are allocated initially 50% to the Company for
a period of five years, subject to adjustment from time to time to reflect
changing costs and usage. Such allocated expenses totaled $1.0 million and
$1.3 million for the six months ended June 30, 1997 and December 31, 1996,
respectively.
Employee Benefits. Under the Operating Agreement, the Company assumed
all liabilities of Banner, Holdings and the Subsidiaries under existing
employee welfare benefit and profit sharing plans cwith respect to the
employees of Banner, Holdings and the Subsidiaries who became employees of
the Company.
55
<PAGE> 57
Tax Sharing Agreement
The Company, Holdings and Banner have entered into an agreement (the "Tax
Sharing Agreement") providing for (i) the payment of federal, state and other
income tax remittances or refunds for periods during which the Company and
Holdings were included in the same consolidated group for federal income tax
purposes, (ii) the allocation of responsibility for the filing of such tax
returns, (iii) the conduct of tax audits and the handling of tax controversies
and (iv) various related matters. For periods during which the Company was
included in Holdings' consolidated federal income tax returns, the Company is
required to pay Holdings its allocable portion of the consolidated federal,
state and other income tax liabilities and is entitled to receive refunds
determined as if the Company and its subsidiaries had filed separate income tax
returns. With respect to Holdings' liability for payment of taxes for all
periods during which the Company was so included in Holdings' consolidated
federal income tax returns, the Company will indemnify Holdings for all federal,
state and other income tax liabilities for such periods. The date of the
consummation of the initial public offering was the last day on which the
Company was included in Holdings' consolidated federal income tax returns.
Indemnification Agreements
The Company, Holdings and Banner have entered into an indemnification
agreement (the "Indemnification Agreement") under which the Company will
indemnify and hold harmless Holdings and Banner with respect to any and all
claims, losses, damages, liabilities, costs and expenses (except when arising
from Holdings' or Banner's intentional misconduct or gross negligence or to the
extent any liability arises from a breach by Banner of its fiduciary duty to
other stockholders of the Company) that arise from or are based on the
operations of the business of the Company and its subsidiaries after the date of
the Reorganization. The Company will also indemnify and hold harmless Holdings
and Banner with respect to any and all claims, losses, damages, liabilities,
costs and expenses that arise from or are based on guarantees or undertakings
made by Holdings or Banner to third parties in respect of liabilities or
obligations of the Company, whether or not such obligations arose before or
after the Reorganization. Holdings and Banner will indemnify and hold harmless
the Company with respect to any and all claims, losses, damages, liabilities,
costs and expenses that arise from or are based on the operations of Holdings or
Banner, other than the business of the Company and its subsidiaries, before or
after the date of the Reorganization. The rights of any party under the
Indemnification Agreement are not assignable or transferable without the prior
written consent of the other parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a requested class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Executive officers, directors and greater than ten-percent stockholders are
required by Securities and Exchange Commission regulation to furnish to the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representation that no Form 5 was required, the Company
believes that during the fiscal year ended December 31, 1996 all executive
officers, directors and greater than ten-percent beneficial owners complied with
all Section 16(a) filing requirements applicable to them, except as follows:
Following the consummation of the Company's initial public offering, a Form 3
reporting initial ownership of the Company's securities was filed late for each
of the following persons or entities: Banner's Central Electric, Inc., Banner
Holdings, Inc., West Coast Private Equity Partners, L.P., Ran Birkins, Louis
Caldera, Gary M. Cypres, Anthony Fortunato, Jose de Jesus Legaspi, Gerard T.
McMahon and Ed Valdez. In addition, a Form 4 reporting a change in beneficial
ownership of the Company's securities was filed late for each of Anthony
Fortunato, Gerard T. McMahon and Ed Valdez, and two Form 4s were filed late for
Gary M. Cypres.
56
<PAGE> 58
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
common stock as of June 30, 1997 by (i) each person known to the Company to be
the beneficial owner of more than five percent of the outstanding shares of the
Company's common stock, (ii) each director of the Company, (iii) Named
Executives and (iv) all directors and Named Executives as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER(2) SHARES(3) CLASS(4)
----------------------------------------------------------------- --------- ----------
<S> <C> <C>
Gary M. Cypres(5)................................................ 5,190,000 71.2%
Banner's Central Electric, Inc.(6)............................... 5,150,000 70.8%
Wellington Management Company, LLP(7)............................ 770,500 10.6%
Ed Valdez(8)..................................................... 8,100 *
Jose de Jesus Legaspi(9)......................................... 2,800 *
Anthony Fortunato................................................ 100 *
Salvatore J. Caltagirone......................................... -- N/A
Gerard T. McMahon................................................ -- N/A
William R. Sweet................................................. -- N/A
All directors and Named Executives as a group (7 persons)(10).... 5,201,000 71.2%
</TABLE>
- ---------------
* Less than 1%.
(1) In accordance with Rule 13d-3 of the Exchange Act, a person is deemed to be
the beneficial owner of a security if he or she has or shares voting power
or investment power with respect to such security or has the right to
acquire such ownership within 60 days.
(2) The address for each of the beneficial owners, other than Wellington
Management Company LLP, is in care of the Company: 5480 East Ferguson
Drive, Commerce, California 90022.
(3) Except as otherwise noted below, each individual named in the table
directly or indirectly has sole or shared voting and investment power with
respect to the shares shown as beneficially owned by such individual.
(4) Shares of common stock issuable upon exercise of stock options exercisable
within 60 days of June 30, 1997 are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
deemed outstanding for computing the percentage of any other person or
entity.
(5) Consists of 5,150,000 shares owned by Banner, 12,500 shares owned by Mr.
Cypres' spouse, 12,500 shares held by or in trust by Mr. Cypres and his
spouse for their children, and 15,000 shares issuable upon exercise of
stock options exercisable within 60 days of June 30, 1997.
(6) Banner is a wholly-owned subsidiary of Holdings. West Coast controls
Holdings. Mr. Cypres is Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer of Holdings and Banner and the
managing general partner of West Coast. Mr. Cypres controls the Company
through West Coast, Holdings and Banner.
(7) Based on a Schedule 13G filed with the Commission on May 9, 1997. The
address of Wellington Management Company LLP is 75 State Street, Boston,
Massachusetts 02109.
(8) Includes 6,000 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1997.
(9) Consists of 2,800 shares issuable upon exercise of stock options
exercisable within 60 days of June 30, 1997.
(10) Includes 23,800 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1997.
57
<PAGE> 59
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities and the Common Securities will be issued
pursuant to the terms of the Trust Agreement. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act. Initially, Wilmington
Trust Company will be the Delaware Trustee and the Property Trustee and will act
as trustee for the purpose of complying with the Trust Indenture Act. The terms
of the Trust Preferred Securities will include those stated in the Trust
Agreement and those made part of the Trust Agreement by the Trust Indenture Act.
This summary of certain terms and provisions of the Trust Preferred Securities
and the Trust Agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement (as
amended or supplemented from time to time) are referred to herein, such defined
terms are incorporated herein. The form of the Trust Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Administrative Trustees
on behalf of CFAC Capital will issue the Trust Preferred Securities and the
Common Securities (collectively, the "Trust Securities"). The Trust Preferred
Securities will represent preferred undivided beneficial interests in the assets
of CFAC Capital and the holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of CFAC Capital (which will
be held by Central), as well as other benefits as described in the Trust
Agreement.
The Trust Preferred Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities of CFAC Capital except as
described under "-- Subordination of Common Securities of CFAC Capital Held by
Central" below. Legal title to the Junior Subordinated Debentures will be held
by the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee executed by Central for the benefit of the holders of
the Trust Preferred Securities (the "Guarantee") will be a guarantee on a
subordinated basis and will not guarantee payment of Distributions or amounts
payable on redemption of the Trust Preferred Securities or on liquidation of the
Trust Preferred Securities if CFAC Capital does not have funds on hand available
to make such payments. See "Description of Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on the Trust Preferred Securities
will be payable at the annual rate of % of the stated Liquidation Amount of
$25, payable quarterly in arrears on the 15th day of March, June, September and
December in each year, commencing , 1997 to the holders of the Trust
Preferred Securities on the relevant record dates (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). The amount of each Distribution due with respect to the Trust Preferred
Securities will include amounts accrued through the date the Distribution
payment is due. Distributions on the Trust Preferred Securities will be payable
to the holders thereof as they appear on the register of CFAC Capital on the
relevant record date which, for so long as the Trust Preferred Securities remain
in book-entry form, will be one Business Day (as defined below) prior to the
relevant Distribution Date and, in the event the Trust Preferred Securities are
not in book-entry form, will be the first day of the month in which the relevant
Distribution Date occurs. Distributions will accumulate from the date of
original issuance. The first Distribution Date for the Trust Preferred
Securities will be , 1997.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the Distribution payable on such date will be made on
the next Business Day (and without any interest or other payment in respect to
any such delay), with the same force and effect as if made on the date such
payment was originally payable. As used in this Prospectus, a "Business Day"
shall mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in the State of California are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Indenture Trustee is closed for business.
58
<PAGE> 60
The funds of CFAC Capital available for distribution to holders of its
Trust Preferred Securities will be limited to payments by Central under the
Junior Subordinated Debentures in which CFAC Capital will invest the proceeds
from the issuance and sale of its Trust Preferred Securities. See "Description
of Junior Subordinated Debentures." If Central does not make interest payments
on the Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Trust Preferred Securities. The payment of
Distributions (if and to the extent CFAC Capital has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by Central. See "Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred and
is continuing, Central has the right under the Indenture to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each such
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. As a
consequence of any such election, quarterly Distributions on the Trust Preferred
Securities will be deferred by CFAC Capital during any such Extension Period.
Distributions to which holders of Trust Preferred Securities are entitled will
accumulate additional amounts thereon at the rate per annum of % thereof,
compounded quarterly from the relevant Distribution Date, to the extent
permitted under applicable law. The term "Distributions" as used herein shall
include any such additional accumulated amounts. Neither the default by Central
on any Senior and Subordinated Debt nor a default with respect to Senior and
Subordinated Debt resulting in an acceleration of the maturity thereof
constitutes a Debenture Event of Default. See "Description of Junior
Subordinated Debentures -- Debenture Events of Default." During any such
Extension Period, Central may not and shall not allow any of its subsidiaries to
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Central's capital
stock (which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of Central other than the Junior Subordinated Debentures that
rank pari passu with or junior in interest to the Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by Central of
the debt securities of any subsidiary of Central if such guarantee ranks pari
passu with or junior in interest to the Junior Subordinated Debentures (other
than (a) dividends or distributions in common stock of Central, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee and (d) purchases of common stock related to the
issuance of common stock or rights under any of Central's benefit plans for its
directors, officers or employees) or (iv) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or the Trust Preferred Securities.
During an Extension Period, Central would have the ability to continue to make
payments on Senior and Subordinated Debt. Prior to the termination of any such
Extension Period, Central may further extend such Extension Period, provided
that such extension does not cause such Extension Period to exceed 20
consecutive quarters or extend beyond the Stated Maturity. Upon the termination
of any such Extension Period and the payment of all amounts then due, and
subject to the foregoing limitations, Central may elect to begin a new Extension
Period. Subject to the foregoing, there is no limitation on the number of times
that Central may elect to begin an Extension Period. Central has no current
intention of exercising its right to defer payments of interest by extending the
interest payment period on the Junior Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption at any time, in whole or in part, of any
Junior Subordinated Debentures, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined
below) of the Trust Securities, upon not less than 30 nor more than 60 days'
notice of a date of redemption (the "Redemption Date"), at the Redemption Price
(as defined below). See "Description of Junior Subordinated
Debentures -- Redemption." If less than all of the Junior Subordinated
Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds
from such repayment or redemption shall be allocated to the redemption of the
Trust Securities pro rata. The amount of premium, if any, paid by Central upon
the redemption of all or any part of the Junior Subordinated
59
<PAGE> 61
Debentures to be repaid or redeemed on a Redemption Date shall be allocated to
the redemption pro rata of the Trust Securities.
Subject to restrictions contained in any Senior and Subordinated Debt or
regulatory approval if then required under applicable regulatory policy, Central
will have the right to redeem the Junior Subordinated Debentures (i) on or after
, 2002, in whole at any time or in part from time to time at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof, or (ii) at any time (whether occurring before
or after , 2002), in whole (but not in part), within 90 days
following the occurrence of a Tax Event, an Investment Company Event or a
Capital Treatment Event at a redemption price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof. See "Description of
Junior Subordinated Debentures -- Redemption."
If a Tax Event, Capital Treatment Event or an Investment Company Event has
occurred and is continuing and Central does not elect to redeem the Junior
Subordinated Debentures and thereby cause a mandatory redemption of the Trust
Securities or to liquidate CFAC Capital and cause the Junior Subordinated
Debentures to be distributed to holders of the Trust Securities in liquidation
of CFAC Capital as described below, such Trust Securities will remain
outstanding and Additional Sums (as defined below) may be payable on the Junior
Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary to be
paid by Central with respect to the Junior Subordinated Debentures in order that
the amount of Distributions then due and payable by CFAC Capital on the
outstanding Trust Securities of CFAC Capital shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which CFAC
Capital has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Trust Preferred Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of CFAC Capital, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Subject to Central and CFAC Capital having received an opinion of counsel
to the effect that such distribution will not be a taxable event to the holders
of the Trust Preferred Securities, Central will have the right at any time to
liquidate CFAC Capital and, after satisfaction of the liabilities of creditors
of CFAC Capital as provided by applicable law, cause a Like Amount of the Junior
Subordinated Debentures to be distributed to the holders of Trust Securities in
liquidation of CFAC Capital. After the liquidation date fixed for any
distribution of Junior Subordinated Debentures for Trust Preferred Securities
(i) such Trust Preferred Securities will no longer be deemed to be outstanding,
(ii) certificates representing a Like Amount of Junior Subordinated Debentures
will be issued to holders of Trust Securities certificates, upon surrender of
such certificates to the Administrative Trustees or their agent for exchange,
(iii) Central shall use its best efforts to have the Junior Subordinated
Debentures listed on the Nasdaq National Market or on such other exchange,
interdealer quotation system or self-regulatory organization as the Trust
Preferred Securities are then listed,
60
<PAGE> 62
(iv) any Trust Securities certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Junior Subordinated Debentures, accruing
interest at the rate provided for in the Junior Subordinated Debentures from the
last Distribution Date on which a Distribution was made on such Trust Securities
certificates until such certificates are so surrendered (and until such
certificates are so surrendered, no payments of interest or principal will be
made to holders of Junior Subordinated Debentures represented by such
certificates) and (v) all rights of securityholders holding Trust Securities
will cease, except the right of such securityholders to receive a Like Amount of
Junior Subordinated Debentures upon surrender of Trust Securities certificates.
There can be no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
CFAC Capital were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of CFAC Capital, may trade at a
discount to the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
REDEMPTION PROCEDURES
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that CFAC Capital has funds
on hand available for the payment of such Redemption Price. See
"-- Subordination of Common Securities of CFAC Capital Held by Central" below
and "Description of Guarantee."
If CFAC Capital gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, Eastern time on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably deposit
with the Depositary funds sufficient to pay the aggregate Redemption Price and
will give the Depositary irrevocable instructions and authority to pay the
Redemption Price to the holders of such Trust Preferred Securities. See
"Book-Entry Issuance." If such Trust Preferred Securities are no longer in book-
entry form, the Property Trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for such Trust Preferred Securities
funds sufficient to pay the aggregate Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the Redemption Price to the
holders thereof upon surrender of their certificates evidencing such Trust
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date shall be payable to the holders of such Trust
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of the
Trust Preferred Securities will cease, except the right of the holders of the
Trust Preferred Securities to receive the applicable Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest on
such Redemption Price, and such Trust Preferred Securities will cease to be
outstanding. In the event that any date fixed for redemption of such Trust
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding Business Day (and
without any interest or other payment in respect of any such delay). In the
event that payment of the Redemption Price in respect of Trust Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by CFAC Capital or by Central pursuant to the Guarantee, Distributions on
such Trust Preferred Securities will continue to accrue at the then applicable
rate, from the Redemption Date originally established by CFAC Capital for such
Trust Preferred Securities to the date such Redemption Price is actually paid,
in which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and further provided that Central is not then
exercising its rights to defer interest payments on the Junior Subordinated
Debentures, the Company (other than CFAC Capital) may at any time and from time
to time purchase outstanding Trust Preferred Securities by tender, in the open
market or by private agreement.
61
<PAGE> 63
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register of such Trust Preferred Securities on the relevant record date,
which date shall be one Business Day prior to the relevant Redemption Date or
Liquidation Date, as applicable; provided, however, that in the event that any
Trust Preferred Securities are not in book-entry form, the relevant record date
for such Trust Preferred Securities shall be a date at least 15 days prior to
the Redemption Date or Liquidation Date, as applicable. In the case of a
liquidation, the record date shall be no more than 45 days before the
Liquidation Date.
If less than all of the Trust Securities issued by CFAC Capital are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of such classes. The particular Trust Preferred Securities to be
redeemed shall be selected on a pro rata basis (based upon Liquidation Amounts)
not more than 60 days prior to the Redemption Date by the Property Trustee from
the outstanding Trust Preferred Securities not previously called for redemption,
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or an
integral multiple thereof) of the Liquidation Amount of Trust Preferred
Securities. The Property Trustee shall promptly notify the Security registrar in
writing of the Trust Preferred Securities selected for redemption and, in the
case of any Trust Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of the Trust
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of Trust Preferred Securities shall relate to the portion of the
aggregate Liquidation Amount of Trust Preferred Securities which has been or is
to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless CFAC Capital defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES OF CFAC CAPITAL HELD BY CENTRAL
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amounts of the Trust Preferred Securities and
Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or applicable Redemption Price of, any of the Common Securities,
and no other payment on account of the redemption, liquidation or other
acquisition of the Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all of the outstanding Trust Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the applicable Redemption Price the full amount of such Redemption Price on
all of the outstanding Trust Preferred Securities then called for redemption,
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Trust Preferred Securities then
due and payable (including Additional Amounts, if applicable).
In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, Central as holder of the Common Securities
will be deemed to have waived any right to act with respect to any such Event of
Default until the effect of all such Events of Default have been cured, waived
or otherwise eliminated. Until any such Events of Default have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on behalf
of the holders of the Trust Preferred Securities and not on behalf of Central as
holder of the Common Securities, and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee to act on their
behalf.
62
<PAGE> 64
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Central will have the right at any time to dissolve CFAC Capital and cause
the Junior Subordinated Debentures to be distributed to the holders of the Trust
Preferred Securities. Such right is subject to Central having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. See "-- Distribution of Junior
Subordinated Debentures" above.
In addition, pursuant to the Trust Agreement, CFAC Capital shall
automatically dissolve upon expiration of its term and shall earlier dissolve on
the first to occur of: (i) certain events of bankruptcy, dissolution or
liquidation of Central; (ii) the distribution of a Like Amount of the Junior
Subordinated Debentures to the holder of its Trust Securities, if Central, as
Depositor, has delivered written direction to the Property Trustee to terminate
CFAC Capital (which direction is optional and, except as described above, wholly
within the discretion of Central, as Depositor); (iii) redemption of all of the
Trust Preferred Securities as described under "-- Redemption" above; and (iv)
the entry of an order for the dissolution of CFAC Capital by a court of
competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), or (iv)
above or upon the Expiration Date, CFAC Capital shall be liquidated by the
Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of CFAC Capital as
provided by applicable law, to the holders of such Trust Securities a Like
Amount of the Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of CFAC Capital available
for distribution to holders, after satisfaction of liabilities to creditors of
CFAC Capital as provided by applicable law, an amount equal to, in the case of
holders of Trust Preferred Securities, the aggregate of the Liquidation Amount
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If such Liquidation Distribution
can be paid only in part because CFAC Capital has insufficient assets available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by CFAC Capital on the Trust Preferred Securities shall be paid on a
pro rata basis (based upon Liquidation Amounts). The holder(s) of the Common
Securities will be entitled to receive distributions upon any such liquidation
pro rata with the holders of the Trust Preferred Securities, except that if a
Debenture Event of Default has occurred and is continuing, the Trust Preferred
Securities shall have a priority over the Common Securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, CFAC Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable event
to holders of the Trust Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences." If Central elects
neither to redeem the Junior Subordinated Debentures prior to maturity nor to
liquidate CFAC Capital and distribute the Junior Subordinated Debentures to
holders of the Trust Preferred Securities, the Trust Preferred Securities will
remain outstanding until the repayment of the Junior Subordinated Debentures.
If Central elects to dissolve CFAC Capital and thereby causes the Junior
Subordinated Debentures to be distributed to holders of the Trust Preferred
Securities in liquidation of CFAC Capital, Central shall continue to have the
right to redeem the Junior Subordinated Debentures prior to the Stated Maturity.
See "Description of Junior Subordinated Debentures -- General."
EVENTS OF DEFAULT; NOTICE
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(i) the occurrence of a Debenture Event of Default (see "Description
of Junior Subordinated Debentures -- Debenture Events of Default"); or
63
<PAGE> 65
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in the Trust Agreement (other
than a default or breach in the performance of a covenant or warranty which
is addressed in clause (ii) or (iii) above), and continuation of such
default or breach, for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Issuer Trustee or Trustees
by the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Trust Preferred Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by Central to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Trust Preferred
Securities, the Administrative Trustees and Central, as Depositor, unless such
Event of Default shall have been cured or waived. Central as Depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Common Securities upon
termination of CFAC Capital as described above. See "-- Liquidation Distribution
upon Dissolution." Upon a Debenture Event of Default (other than with respect to
certain events in bankruptcy, insolvency or reorganization), unless the
principal of all the Junior Subordinated Debentures has already become due and
payable, either the Property Trustee or the holders of not less than 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding may declare all of the Junior Subordinated Debentures to be due and
payable immediately by giving notice in writing to Central (and to the Property
Trustee, if notice is given by holders of the Junior Subordinated Debentures).
If the Property Trustee or the holders of not less than 25% in principal amount
of the outstanding Junior Subordinated Debentures fail to declare the principal
of all of the Junior Subordinated Debentures due and payable upon a Debenture
Event of Default, the holders of at least 25% in Liquidation Amount of the Trust
Preferred Securities then outstanding shall have the right to declare the Junior
Subordinated Debentures immediately due and payable. In either event, payment of
principal and interest on the Junior Subordinated Debentures shall remain
subordinated to the extent provided in the Indenture. In addition, holders of
the Trust Preferred Securities have the right in certain circumstances to bring
a Direct Action (as hereinafter defined). See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Trust
Preferred Securities."
If a Debenture Event of Default with respect to certain events in
bankruptcy, insolvency or reorganization occurs, the Junior Subordinated
Debentures shall automatically, and without any declaration or other action on
the part of the Property Trustee or the holders of the Junior Subordinated
Debentures, become immediately due and payable. In such event, payment of
principal and interest on the Junior Subordinated Debentures will also remain
subordinated to the extent provided in the Indenture.
REMOVAL OF TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any of the Property Trustee, the Depositary Trustee or the Administrative
Trustees may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
or the Delaware Trustee or both of them may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Trust Preferred
Securities. In no event will the holders of the Trust Preferred Securities have
the right to vote to appoint, remove or replace the Administrative Trustees,
which
64
<PAGE> 66
voting rights are vested exclusively in Central as the holder of the Common
Securities. An Administrative Trustee may be removed by the holder of the Common
Securities at any time. No resignation or removal of a Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of Trust Property may at
the time be located, Central, as the holder of the Common Securities, and the
Administrative Trustees by agreed action of the majority of such Trustees shall
have power to appoint one or more persons either to act as a co-trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such person or
persons in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. If Central does not
join in such appointment within 15 days of the receipt by it of a request to do
so, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person (as defined in the Trust Agreement) into which the Property
Trustee, the Delaware Trustee or any Administrative Trustee that is not a
natural person may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
such Issuer Trustee shall be a party, or any person succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall be
the successor of such Issuer Trustee under the Trust Agreement, provided such
corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF CFAC CAPITAL
CFAC Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. CFAC Capital may, at the request of Central, with the consent
of the Administrative Trustees and without the consent of the holders of the
Trust Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of the
obligations of CFAC Capital with respect to the Trust Preferred Securities or
(b) substitutes for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) Central expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Trust Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, conveyance, transfer or lease
does not cause the Trust Preferred Securities to be downgraded by any nationally
recognized statistical rating organization which gives ratings to the Trust
Preferred Securities; (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of CFAC Capital, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, Central
has received an opinion from independent counsel to CFAC Capital experienced in
such matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor
65
<PAGE> 67
Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
CFAC Capital nor such successor entity will be required to register as an
investment company under the Investment Company Act and (viii) Central owns all
of the common securities of such successor entity and guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, CFAC Capital shall
not, except with the consent of holders of 100% in Liquidation Amount of the
Trust Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
CFAC Capital or the successor entity to be classified as other than a grantor
trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by Central, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that CFAC Capital will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that CFAC Capital will not be required
to register as an "investment company" under the Investment Company Act;
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of the Trust Agreement shall become effective
when notice thereof is given to the holders of the Trust Securities. The Trust
Agreement may be amended by the Administrative Trustees and the Property Trustee
with (i) the consent of holders representing not less than a majority of the
aggregate Liquidation Amount of the outstanding Trust Securities, and (ii)
receipt by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect CFAC Capital's status as a
grantor trust for United States federal income tax purposes or CFAC Capital's
exemption from status as an "investment company" under the Investment Company
Act, provided that without the consent of each holder of Trust Securities, the
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in aggregate Liquidation Amount of all outstanding Trust Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Trust Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Trust Preferred Securities except by subsequent vote of
the holders of the Trust Preferred Securities. The Property
66
<PAGE> 68
Trustee shall notify each holder of the Trust Preferred Securities of any notice
of default with respect to the Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of such holders of the Trust Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that CFAC Capital will not be classified as other than a grantor trust for
United States federal income tax purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent of the holders of a majority of the Trust
Preferred Securities (based on aggregate Liquidation Amount). Notwithstanding
the foregoing, CFAC Capital shall not, except with the consent of holders of
100% in Liquidation Amount of the Trust Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause CFAC Capital or the successor entity to be
classified as other than a grantor trust for United States federal income tax
purposes. The Property Trustee will cause a notice of any meeting at which
holders of the Trust Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of the Trust Preferred Securities in the manner set
forth in the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will be
required for CFAC Capital to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by Central, the Trustees or any
affiliate of Central or any Trustees, shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
GLOBAL TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee (a "Global
Trust Preferred Security"). Beneficial interests in the Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary ("Participants").
Except as described below, Trust Preferred Securities in certificated form will
not be issued in exchange for the global certificates. See "Book-Entry
Issuance."
A global security shall be exchangeable for Trust Preferred Securities
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies Central that it is unwilling or unable to
continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, at a time when the Depositary
is required to be so registered to act as such depositary, (ii) Central in its
sole discretion determines that such global security shall be so exchangeable,
or (iii) there shall have occurred and be continuing an Event of Default under
the Indenture. Any global security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive certificates registered
in such names as the Depositary shall direct. It is expected that such
instructions will be based upon directions received by the Depositary with
respect to ownership of beneficial interests in such global security. In the
event that Trust Preferred Securities are issued in definitive form, such Trust
Preferred Securities will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary to a nominee
of such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
Payments on Trust Preferred Securities represented by a global security
will be made to the Depositary, as the depositary for the Trust Preferred
Securities. In the event the Trust Preferred Securities are issued in
67
<PAGE> 69
definitive form, Distributions will be payable, the transfer of the Trust
Preferred Securities will be registrable, and Trust Preferred Securities will be
exchangeable for Trust Preferred Securities of other denominations of a like
aggregate Liquidation Amount, at the corporate office of the Property Trustee,
or at the offices of any paying agent or transfer agent appointed by the
Administrative Trustees, provided that payment of any Distribution may be made
at the option of the Administrative Trustees by check mailed to the address of
the persons entitled thereto or by wire transfer. In addition, if the Trust
Preferred Securities are issued in certificated form, the record dates for
payment of Distributions will be the first day of the month in which the
relevant Distribution Date occurs. For a description of the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security, and the deposit of
such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
such Global Trust Preferred Securities to the accounts of Participants. Such
accounts shall be designated by the dealers, underwriters or agents with respect
to such Trust Preferred Securities. Ownership of beneficial interests in a
Global Trust Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Trust Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owners of such Global Trust Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Trust Preferred Securities represented by such Global
Trust Preferred Security for all purposes under the Trust Agreement governing
such Trust Preferred Securities. Except as provided below, owners of beneficial
interests in a Global Trust Preferred Security will not be entitled to have any
of the individual Trust Preferred Securities represented by such Global Trust
Preferred Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Trust Preferred Securities in definitive
form and will not be considered the owners or holders thereof under the Trust
Agreement.
None of Central, the Property Trustee, any Paying Agent, or the Securities
Registrar (defined below) for such Trust Preferred Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Trust
Preferred Security representing such Trust Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Central expects that the Depositary for the Trust Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Trust Preferred Security
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Trust Preferred Security as shown on the
records of such Depositary or its nominee. Central also expects that payments by
Participants to owners of beneficial interests in such Global Trust Preferred
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If the Depositary for the Trust Preferred Securities is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by Central within 90 days, CFAC Capital will issue
individual Trust Preferred Securities in exchange for the Global Trust Preferred
Security. In addition, CFAC Capital may at any time and in its sole discretion,
subject to any limitations described herein
68
<PAGE> 70
relating to such Trust Preferred Securities, determine not to have any Trust
Preferred Securities represented by one or more Global Trust Preferred
Securities and, in such event, will issue individual Trust Preferred Securities
in exchange for the Global Trust Preferred Security or Securities representing
the Trust Preferred Securities. Further, if CFAC Capital so specifies with
respect to the Trust Preferred Securities, an owner of a beneficial interest in
a Global Trust Preferred Security representing Trust Preferred Securities may,
on terms acceptable to Central, the Property Trustee and the Depositary for such
Global Trust Preferred Security, receive individual Trust Preferred Securities
in exchange for such beneficial interests, subject to any limitations described
herein. In any such instance, an owner of a beneficial interest in a Global
Trust Preferred Security will be entitled to physical delivery of individual
Trust Preferred Securities represented by such Global Trust Preferred Security
equal in Liquidation Amount to such beneficial interest and to have such Trust
Preferred Securities registered in its name. Individual Trust Preferred
Securities so issued will be issued in denominations, unless otherwise specified
by CFAC Capital, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENT
Payments in respect of the Trust Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Trust Preferred Securities are
not held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. The paying agent (the "Paying Agent") shall initially be the Property
Trustee and any co-paying agent chosen by the Property Trustee and acceptable to
the Administrative Trustees and Central. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Property Trustee and
Administrative Trustees. In the event that the Property Trustee shall no longer
be the Paying Agent, the Administrative Trustees shall appoint a successor
(which shall be a bank or trust company acceptable to the Administrative
Trustees and Central) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the Trust
Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of CFAC Capital, but
upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. CFAC Capital will not be required to
register or cause to be registered the transfer of the Trust Preferred
Securities after such Trust Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of the Trust
Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by Central and if not so
directed, shall take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for its
own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate CFAC Capital in such a way that CFAC Capital will not
be deemed to be an "investment company" required to be
69
<PAGE> 71
registered under the Investment Company Act or classified as an association
taxable as a corporation for United States federal income tax purposes and so
that the Junior Subordinated Debentures will be treated as indebtedness of
Central for United States federal income tax purposes. In this connection,
Central and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of CFAC Capital or
the Trust Agreement, that Central and the Administrative Trustees determine in
their discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Trust Preferred Securities. Holders of the Trust Preferred Securities have no
preemptive or similar rights.
CFAC Capital may not borrow money or issue debt or mortgage or pledge any
of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Trust Preferred Securities, CFAC
Capital will invest the proceeds thereof, together with the consideration paid
by Central for the Common Securities, in Junior Subordinated Debentures issued
by Central. The Junior Subordinated Debentures will be issued as unsecured debt
under the Indenture. The following summary of the terms and provisions of the
Junior Subordinated Debentures and the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture, which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and to the Trust Indenture Act. The
Indenture is qualified under the Trust Indenture Act. Whenever particular
defined terms of the Indenture are referred to herein, such defined terms are
incorporated herein or therein by reference.
GENERAL
The Junior Subordinated Debentures will bear interest at the annual rate
of % of the principal amount thereof, payable quarterly in arrears on the
15th day of March, June, September and December of each year (each, an "Interest
Payment Date"), commencing , 1997, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. Notwithstanding the above, in the event that either the (i) Junior
Subordinated Debentures are held by the Property Trustee and the Trust Preferred
Securities are no longer in book-entry only form or (ii) the Junior Subordinated
Debentures are not represented by a Global Subordinated Debenture (as defined
herein), the record date for such payment shall be the first day of the month in
which such payment is made. The amount of each interest payment due with respect
to the Junior Subordinated Debentures will include amounts accrued through the
date the interest payment is due. It is anticipated that, until the liquidation,
if any, of CFAC Capital, each Junior Subordinated Debenture will be held in the
name of the Property Trustee in trust for the benefit of the holders of the
Trust Preferred Securities. The amount of interest payable for any period will
be computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Junior Subordinated Debentures
is not a Business Day, then payment of the interest payable on such date will be
made on the next Business Day (and without any interest or other payment in
respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable. Accrued interest that is not paid on
the applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of %
thereof, compounded quarterly. The term "interest" as used herein shall include
quarterly interest payments, interest on quarterly interest payments not paid on
the applicable Interest Payment Date and Additional Sums (as defined below), as
applicable. The Junior Subordinated Debentures will mature on
, 2027 (the "Stated Maturity"), subject to redemption
on earlier dates as described below.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior and Subordinated Debt of
Central. Because Central is a holding company, substantially all of Central's
assets consist of the capital stock of its subsidiaries. The right of Central to
participate in any distribution of assets of any subsidiaries upon any such
subsidiaries' liquidation or reorganization or otherwise (and thus the ability
of holders of the Trust Preferred Securities to benefit indirectly from such
distribution),
70
<PAGE> 72
is subject to the prior claims of creditors of that subsidiary, except to the
extent that Central may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures will be effectively subordinated
to all existing and future liabilities of the Company, and holders of Junior
Subordinated Debentures should look only to the assets of Central for payments
on the Junior Subordinated Debentures. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of Central and its
subsidiaries, including Senior and Subordinated Debt, whether under the
Indenture or any existing or other indenture that Central may enter into in the
future or otherwise. See "-- Subordination" below.
OPTION TO DEFER INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
Central has the right under the Indenture at any time during the term of the
Junior Subordinated Debentures to defer the payment of interest at any time or
from time to time for a period not exceeding 20 consecutive quarters (each such
period an "Extension Period"), during which Extension Periods the Company shall
have the right to make partial payments of interest on any Interest Payment
Date. No Extension Period shall end other than on an Interest Payment Date. No
Extension Period may extend beyond the Stated Maturity. At the end of such
Extension Period, Central must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of %, compounded
quarterly, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of Junior Subordinated
Debentures will be required to accrue interest income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences -- Interest
Income and Original Issue Discount." Neither the default by Central on any
Senior and Subordinated Debt nor a default with respect to Senior and
Subordinated Debt resulting in acceleration of the maturity thereof constitutes
a Debenture Event of Default. See "-- Debenture Events of Default" below.
During any such Extension Period, Central may not and shall not permit any
of its subsidiaries to (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
Central's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of
Central (including other Junior Subordinated Debentures) that rank pari passu
with or junior in interest to the Junior Subordinated Debentures or (iii) make
any guarantee payments with respect to any guarantee by Central of the debt
securities of any subsidiary of Central if such guarantee ranks pari passu with
or junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in capital stock of Central, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, and (d) purchases of common stock related to the issuance of common
stock or rights under any of Central's benefit plans for its directors, officers
or employees) or (iv) redeem, purchase or acquire less than all of the Junior
Subordinated Debentures or of the Trust Preferred Securities. During an
Extension Period, Central would have the ability to continue to make payments on
Senior and Subordinated Debt. Prior to the termination of any such Extension
Period, Central may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 20 consecutive quarters
or extend beyond the Stated Maturity. Upon the termination of any such Extension
Period and the payment of all amounts then due on any Interest Payment Date,
Central may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. Central must give the Property Trustee, the
Administrative Trustees and the Indenture Trustee notice of its election of any
Extension Period at least one Business Day prior to the earlier of (i) the date
the Distributions on the Trust Preferred Securities would have been payable
except for the election to begin or extend such Extension Period or (ii) the
date the Administrative Trustees are required to give notice to the New York
Stock Exchange, the Nasdaq National Market or any applicable stock exchange or
automated quotation system on which the Trust Preferred Securities are then
listed or quoted or to the holders of the Trust Preferred Securities on the
record date or the date such Distributions are payable, but in any event not
less than one Business Day prior to such record date. The Indenture Trustee
shall give notice of Central's election to begin or extend a new Extension
Period to the holders of the Trust
71
<PAGE> 73
Preferred Securities. There is no limitation on the number of times that Central
may elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by CFAC
Capital during any such Extension Period. See "Description of the Trust
Preferred Securities -- Distributions." For a description of certain federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
ADDITIONAL SUMS
If CFAC Capital is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, Central will pay as additional
amounts on the Junior Subordinated Debentures such amounts ("Additional Sums")
as shall be required so that the Distributions payable by CFAC Capital shall not
be reduced as a result of any such additional taxes, duties or other
governmental charges.
REDEMPTION
Subject to restrictions contained in any Senior and Subordinated Debt or
regulatory approval if then required under applicable regulatory policies, the
Junior Subordinated Debentures are redeemable prior to maturity at the option of
Central (i) on or after , 2002, in whole at any time (whether occurring
before or after , 2002) or in part from time to time, or (ii) at any
time in whole (but not in part), within 90 days following a Tax Event, a Capital
Treatment Event or an Investment Company Event, in each case at a redemption
price equal to the accrued and unpaid interest on the Junior Subordinated
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless Central
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
If CFAC Capital is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, Central will pay as additional
amounts on the Junior Subordinated Debentures the Additional Sums (as defined
herein).
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution," under certain
circumstances involving the dissolution of CFAC Capital, the Junior Subordinated
Debentures may be distributed to the holders of the Trust Preferred Securities
in liquidation of CFAC Capital after satisfaction of liabilities to creditors of
CFAC Capital as provided by applicable law. If distributed to holders of the
Trust Preferred Securities in liquidation, the Junior Subordinated Debentures
will initially be issued in the form of one or more global securities and the
Depositary, or any successor depositary for the Trust Preferred Securities, will
act as depositary for the Junior Subordinated Debentures. It is anticipated that
the depositary arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Trust Preferred Securities.
If the Junior Subordinated Debentures are distributed to the holders of Trust
Preferred Securities upon the liquidation of CFAC Capital. Central will use its
best efforts to list the Junior Subordinated Debentures on the Nasdaq National
Market or such other stock exchanges or automated quotation system, if any, on
which the Trust Preferred Securities are then listed or quoted. There can be no
assurance as to the market price of any Junior Subordinated Debentures that may
be distributed to the holders of Trust Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there shall have occurred any event of which Central has
actual knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute a Debenture Event of Default and
72
<PAGE> 74
(b) in respect of which Central shall not have taken reasonable steps to cure,
or (ii) Central shall have given notice of its election of an Extension Period
as provided in the Indenture with respect to the Junior Subordinated Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing, or (iii) while the Junior Subordinated
Debentures are held by CFAC Capital, Central shall be in default with respect to
its payment of any obligation under the Guarantee, then Central will not and
will not allow any of its subsidiaries to (1) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of Central's capital stock or (2) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of Central (including other Junior Subordinated Debt) that rank
pari passu with or junior in interest to the Junior Subordinated Debentures or
(3) make any guarantee payments with respect to any guarantee by Central of the
debt securities of any subsidiary of Central if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debentures (other than (a)
dividends or distributions in common stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future or the
redemption or repurchase of any such rights pursuant thereto, (c) payments under
the Guarantee and (d) purchases of Common Stock related to issuance of common
stock or rights under any of Central's benefit plans for its directors, officers
or employees) or (4) redeem, purchase or acquire less than all of the Junior
Subordinated Debentures or Trust Preferred Securities.
SUBORDINATION
In the Indenture, Central has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior and Subordinated Debt to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Central, the holders of Senior and Subordinated Debt
will first be entitled to receive payment in full of principal of all Allocable
Amounts (as defined below) on such Senior and Subordinated Debt before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect thereof.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior and Subordinated Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or interest, if any, in respect of the
Junior Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior and Subordinated Debt
or an event of default with respect to any Senior and Subordinated Debt
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior and Subordinated
Debt, means all amounts due or to become due on such Senior and Subordinated
Debt less, if applicable, any amount which would have been paid to, and retained
by, the holders of such Senior and Subordinated Debt (whether as a result of the
receipt of payments by the holders of such Senior and Subordinated Debt from
Central or any other obligor thereon or from any holders of, or trustee in
respect of, other indebtedness that is subordinate and junior in right of
payment to such Senior and Subordinated Debt pursuant to any provision of such
indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior and Subordinated Debt or otherwise)
but for the fact that such Senior and Subordinated Debt is subordinated or
junior in right of payment to (or subject to a requirement that amounts received
on such Senior and Subordinated Debt be paid over to obligees on) trade accounts
payable or accrued liabilities arising in the ordinary course of business.
73
<PAGE> 75
"Debt" means with respect to any person, whether recourse is to all or a
portion of the assets of such person and whether or not contingent: (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such person; (vi) all
indebtedness of such person whether incurred on or prior to the date of the
Indenture or thereafter incurred, for claims in respect of derivative products
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another person and all dividends
of another person the payment of which, in either case, such person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
"Senior and Subordinated Debt" means the principal of (and premium, if any)
and interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to Central whether or not
such claim for post-petition interest is allowed in such proceeding), on Debt of
Central whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is pari passu with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior and Subordinated Debt shall not be
deemed to include (i) any Debt of Central which when incurred and without
respect to any election under section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to Central, (ii) any Debt of
Central to any of its subsidiaries, (iii) Debt to any employee of Central, and
(iv) any other debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of Senior and Subordinated
Debt that may be incurred by Central. Central has a Line of Credit that provides
for borrowings by Central of up to $100 million, subject to an allowable
borrowing base. Borrowings under the Line of Credit are guaranteed by all of the
significant domestic subsidiaries of the Company and are secured by
substantially all of the assets, including receivables of the Company, and a
pledge by Central of the stock of all of its significant subsidiaries. The Line
of Credit contains many restrictive covenants including, among other things,
requirements that the Company maintain specific financial ratios and satisfy
certain financial tests. All borrowings under the Line of Credit constitute
Senior and Subordinated Debt. Central anticipates that it may from time to time
incur additional indebtedness constituting Senior and Subordinated Debt. No
assurance can be given that the terms of any such additional Senior and
Subordinated Debt will not contain terms, covenants or conditions which are more
restrictive or less favorable than those currently existing under the Line of
Credit. See "Risk Factors -- Subordination of Central's Obligations Under the
Junior Subordinated Debentures and the Guarantee", "Risk Factors -- Restrictions
Imposed by the Line of Credit", "Risk Factors -- Need for Senior Credit
Facility", and "Management's Discussion and Analysis of Financial Condition and
Results of Operation -- Liquidity and Capital Resources."
DENOMINATIONS, REGISTRATION AND TRANSFER
The Junior Subordinated Debentures will be represented by global
certificates registered in the name of the Depositary or its nominee (a "Global
Subordinated Debenture"). Beneficial interests in the Junior Subordinated
Debentures will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary. Except as described below, Junior
Subordinated Debentures in certificated form will not be issued in exchange for
the global certificates. See "Book-Entry Issuance."
Unless and until a Global Subordinated Debenture is exchanged in whole or
in part for the individual Junior Subordinated Debentures represented thereby,
it may not be transferred except as a whole by the Depositary for such Global
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
74
<PAGE> 76
A global security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies Central that it is unwilling or unable to
continue as a depositary for such global security and no successor depositary
shall have been appointed, or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, at a time when the Depositary
is required to be so registered to act as such depositary, (ii) Central in its
sole discretion determines that such global security shall be so exchangeable or
(iii) there shall have occurred and be continuing a Debenture Event of Default
with respect to such global security. Any global security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for definitive
certificates registered in such names as the Depositary shall direct. It is
expected that such instructions will be based upon directions received by the
Depositary from its Participants with respect to ownership of beneficial
interests in such global security. In the event that Junior Subordinated
Debentures are issued in definitive form, such Junior Subordinated Debentures
will be in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures represented by a global security
will be made to the Depositary, as the depositary for the Junior Subordinated
Debentures. In the event Junior Subordinated Debentures are issued in definitive
form, principal and interest will be payable, the transfer of the Junior
Subordinated Debentures will be registrable, and Junior Subordinated Debentures
will be exchangeable for Junior Subordinated Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Indenture
Trustee, or at the offices of any paying agent or transfer agent appointed by
Central, provided that payment of interest may be made at the option of Central
by check mailed to the address of the persons entitled thereto or by wire
transfer. In addition, if the Junior Subordinated Debentures are issued in
certificated form, the record dates for payment of interest will be the first
day of the month in which such payment is to be made. For a description of the
Depositary and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance."
Central will appoint the Indenture Trustee as securities registrar under
the Indenture (the "Securities Registrar"). Junior Subordinated Debentures may
be presented for exchange as provided above, and may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the Securities Registrar. Central may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, provided that Central maintains a transfer agent in the
place of payment. Central may at any time designate additional transfer agents
with respect to the Junior Subordinated Debentures.
In the event of any redemption, neither Central nor the Indenture Trustee
shall be required to (i) issue, register the transfer of or exchange Junior
Subordinated Debentures during a period beginning at the opening of business 15
days before the day of selection for redemption of Junior Subordinated
Debentures and ending at the close of business on the day of mailing of the
relevant notice of redemption or (ii) transfer or exchange any Junior
Subordinated Debentures so selected for redemption, except, in the case of any
Junior Subordinated Debentures being redeemed in part, any portion thereof not
to be redeemed.
GLOBAL SUBORDINATED DEBENTURES
Upon the issuance of the Global Subordinated Debenture, and the deposit of
such Global Subordinated Debenture with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debenture or its nominee will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the individual Junior Subordinated Debentures represented by such
Global Subordinated Debenture to the accounts of Participants. Ownership of
beneficial interests in a Global Subordinated Debenture will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Subordinated Debenture will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of
75
<PAGE> 77
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Subordinated Debenture.
So long as the Depositary for a Global Subordinated Debenture, or its
nominee, is the registered owner of such Global Subordinated Debenture, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Junior Subordinated Debentures represented by such Global
Subordinated Debenture for all purposes under the Indenture governing such
Junior Subordinated Debentures. Except as provided below, owners of beneficial
interests in a Global Subordinated Debenture will not be entitled to have any of
the individual Junior Subordinated Debentures represented by such Global
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated Debentures
in definitive form and will not be considered the owners or holders thereof
under the Indenture.
Payments of principal of and interest on individual Junior Subordinated
Debentures represented by a Global Subordinated Debenture registered in the name
of the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner of the Global Subordinated Debenture
representing such Junior Subordinated Debentures. None of Central, the Indenture
Trustee, any Paying Agent, or the Securities Registrar for such Junior
Subordinated Debentures will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests of the Global Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Central expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a permanent Global Subordinated
Debenture representing the Junior Subordinated Debentures, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of the Global
Subordinated Debenture as shown on the records of such Depositary or its
nominee. Central also expects that payments by Participants to owners of
beneficial interests in such Global Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by Central
within 90 days, Central will issue individual Junior Subordinated Debentures in
exchange for the Global Subordinated Debenture. In addition, Central may at any
time and in its sole discretion, determine not to have the Junior Subordinated
Debentures represented by one or more Global Junior Subordinated Debentures and,
in such event, will issue individual Junior Subordinated Debentures in exchange
for the Global Subordinated Debenture. Further, if Central so specifies with
respect to the Junior Subordinated Debentures, an owner of a beneficial interest
in a Global Subordinated Debenture representing Junior Subordinated Debentures
may, on terms acceptable to Central, the Indenture Trustee and the Depositary
for such Global Subordinated Debenture, receive individual Junior Subordinated
Debentures in exchange for such beneficial interests. In any such instance, an
owner of a beneficial interest in a Global Subordinated Debenture will be
entitled to physical delivery of individual Junior Subordinated Debentures equal
in principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures so issued will be issued in denominations, unless otherwise specified
by Central, of $25 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Indenture Trustee, except that at
the option of Central payment of any interest may be made (i) except in the case
of Global Junior Subordinated Debentures, by check mailed to the address of the
person entitled thereto as such address shall appear in the securities register
or (ii) by transfer to an account maintained by the person entitled thereto as
specified in the securities register, provided that proper transfer instructions
have been received by the regular record date. Payment of any interest on Junior
Subordinated Debentures will be made to the person in whose name such Junior
Subordinated Debenture is registered at the
76
<PAGE> 78
close of business on the regular record date for such interest. Central may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agent; however Central will at all times be required to maintain a Paying
Agent in each place of payment for the Junior Subordinated Debentures. Any
moneys deposited with the Indenture Trustee or any Paying Agent, or then held by
Central in trust, for the payment of the principal of or interest on the Junior
Subordinated Debentures and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at the request of
Central, be repaid to Central and the holder of such Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to
Central for payment thereof.
MODIFICATION OF INDENTURE
From time to time Central and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interests of the holders of the Junior
Subordinated Debentures or the Trust Preferred Securities so long as they remain
outstanding) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions permitting
Central and the Indenture Trustee, with the consent of the holders of not less
than a majority in principal amount of the outstanding Junior Subordinated
Debentures, to modify the Indenture in a manner affecting the rights of the
holders of the Junior Subordinated Debentures; provided, that no such
modification may, without the consent of the holder of each outstanding Junior
Subordinated Debenture, (i) change the Stated Maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture,
provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that adversely affects the holders
of such Trust Preferred Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate Liquidation
Amount of the Trust Preferred Securities unless and until the principal of the
Junior Subordinated Debentures and all accrued and unpaid interest thereon have
been paid in full and certain other conditions are satisfied. Where a consent
under the Indenture would require the consent of each holder of Junior
Subordinated Debentures, no such consent shall be given by the Property Trustee
without the prior consent of each holder of Trust Preferred Securities. In
addition, Central and the Indenture Trustee may execute, without the consent of
any holder of Junior Subordinated Debentures, any supplemental Indenture for the
purpose of creating any new series of Junior Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default" with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due including any Additional Interest in respect thereof
(subject to the deferral of any due date in the case of an Extension
Period); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures when due whether at maturity, upon redemption by
declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to Central from the Indenture Trustee or to Central and the Indenture
Trustee by the holders of at least 25% in aggregate outstanding principal
amount of the Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Central.
77
<PAGE> 79
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee. The Indenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures may
declare the principal due and payable immediately upon a Debenture Event of
Default. If the Indenture Trustee or such holders of such Junior Subordinated
Debentures fail to make such declaration, the holders of at least 25% in
aggregate Liquidation Amount of the Trust Preferred Securities shall have such
right. The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
Junior Subordinated Debentures which has become due solely by such acceleration)
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Indenture Trustee. Should the holders of the Junior Subordinated Debentures fail
to annul such declaration and waive such default, the holders of a majority in
aggregate Liquidation Amount of the Trust Preferred Securities shall have such
right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Junior Subordinated Debentures, the Property Trustee will have the right to
declare the principal of and the interest on such Junior Subordinated
Debentures, and any other amounts payable under the Indenture, to be forthwith
due and payable and to enforce its other rights as a creditor with respect to
such Junior Subordinated Debentures. If a Debenture Event of Default with
respect to certain events in bankruptcy, insolvency or reorganization occurs,
the Junior Subordinated Debentures shall automatically, and without any
declaration or other action on the part of the Property Trustee or the holders
of the Junior Subordinated Debentures, become immediately due and payable. In
either event, payment of principal and interest on the Junior Subordinated
Debentures shall remain subordinated to the extent provided in the Indenture.
See "-- Subordination" above.
Central is required to file annually with the Indenture Trustee a
certificate as to whether or not Central is in compliance with all the
conditions and covenants applicable to it under the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of Central to pay interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Trust Preferred Securities may institute a legal
proceeding directly against Central for enforcement of payment to such holder of
the principal of or interest on such Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder ("Direct Action"). Central may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Trust Preferred Securities
outstanding. If the right to bring a Direct Action is removed, CFAC Capital may
become subject to the reporting obligations under the Exchange Act. Central
shall have the right under the Indenture to set-off any payment made to such
holder of Trust Preferred Securities by Central in connection with a Direct
Action.
The holders of the Trust Preferred Securities would not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of the Trust Preferred Securities -- Events of Default; Notice."
78
<PAGE> 80
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that Central shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into Central or convey, transfer or lease its properties and assets
substantially as an entirety to Central, unless (i) in case Central consolidates
with or merges into another Person or conveys or transfers its properties and
assets substantially as an entirety to any Person, the successor Person is
organized under the laws of the United States or any state or the District of
Columbia, and such successor Person expressly assumes Central's obligations on
the Junior Subordinated Debentures issued under the Indenture; (ii) immediately
after giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing; (iii) such transaction is
permitted under the Trust Agreement and the Guarantee Agreement; and does not
give rise to any breach or violation of the Trust Agreement or Guarantee
Agreement; and (iv) certain other conditions as prescribed in the Indenture are
met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving Central that may adversely affect holders of the Junior
Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and Central deposits or causes to be
deposited with the Indenture Trustee trust funds, in trust, for the purpose and
in an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Indenture
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to Central's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and Central will be
deemed to have satisfied and discharged the Indenture.
COVENANTS OF CENTRAL
Central will covenant in the Indenture, as to the Junior Subordinated
Debentures, that so long as no Event of Default has occurred and is continuing,
if and so long as (i) CFAC Capital is the holder of all such Junior Subordinated
Debentures, (ii) a Tax Event in respect of CFAC Capital has occurred and is
continuing and (iii) Central has elected, and has not revoked such election, to
pay Additional Sums (as defined under "Description of the Trust Preferred
Securities -- Redemption") in respect of the Trust Preferred Securities, Central
will pay to CFAC Capital such Additional Sums. Central will also covenant, as to
the Junior Subordinated Debentures, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of CFAC Capital, provided that certain
successors which are permitted pursuant to the Indenture may succeed to
Central's ownership of the Common Securities, (ii) not to voluntarily terminate,
wind up or liquidate CFAC Capital, except (a) in connection with a distribution
of Junior Subordinated Debentures to the holders of the Trust Preferred
Securities in liquidation of CFAC Capital or (b) in connection with certain
mergers, consolidations, or amalgamations permitted by the Trust Agreement and
(iii) to use its reasonable efforts, consistent with the terms and provisions of
the Trust Agreement, to cause CFAC Capital to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of California, except
that the immunities and standard of care of the Indenture Trustee will be
governed by Delaware law.
79
<PAGE> 81
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and the Junior Subordinated Debentures. The Trust Preferred
Securities and the Junior Subordinated Debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global certificates will be
issued for the Trust Preferred Securities and the Junior Subordinated Debentures
and will be deposited with the Depositary.
The Depositary is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
"Direct Participants" include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The Depositary
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the Depositary system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Securities and each Subordinated
Debenture ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Trust Preferred
Securities or Junior Subordinated Debentures. Transfers of ownership interests
in the Trust Preferred Securities or Junior Subordinated Debentures are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Trust Preferred Securities or Junior Subordinated
Debentures, except in the event that use of the book-entry system for the Junior
Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Trust Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners
80
<PAGE> 82
and the voting rights of Direct Participants, Indirect Participants and
Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, the Depositary will determine by lot or pro rata the amount of
the Trust Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the
Junior Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, the Depositary would mail
an omnibus proxy (the "Omnibus Proxy") to the relevant Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, CFAC Capital or Central, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depositary with respect to any of the Trust Preferred Securities or the Junior
Subordinated Debentures at any time by giving reasonable notice to the relevant
Trustee and Central. In the event that a successor securities depositary is not
obtained, definitive Trust Preferred Securities or Subordinated Debenture
certificates representing such Trust Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. Central, at its option, may
decide to discontinue use of the system of book-entry transfers through the
Depositary (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in liquidation preference of Trust Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through the Depositary. In any
such event, definitive certificates for such Trust Preferred Securities or
Junior Subordinated Debentures will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that CFAC Capital
and Central believe to be accurate, but CFAC Capital and Central assume no
responsibility for the accuracy thereof. Neither CFAC Capital nor Central has
any responsibility for the performance by the Depositary or its Participants of
their respective obligations as described herein or under the rules and
procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by Central
concurrently with the issuance of the Trust Preferred Securities for the benefit
of the holders of the Trust Preferred Securities. Wilmington Trust Company will
act as Guarantee Trustee under the Guarantee Agreement for the purposes of
compliance with the Trust Indenture Act, and the Guarantee will be qualified as
an Indenture under the Trust Indenture Act. The following summary of certain
provisions of the Guarantee does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Guarantee Agreement, including the definitions therein of certain terms, and the
Trust Indenture Act. The form of the Guarantee has
81
<PAGE> 83
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Guarantee Trustee will hold the Guarantee for the benefit of
the holders of the Trust Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
CFAC Capital's obligations under the Trust Preferred Securities, but will apply
only to the extent that CFAC Capital has funds sufficient to make such payments,
and is not a guarantee of collection.
Central will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Trust Preferred Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that CFAC
Capital may have or assert other than the defense of payment. The following
payments with respect to the Trust Preferred Securities, to the extent not paid
by or on behalf of CFAC Capital (the "Guarantee Payments"), will be subject to
the Guarantee: (i) any accrued and unpaid Distributions required to be paid on
the Trust Preferred Securities, to the extent that CFAC Capital has funds on
hand available therefor at such time, (ii) the redemption price with respect to
any Trust Preferred Securities called for redemption, to the extent that CFAC
Capital has funds on hand available therefor at such time, and (iii) upon a
voluntary or involuntary dissolution, winding up or liquidation of CFAC Capital
(unless the Junior Subordinated Debentures are distributed to holders of the
Trust Preferred Securities), the lesser of (a) the Liquidation Distribution and
(b) the amount of assets of CFAC Capital remaining available for distribution to
holders of Trust Preferred Securities after satisfaction of liabilities to
creditors of CFAC Capital as required by applicable law. Central's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by Central to the holders of the Trust Preferred Securities or by
causing CFAC Capital to pay such amounts to such holders.
If Central does not make interest payments on the Junior Subordinated
Debentures held by CFAC Capital, CFAC Capital will not be able to pay
Distributions on the Trust Preferred Securities and will not have funds legally
available therefor. The Guarantee will constitute unsecured obligations of
Central and will rank subordinate and junior in right of payment to all Senior
and Subordinated Debt of Central. See "-- Status of the Guarantee" below.
Central has a Line of Credit that provides for borrowings by Central of up to
$100 million, subject to an allowable borrowing base. Borrowings under the Line
of Credit are guaranteed by all of the significant domestic subsidiaries of the
Company and are secured by substantially all of the assets, including the
receivables, of the Company and a pledge by Central of the stock of all of its
significant subsidiaries. All borrowings under the Line of Credit are Senior and
Subordinated Debt. In addition, because Central is a holding company,
substantially all of Central's assets consist of the capital stock of its
subsidiaries. The right of Central to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of that subsidiary,
except to the extent Central may itself be recognized as a creditor of that
subsidiary. Accordingly, Central's obligations under the Guarantee will be
effectively subordinated to all existing and future liabilities of Central's
subsidiaries, and claimants should look only to the assets of Central for
payments thereunder. Except as otherwise described herein, the Guarantee does
not limit the incurrence or issuance of other secured or unsecured debt of
Central, including Senior and Subordinated Debt whether under the Indenture, any
other indenture that Central may enter into in the future, or otherwise.
Central has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed all
of CFAC Capital's obligations under the Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of CFAC Capital's obligations under the Trust Preferred
Securities. See "Relationship Among the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
82
<PAGE> 84
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Central and will
rank subordinate and junior in right of payment to all Senior and Subordinated
Debt in the same manner as the Junior Subordinated Debentures. See "Description
of Junior Subordinated Debentures -- Subordination."
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against Central to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The Guarantee
will be held for the benefit of the holders of the Trust Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by CFAC Capital or upon distribution to the
holders of the Trust Preferred Securities of the Junior Subordinated Debentures
to the holders of the Trust Preferred Securities. The Guarantee does not place a
limitation on the amount of additional Senior and Subordinated Debt that may be
incurred by Central. Central expects from time to time to incur additional
indebtedness constituting Senior and Subordinated Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Trust Preferred Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Trust Preferred Securities. See "Description of the
Trust Preferred Securities -- Voting Rights; Amendment of the Trust Agreement."
All guarantees and agreements contained in the Guarantee Agreement shall bind
the successors, assigns, receivers, trustees and representatives of Central and
shall inure to the benefit of the holders of the Trust Preferred Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee Agreement will occur upon the
failure of Central to perform any of its payment or other obligations
thereunder. The holders of not less than a majority in aggregate Liquidation
Amount of the Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee
Agreement. Any holder of the Trust Preferred Securities may institute a legal
proceeding directly against Central to enforce its rights under the Guarantee
without first instituting a legal proceeding against CFAC Capital, the Guarantee
Trustee or any other person or entity.
Central, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not Central is in compliance with all the
conditions and covenants applicable to it under the Guarantee Agreement.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by Central in performance of the Guarantee, undertakes to perform only
such duties as are specifically set forth in the Guarantee Agreement and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by the Guarantee Agreement at the
request of any holder of the Trust Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon the
earliest of (i) full payment of the Redemption Price of the Trust Preferred
Securities, (ii) full payment of the amounts payable or (iii) liquidation of
CFAC Capital or upon distribution of Junior Subordinated Debentures to the
holders of
83
<PAGE> 85
the Trust Preferred Securities. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the Trust
Preferred Securities must restore payment of any sums paid under the Trust
Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee Agreement will be governed by and construed in accordance
with the laws of the State of California.
EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by Central under the Trust
Agreement, Central will irrevocably and unconditionally guarantee to each person
or entity to whom CFAC Capital becomes indebted or liable, the full payment of
any costs, expenses or liabilities of CFAC Capital, other than obligations of
CFAC Capital to pay to the holders of the Trust Preferred Securities or other
similar interests in CFAC Capital of the amounts due such holders pursuant to
the terms of the Trust Preferred Securities or such other similar interests, as
the case may be.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent CFAC Capital has funds available for the payment of
such Distributions) are irrevocably guaranteed by Central as and to the extent
set forth under "Description of Guarantee." Taken together, Central's
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement, the Expense Agreement, the Guarantee Agreement and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Trust Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of those documents that has the effect of providing a full,
irrevocable and unconditional guarantee of CFAC Capital's obligations under the
Trust Preferred Securities. If and to the extent that Central does not make
payments on the Junior Subordinated Debentures, CFAC Capital will not pay
Distributions or other amounts due on the Trust Preferred Securities. The
Guarantee does not cover payment of Distributions when CFAC Capital does not
have sufficient funds to pay such Distributions. In such event, the remedy of a
holder of the Trust Preferred Securities is to institute a legal proceeding
directly against Central for enforcement of payment of such Distributions to
such holder. The obligations of Central under the Guarantee are subordinate and
junior in right of payment to all Senior and Subordinated Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Preferred Securities and Common Securities; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Trust Preferred Securities; (iii) Central shall pay for all and any costs,
expenses and liabilities of CFAC Capital except CFAC Capital's obligations to
holders of Trust Preferred Securities; and (iv) the Trust Agreement further
provides that CFAC Capital will not engage in any activity that is not
consistent with its limited purposes.
84
<PAGE> 86
Notwithstanding anything to the contrary in the Indenture, Central has the
right to set-off any payment it is otherwise required to make thereunder with
and to the extent Central has theretofore made, or is concurrently on the date
of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF THE TRUST PREFERRED SECURITIES UNDER THE
GUARANTEE
A holder of Trust Preferred Securities may institute a legal proceeding
directly against Central to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, CFAC Capital or
any other person or entity.
A default or event of default under any Senior and Subordinated Debt would
not constitute a default or Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior and
Subordinated Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on Junior Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF CFAC CAPITAL
The Trust Preferred Securities evidence a beneficial interest in CFAC
Capital, and CFAC Capital exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in Junior Subordinated Debentures.
A principal difference between the rights of a holder of the Trust Preferred
Securities and a holder of a Junior Subordinated Debenture is that a holder of a
Junior Subordinated Debenture is entitled to receive from Central the principal
amount of and interest accrued on Junior Subordinated Debentures held, while a
holder of the Trust Preferred Securities is entitled to receive Distributions
from CFAC Capital (or from Central under the Guarantee) if and to the extent
CFAC Capital has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
CFAC Capital involving the liquidation of the Junior Subordinated Debentures,
the holders of Trust Preferred Securities will be entitled to receive, out of
assets held by CFAC Capital, the Liquidation Distribution in cash. See
"Description of the Trust Preferred Securities -- Liquidation Distribution Upon
Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of
Central, the Property Trustee, as holder of the Junior Subordinated Debentures,
would be a subordinated creditor of Central, subordinated in right of payment to
all Senior and Subordinated Debt as set forth in the Indenture, but entitled to
receive payment in full of principal and interest, before any stockholders of
Central receive payments or distributions. Since Central is the guarantor under
the Guarantee and has agreed to pay for all costs, expenses and liabilities of
CFAC Capital (other than CFAC Capital's obligations to the holders of its Trust
Preferred Securities), the positions of a holder of the Trust Preferred
Securities and a holder of Junior Subordinated Debentures relative to other
creditors and to stockholders of Central in the event of liquidation or
bankruptcy of Central are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Manatt, Phelps & Phillips, LLP, counsel to the Company
("Counsel"), the following summary accurately describes the material United
States federal income tax consequences that may be relevant to the purchase,
ownership and disposition of Trust Preferred Securities. Unless otherwise
stated, this summary deals only with Trust Preferred Securities held as capital
assets by United States Persons (defined below) who purchase the Trust Preferred
Securities upon original issuance at their original offering price. As used
herein, a "United States Person" means a person that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust the
income of which is subject to United States federal income taxation regardless
of its source; provided, however, that for taxable years beginning after
December 31, 1996
85
<PAGE> 87
(or, if a trustee so elects, for taxable years ending after August 20, 1996), a
"United States Person" shall include any trust if a court is able to exercise
primary supervision over the administration of such trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
such trust. The tax treatment of holders may vary depending on their particular
situation. This summary does not address all the tax consequences that may be
relevant to a particular holder or to holders who may be subject to special tax
treatment, such as banks, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or foreign investors. In addition, this summary does not include any
description of any alternative minimum tax consequences or the tax laws of any
state, local or foreign government that may be applicable to a holder of Trust
Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might
be relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as to
the specific United States federal income tax consequences of the purchase,
ownership and disposition of Trust Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Counsel are not binding on the Internal
Revenue Service ("Service") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the Service with
respect to the transactions described herein. Accordingly, there can be no
assurance that the Service will not challenge the opinions expressed herein or
that a court would not sustain such a challenge. Nevertheless, Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein more likely than not would be sustained by a court with jurisdiction in a
properly presented case.
Holders should consult their own tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the Trust
Preferred Securities, including the tax consequences under state, local,
foreign, and other tax laws and the possible effects of changes in United States
federal or other tax laws. For a discussion of the possible redemption of the
Trust Preferred Securities upon the occurrence of certain tax events, see
"Description of the Trust Preferred Securities -- Redemption."
CLASSIFICATION OF CFAC CAPITAL
In connection with the issuance of the Trust Preferred Securities, Counsel
is of the opinion that, under current law and assuming compliance with the terms
of the Trust Agreement, and based on certain facts and assumptions contained in
such opinion, CFAC Capital will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of the Trust Preferred Securities
(a "Securityholder") will be treated as owning an undivided beneficial interest
in the Junior Subordinated Debentures. Accordingly, each Securityholder will be
required to include in its gross income its pro rata share of the interest
income or original issue discount that is paid or accrued on the Junior
Subordinated Debentures. See "-- Interest Income and Original Issue Discount"
herein. No amount included in income with respect to the Trust Preferred
Securities will be eligible for the dividends received deduction. However, if
the Service asserted successfully that CFAC Capital is not a grantor trust, CFAC
Capital could become taxed like a corporation and a Tax Event could occur. The
Securityholders would be taxed like corporate shareholders in that event.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
It is Counsel's opinion that the Junior Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of the
Company under current law, and, by acceptance of a Trust Preferred Security,
each holder covenants to treat the Junior Subordinated Debentures as
indebtedness and the Trust Preferred Securities as evidence of an indirect
beneficial ownership interest in the Junior Subordinated Debentures. No
assurance can be given, however, that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The
86
<PAGE> 88
remainder of this discussion assumes that the Junior Subordinated Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company. See "Risk Factors -- Possible Tax Law Changes Affecting the
Trust Preferred Securities."
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Except as set forth below, stated interest on the Junior Subordinated
Debentures generally will be included in income by a Securityholder at the time
such interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
Central believes that, under the applicable Treasury regulations, the
likelihood, as of the date of issuance of the Junior Subordinated Debentures,
that Central will exercise its option to defer payments of interest is a remote
or incidental contingency and, therefore, Central will take the position that
the Junior Subordinated Debentures will not be considered to have been issued
with "original issue discount" ("OID") within the meaning of Section 1273(a) of
the Code. If, however, Central exercises its right to defer payments of interest
on the Junior Subordinated Debentures, the Junior Subordinated Debentures will
become OID instruments at such time and all Securityholders will be required to
accrue the stated interest on the Junior Subordinated Debentures on a daily
basis during the Extension Period, even though Central will not pay such
interest until the end of the Extension Period, and even though some
Securityholders may use the cash method of tax accounting. Moreover, thereafter
the Junior Subordinated Debentures will be taxed as OID instruments for as long
as they remain outstanding. Thus, even after the end of the Extension Period,
all Securityholders would be required to continue to include the stated interest
on the Junior Subordinated Debentures in income on a daily economic accrual
basis, regardless of their method of tax accounting and in advance of receipt of
the cash attributable to such interest income. Under the OID economic accrual
rules, a Securityholder would accrue an amount of interest income each year that
approximates the stated interest payments called for under the Junior
Subordinated Debentures, and actual cash payments of interest on the Junior
Subordinated Debentures would not be reported separately as taxable income.
The Treasury regulations described above have not yet been addressed in any
definitive interpretations by the Service, and it is possible that the Service
could take a contrary position. If the Service were to assert successfully that
the likelihood that Central will exercise its deferral option is not a remote or
incidental contingency as of the issue date and, therefore, that the stated
interest on the Junior Subordinated Debentures was OID regardless of whether
Central exercises its right to defer payments of interest on such debentures,
all Securityholders would be required to include such stated interest in income
on a daily economic accrual basis as described above.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF TRUST PREFERRED
SECURITIES
Under current law, a distribution by CFAC Capital of the Junior
Subordinated Debentures as described under the caption "Description of the Trust
Preferred Securities -- Liquidation Distribution Upon Dissolution" will be
non-taxable and will result in the Securityholder receiving directly its pro
rata share of the Junior Subordinated Debentures previously held indirectly
through CFAC Capital, with a holding period and aggregate tax basis equal to the
holding period and aggregate tax basis such Securityholder had in its Trust
Preferred Securities before such distribution. If, however, the liquidation of
CFAC Capital were to occur because CFAC Capital is subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debentures as a result of a Tax Event or otherwise, the
distribution of Junior Subordinated Debentures to Securityholders by CFAC
Capital could be a taxable event to CFAC Capital and each Securityholder, and a
Securityholder would recognize gain or loss as if the Securityholder had
exchanged its Trust Preferred Securities for the Junior Subordinated Debentures
it received upon the liquidation of CFAC Capital. A Securityholder would
recognize interest income in respect of Junior Subordinated Debentures received
from CFAC Capital in the manner described above under "-- Interest Income and
Original Issue Discount" herein.
87
<PAGE> 89
SALES OR REDEMPTION OF TRUST PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized (which for this purpose, will exclude
amounts attributable to accrued interest or OID not previously included in
income) and the Securityholder's adjusted tax basis in the Trust Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Trust Preferred Securities held for more than one year will generally be taxable
as long-term capital gain or loss. Under recent tax legislation, the maximum
federal income tax rate applicable to net long term capital gains will depend
upon whether the capital asset sold or exchanged had a holding period in excess
of one year or a holding period in excess of 18 months. Amounts attributable to
accrued interest with respect to a Securityholder's pro rata share of the Junior
Subordinated Debentures not previously included in income will be taxable as
ordinary income.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Trust Preferred Securities held of record
by United States Persons (other than corporations and other exempt
Securityholders), if any, will be reported to the Service. "Backup" withholding
at a rate of 31% will apply to payments of interest to non-exempt United States
Persons unless the Securityholder furnishes its taxpayer identification number
in the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions. Any amounts withheld from a Securityholder
under the backup withholding rules will be allowed as a refund or a credit
against such Securityholder's United States federal income tax liability,
provided the required information is furnished to the Service.
POSSIBLE TAX LAW CHANGES AFFECTING THE TRUST PREFERRED SECURITIES
There can be no assurance that future legislative proposals or final
legislation will not affect the ability of the Company to deduct interest on the
Junior Subordinated Debentures. Such a change could give rise to a Tax Event,
which may permit Central to cause a redemption of the Trust Preferred
Securities. See "Description of the Trust Preferred Securities -- Redemption"
and "Description of Junior Subordinated Debentures -- Redemption."
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") should consider
fiduciary standards under ERISA in the context of the particular circumstances
of such plan before authorizing an investment in the Trust Preferred Securities.
Such fiduciary should consider whether the investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is in
accordance with the documents and instruments governing the plan. In addition,
ERISA and the Code prohibit a wide range of transactions ("Prohibited
Transactions") involving the assets of a plan subject to ERISA or the assets of
an individual retirement account or plan subject to Section 4975 of the Code or
any entity in which such plan invests whose assets are deemed "plan assets"
(hereinafter an "ERISA Plan") and persons who have certain specified
relationships to the ERISA Plan ("parties in interest," within the meaning of
ERISA, and "disqualified persons," within the meaning of the Code). Such
transactions may require "correction" and may cause the ERISA Plan fiduciary to
incur certain liabilities and the parties in interest or disqualified persons to
be subject to excise taxes.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the Prohibited Transaction rules. Such plans may, however, be
subject to federal, state or local laws or regulations which may affect their
investment in the Trust Preferred Securities. Any fiduciary of such a
governmental or church plan considering an investment in the Trust Preferred
Securities should determine the need for, and the availability, if necessary, of
any exemptive relief under such laws or regulations.
88
<PAGE> 90
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Labor
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA. The Labor Regulations provide that, as a general rule, when
an ERISA Plan acquires an equity interest in an entity and such interest does
not represent a "publicly offered security" nor a security issued by an
investment company registered under the 1940 Act, the ERISA Plan's assets
include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the entity
is an operating company or that equity participation in the entity by "benefit
plan investors" is not "significant." For purposes of the Labor Regulations,
CFAC Capital will be neither an investment company nor an operating company.
Under the Labor Regulations, equity participation by benefit plan investors
will not be considered "significant" on any date only if, immediately after the
most recent acquisition of Trust Preferred Securities, the aggregate interest in
the Trust Preferred Securities held by benefit plan investors will be less than
25% of the aggregate outstanding principal amount of the Trust Preferred
Securities. Although it is possible that the equity participation by benefit
plan investors on any date will not be "significant" for purposes of the Labor
Regulations, such result cannot be assured. Consequently, if ERISA Plans or
investors using plan assets of ERISA Plans purchase the Trust Preferred
Securities, CFAC Capital's assets could be deemed to be "plan assets" of such
ERISA Plans for purposes of the fiduciary responsibility provisions of ERISA and
the Code. Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of an ERISA Plan is
considered to be a fiduciary of such ERISA Plan. For example, the Property
Trustee could therefore become a fiduciary of the ERISA Plans that invest in the
Trust Preferred Securities and be subject to the general fiduciary requirements
of ERISA in exercising its authority with respect to the management of the
assets of CFAC Capital. However, the Property Trustee will have only limited
discretionary authority with respect to CFAC Capital assets and the remaining
functions and responsibilities performed by the Property Trustee will be for the
most part custodial and ministerial in nature.
PROHIBITED TRANSACTIONS
Central may be a party in interest or a disqualified person with respect to
an ERISA Plan investing in the Trust Preferred Securities or acquiring Junior
Subordinated Debentures, and therefore, such investment by an ERISA Plan may
give rise to a Prohibited Transaction in the form of a direct or indirect
extension of credit by the investing ERISA Plan to the Company. Consequently,
before investing in the Trust Preferred Securities or acquiring Junior
Subordinated Debentures, any person who is, or who is acquiring such securities
for, or on behalf of, an ERISA Plan should determine that either a statutory or
an administrative exemption from the Prohibited Transaction rules discussed
below or otherwise available is applicable to such investment in the Trust
Preferred Securities or acquisition of Junior Subordinated Debentures, or that
such investment in, or acquisition of, such securities will not result in a
Prohibited Transaction.
The statutory or administrative exemptions from the Prohibited Transaction
rules under ERISA and the Code which may be available to an ERISA Plan which is
investing in the Trust Preferred Securities include: Prohibited Transaction
Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 84-14, regarding transactions effected by qualified
professional asset managers; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 95-60, regarding investments by insurance
company general accounts (collectively referred to as the "ERISA Investor
Exemptions").
Notwithstanding the foregoing, Trust Preferred Securities may not be
acquired by any person who is, or who in acquiring such Trust Preferred
Securities is using the assets of, an ERISA Plan unless one of the ERISA
Investor Exemptions or another applicable exemption is available to the ERISA
Plan. The acquisition of the Trust Preferred Securities by any person who is, or
who in acquiring such Trust Preferred Securities is using the assets of, an
ERISA Plan shall be deemed to constitute a representation by such person to the
Trust that such person is eligible for exemptive relief available pursuant to
either the ERISA Investor Exemptions or another applicable exemption with
respect to the acquisition and holding of such Trust Preferred Securities.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE ALL INCLUSIVE. ANY FIDUCIARY OF AN ERISA PLAN, GOVERNMENTAL PLAN OR CHURCH
PLAN CONSIDERING AN INVESTMENT IN THE TRUST PREFERRED SECURITIES SHOULD CONSULT
WITH ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT.
89
<PAGE> 91
UNDERWRITING
The Underwriters named below, represented by Sutro & Co. Incorporated (the
"Representative"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, to
purchase from CFAC Capital the number of Trust Preferred Securities set forth
opposite their respective names below. The several Underwriters have agreed in
the Underwriting Agreement, subject to the terms and conditions set forth
therein, to purchase all the Trust Preferred Securities offered hereby if any of
the Trust Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF TRUST
UNDERWRITER PREFERRED SECURITIES
------------------------------------------------------------ --------------------
<S> <C>
Sutro & Co. Incorporated....................................
---------
Total............................................. 1,750,000
=========
</TABLE>
The Representative has advised Central and CFAC Capital that it proposes
initially to offer the Trust Preferred Securities to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per Trust
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per Trust Preferred Security to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be used to purchase the Junior Subordinated Debentures of
Central, the Underwriting Agreement provides that Central will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $ per Trust
Preferred Security (or $ in the aggregate) for the accounts of the
Underwriters.
CFAC Capital has granted the Underwriters an option to purchase up to an
additional 262,500 Trust Preferred Securities at the public offering price Such
option, which expires 30 days from the date of this Prospectus, may be exercised
solely to cover over-allotments.
To the extent that the Underwriter exercises its option to purchase
additional Trust Preferred Securities, CFAC Capital will issue and sell to
Central additional Common Securities in such aggregate Liquidation Amount as is
required for Central to continue to hold Common Securities in an aggregate
Liquidation Amount equal to at least 3% of the total capital of CFAC Capital and
Central will issue and sell to CFAC Capital Junior Subordinated Debentures in an
aggregate principal amount equal to the total aggregate Liquidation Amount of
the additional Trust Preferred Securities being purchased pursuant to the option
and the additional Common Securities.
In connection with the offering of the Trust Preferred Securities, the
Underwriters and any selling group members and their respective affiliates may
engage in transactions effected in accordance with Rule 104 of the Commission's
Regulation M that are intended to stabilize, maintain or otherwise affect the
market price of the Trust Preferred Securities. Such transactions may include
over-allotment transactions in which the Underwriters create a short position
for their own account by selling more Trust Preferred Securities than it is
committed to purchase from CFAC Capital. In such case, to cover all or part of
the short position, the Underwriters may exercise the over-allotment option
described above or may purchase Trust Preferred Securities in the open market
following completion of the initial offering of the Trust Preferred Securities.
The Underwriters may also engage in stabilizing transactions in which they bid
for, and purchase, shares of the Trust Preferred Securities at a level above
that which might otherwise prevail in the open market for the purpose of
preventing or retarding a decline in the market price of the Trust Preferred
Securities. The Underwriters also may reclaim any selling concession allowed to
an Underwriter or dealer if the Underwriters repurchase shares distributed by
that Underwriter or dealer. Any of the foregoing transactions may result in the
maintenance of a price for the Trust Preferred Securities at a level above that
which might otherwise
90
<PAGE> 92
prevail in the open market. Neither the Company nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Trust Preferred
Securities. The Underwriters are not required to engage in any of the foregoing
transactions and, if commenced, such transactions may be discontinued at any
time without notice.
During a period of 180 days from the date of this Prospectus, neither CFAC
Capital nor the Company will, subject to certain exceptions, without the prior
written consent of the Representative, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any Trust Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Trust Preferred Securities or Junior Subordinated Debentures or any debt
securities substantially similar to the Junior Subordinated Debentures or equity
securities substantially similar to the Trust Preferred Securities (except for
Junior Subordinated Debentures and the Trust Preferred Securities offered
hereby).
Because the National Association of Securities Dealer, Inc. ("NASD") is
expected to view the Trust Preferred Securities as interests in a direct
participation program, the offering of the Trust Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
The Trust Preferred Securities are a new issue of securities with no
established trading market. Application has been made to list the Trust
Preferred Securities on the Nasdaq National Market. The Underwriters have
advised Central and CFAC Capital that they presently intend to make a market in
the Trust Preferred Securities after the commencement of trading on the Nasdaq
National Market, but no assurances can be made as to the liquidity of such Trust
Preferred Securities or that an active and liquid trading market will develop
or, if developed, that it will continue. The offering price and distribution
rate have been determined by negotiations among representatives of Central and
the Representative, and the offering price of the Trust Preferred Securities may
not be indicative of the market price following the offering. The Underwriters
will have no obligation to make a market in the Trust Preferred Securities,
however, and may cease market-making activities, if commenced, at any time.
Central and CFAC Capital have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the
formation of CFAC Capital will be passed upon by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special counsel to Central and CFAC Capital. The
validity of the Guarantee and the Junior Subordinated Debentures will be passed
upon for the Company by Manatt, Phelps & Phillips, LLP, Los Angeles, California,
counsel to the Company. Certain legal matters in connection with this Offering
will be passed upon for the Underwriters by Stroock & Stroock & Lavan LLP.
Manatt, Phelps & Phillips, LLP and Stroock & Stroock & Lavan LLP will rely on
the opinions of Richards, Layton & Finger, P.A. as to matters of Delaware law.
Certain matters relating to United States federal income tax considerations will
be passed upon for the Company by Manatt, Phelps & Phillips, LLP.
EXPERTS
The consolidated financial statements as of December 31, 1996 and for the
year ended December 31, 1996 included in this Prospectus have been audited by
Arthur Andersen LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements as of December 31, 1995 and the years
ended December 31, 1994 and 1995 included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the authority of
said firm as experts in accounting and auditing.
91
<PAGE> 93
AVAILABLE INFORMATION
Central has filed with the Commission a Registration Statement on Form S-1
under the Securities Act, with respect to the offering of the securities offered
hereby. This Prospectus does not contain all of the information set forth in
such Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission.
Central is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
filed by Central can be inspected and copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New
York Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048. The Commission also maintains a Web site (http://www.sec.gov) at which
reports, proxy and information statements and other information regarding
Central may be accessed. In addition, such reports, proxy statements and other
information can also be inspected at the offices of The Nasdaq Stock Market,
1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of CFAC Capital have been included herein.
Central and CFAC Capital do not consider that such financial statements would be
material to holders of the Trust Preferred Securities because CFAC Capital is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures of Central
and issuing the Trust Securities. See "CFAC Capital," "Description of Trust
Preferred Securities," "Description of Junior Subordinated Debentures" and
"Description of Guarantee."
92
<PAGE> 94
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS............................................ F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS............................................ F-3
CONSOLIDATED FINANCIAL STATEMENTS:
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1995 and 1996......................... F-4
Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1994, 1995 and 1996............................................................ F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996....................................................................... F-7
Notes to Consolidated Financial Statements........................................ F-8
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet at December 31, 1996 and June 30, 1997....... F-19
Condensed Consolidated Statements of Operations for the Six Months Ended June 30,
1996 and 1997.................................................................. F-20
Condensed Consolidated Statement of Cash Flow for the Six Months Ended June 30,
1996 and 1997.................................................................. F-21
Notes to Consolidated Financial Statements........................................ F-22
</TABLE>
F-1
<PAGE> 95
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Central Financial Acceptance
Corporation:
We have audited the accompanying consolidated balance sheet of Central
Financial Acceptance Corporation, a Delaware corporation, and subsidiaries (the
"Company") as of December 31, 1996, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
February 19, 1997
F-2
<PAGE> 96
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Central Financial Acceptance Corporation
Los Angeles, California:
We have audited the accompanying consolidated balance sheet of Central Financial
Acceptance Corporation and subsidiaries (the "Company") as of December 31, 1995,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Central Financial Acceptance
Corporation and subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Los Angeles, California
April 12, 1996 (June 25, 1996 as to the effects
of the reorganization described in Note 1)
F-3
<PAGE> 97
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash............................................................ $ 5,848,000 $ 57,000
Finance receivables, net........................................ 120,391,000 94,674,000
Prepaid expenses and other current assets....................... 3,962,000 200,000
Net assets of discontinued operation............................ -- 1,033,000
Deferred income taxes........................................... 3,536,000 2,307,000
Property and equipment, net..................................... 3,425,000 2,060,000
Intangible assets, net.......................................... 8,725,000 1,399,000
------------ ------------
Total................................................. $145,887,000 $101,730,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable................................................... $ 74,024,000 $ 63,967,000
Accrued expenses and other current liabilities.................. 8,708,000 1,688,000
Income taxes payable............................................ 952,000 1,593,000
Long term debt.................................................. 850,000 850,000
------------ ------------
Total liabilities..................................... 84,534,000 68,098,000
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares outstanding...................................... -- --
Common stock, $.01 par value, 20,000,000 shares authorized;
7,277,000 and 5,150,000 shares issued and outstanding,
respectively............................................... 73,000 52,000
Paid in capital............................................... 47,903,000 26,082,000
Retained earnings............................................. 13,377,000 7,498,000
------------ ------------
Total stockholders' equity................................. 61,353,000 33,632,000
------------ ------------
Total................................................. $145,887,000 $101,730,000
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements.
F-4
<PAGE> 98
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Interest income
Consumer product portfolio..................... $12,850,000 $12,508,000 $11,787,000
Small loan portfolio........................... 9,686,000 5,095,000 1,057,000
Automobile finance portfolio................... 1,548,000 240,000 0
Other.......................................... 1,691,000 176,000 0
----------- ----------- -----------
Total interest income..................... 25,775,000 18,019,000 12,844,000
Travel services................................... 2,449,000 371,000 0
Transaction fees from affiliate................... 965,000 916,000 857,000
Other income...................................... 7,238,000 2,857,000 1,868,000
----------- ----------- -----------
Total revenues............................ 36,427,000 22,163,000 15,569,000
----------- ----------- -----------
Costs and expenses:
Operating expenses................................ 12,676,000 7,288,000 5,170,000
Provision for credit losses....................... 9,105,000 5,449,000 3,923,000
Interest expense.................................. 4,697,000 4,278,000 2,801,000
----------- ----------- -----------
Total costs and expenses.................. 26,478,000 17,015,000 11,894,000
----------- ----------- -----------
Income before taxes and discontinued operations..... 9,949,000 5,148,000 3,675,000
Income tax expense.................................. 3,979,000 2,079,000 1,493,000
----------- ----------- -----------
Income from continuing operations................... 5,970,000 3,069,000 2,182,000
Discontinued operations net income (loss)........... (91,000) 50,000 0
----------- ----------- -----------
Net income.......................................... $ 5,879,000 $ 3,119,000 $ 2,182,000
=========== =========== ===========
Per share data: (Note 3)
Earnings per share from continuing operations..... $ 0.96 $ 0.60 $ 0.42
Earnings (loss) per share discontinued
operations..................................... (0.01) 0.01 0.00
----------- ----------- -----------
Net income per share.............................. $ 0.95 $ 0.61 $ 0.42
=========== =========== ===========
Weighted average common shares outstanding........ 6,213,500 5,150,000 5,150,000
=========== =========== ===========
Supplementary net income per share (unaudited).... $ 0.88 $ 0.58 $ 0.43
=========== =========== ===========
Supplementary weighted average number of common
shares outstanding (unaudited)................. 7,277,000 7,277,000 7,277,000
=========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements.
F-5
<PAGE> 99
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994............. 5,150,000 $52,000 $17,916,000 $ 2,197,000 $20,165,000
Net income......................... 2,182,000 2,182,000
Capital contribution............... 1,604,000 1,604,000
--------- -------- ----------- ----------- -----------
Balance, December 31, 1994........... 5,150,000 52,000 19,520,000 4,379,000 23,951,000
Net income......................... 3,119,000 3,119,000
Capital contribution............... 6,562,000 6,562,000
--------- -------- ----------- ----------- -----------
Balance, December 31, 1995........... 5,150,000 52,000 26,082,000 7,498,000 33,632,000
Net income......................... 5,879,000 5,879,000
Capital withdrawal................. (615,000) (615,000)
Net proceeds from public
offering........................ 2,127,000 21,000 22,436,000 22,457,000
--------- -------- ----------- ----------- -----------
Balance, December 31, 1996........... 7,277,000 $73,000 $47,903,000 $13,377,000 $61,353,000
========= ======== =========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements.
F-6
<PAGE> 100
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 5,879,000 $ 3,119,000 $ 2,182,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 224,000 386,000 264,000
Provision for credit losses.................... 9,105,000 5,449,000 3,923,000
Deferred income taxes.......................... (1,229,000) (663,000) (281,000)
Changes in assets and liabilities:
Prepaid expenses and other current assets...... (3,762,000) (166,000) 131,000
Net assets of discontinued operations.......... 1,033,000 (1,033,000) 0
Accrued expenses and other current liabilities
and income taxes payable.................... 6,379,000 2,135,000 521,000
----------- ----------- -----------
Net cash provided by operating activities... 17,629,000 9,227,000 6,740,000
----------- ----------- -----------
Cash flows from investing activities:
Installment contracts (originated and acquired)
collected, net.............................. (34,822,000) (29,795,000) (20,833,000)
Capital expenditures........................... (1,492,000) (2,124,000) (7,000)
Acquisitions................................... (7,423,000) 0 0
----------- ----------- -----------
Net cash used in investing activities....... (43,737,000) (31,919,000) (20,840,000)
----------- ----------- -----------
Cash flows from financing activities:
Capital contribution (withdrawal).............. (615,000) 6,562,000 1,604,000
Net proceeds from public offering.............. 22,457,000 0 0
Proceeds from long-term debt................... 0 850,000 0
Net proceeds from notes payable................ 10,057,000 15,122,000 12,195,000
----------- ----------- -----------
Net cash provided by financing activities... 31,899,000 22,534,000 13,799,000
----------- ----------- -----------
Net increase (decrease) in cash.................. 5,791,000 (158,000) (301,000)
Cash, beginning of year.......................... 57,000 215,000 516,000
----------- ----------- -----------
Cash, end of year................................ $ 5,848,000 $ 57,000 $ 215,000
=========== =========== ===========
Cash paid during the year for:
Interest....................................... $ 4,531,000 $ 4,250,000 $ 2,772,000
=========== =========== ===========
Income taxes................................... $ 5,909,000 $ 1,675,000 $ 1,549,000
=========== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are
an integral part of these consolidated financial statements.
F-7
<PAGE> 101
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS
Basis of Presentation -- Central Financial Acceptance Corporation ("CFAC")
was formed in April 1996 and was a wholly owned subsidiary of Banner's Central
Electric, Inc ("Banner"). Banner's Central Electric, Inc. is wholly owned by
Banner Holdings, Inc. ("Holdings") and is a consumer products retailer that
provides its customers with financing for the merchandise it sells. On June 24
1996, CFAC, Banner's Central Electric, Inc. and Holdings entered into an
agreement (the "Reorganization Agreement") whereby Holdings contributed to
Banner its investments in certain wholly owned subsidiaries, along with the
subsidiaries' operations, (the "Holding Subsidiaries") and Banner's Central
Electric, Inc. contributed to CFAC its investments in the Holdings Subsidiaries
and the finance portion of its consumer products business, and cash in such
amount so as to leave CFAC with $500,000 of cash on hand. Pursuant to the
Reorganization Agreement, the intercompany accounts between CFAC, Banner's
Central Electric, Inc. and Holdings that arose as a result of the Reorganization
Agreement and from other transactions, except with respect to income taxes, were
forgiven and reclassified as stockholders' equity.
In addition to the Reorganization Agreement, CFAC, Banner's Central
Electric, Inc. and Holdings entered into certain agreements for the purpose of
defining the ongoing relationships among them (see Note 11). The transactions
and agreements entered into pursuant to the Reorganization Agreement are
referred to herein as the "Reorganization." Management of CFAC believes that
such agreements provide for reasonable allocations of costs between the parties.
The reorganization was accounted for at historical cost in a manner similar
to a pooling of interests. The accompanying consolidated financial statements
reflect the combined historical operations of CFAC and its subsidiaries as if
the Reorganization had taken place at the beginning of the periods presented,
except for the contribution of cash in such amount so as to leave CFAC with
$500,000 upon the Reorganization.
On July 2, 1996, CFAC consummated its initial public offering when it sold
2.127 million shares of common stock, which resulted in net proceeds to the
Company of $22.5 million.
On August 1, 1996, the business of Central Auto Sales, Inc., (a wholly
owned subsidiary of CFAC) was sold to CFAC's parent company for net book value.
The consolidated financial statements have been restated to reflect this
business as a discontinued operation.
Nature of Operations -- The Company (i) purchases and services consumer
finance receivables generated by the Company's customers for purchases of high
quality brand name consumer products, appliances and furniture sold by Banner,
and by independent retailers; (ii) provides financing for purchases of used
automobiles sold by Banner; (iii) provides small loans to its customers; (iv)
originates and services consumer finance receivables generated by the Company's
customers for purchases of airline tickets sold by the Company; and (v) provides
insurance products and insurance premium financing to its customers. The
majority of the Company's business is focused in Southern California, and the
Company experiences the highest demand for its financial products and services
between October and December.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of Central Financial Acceptance Corporation and
its wholly owned subsidiaries, Central Installment Credit Corporation, Central
Consumer Finance Company, Centravel, Inc., Central Financial
Acceptance/Insurance Agency, Central Premium Finance Company, Central
International, Ltd. and BCE Properties, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
Finance Receivables -- Central's finance receivables include installment
contracts that are purchased from Banner (referred to herein as the "Consumer
Product Portfolio"), receivables that arise from unsecured, small loans
(referred to herein as the "Small Loan Portfolio"), installment contracts that
are originated when
F-8
<PAGE> 102
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
customers buy used cars and travel tickets (referred to herein as the
"Automobile Finance Portfolio" and the "Travel Finance Portfolio,"
respectively), and installment contracts purchased from unaffiliated third party
retailers that sell products or services and receivables that arise from
automobile insurance premium contracts (referred to herein as the "Other
Portfolio.") Add-on interest of 11% to 13% per annum is included in the face
amount of the finance receivables together with administrative fees that are
charged on certain small loan contracts. The annual percentage rate varies
depending on the length of the contract and the amount of administrative fees.
The contracts provide for scheduled monthly payments and mature generally from 1
to 24 months in the Consumer Product Finance Portfolio and the Other Portfolio,
which includes the independent retailers, from 1 to 12 months in the Small Loan
and Travel Finance Portfolios, and from 36 to 42 months in the Automobile
Finance Portfolio.
Certain direct loan origination costs are capitalized and recognized into
expense over the life of the related loan using a method that approximates the
interest method.
The Company provides an allowance for credit losses in the Consumer Product
and Travel Finance Portfolios at the time that the contract is purchased or the
retail sale is made. The allowance for credit losses in the Small Loan Portfolio
and independent retailers is provided for following the origination of the loans
over the period that the events giving rise to the credit losses are estimated
to occur. The Company's portfolios comprise smaller-balance, homogeneous loans
that are evaluated collectively to determine an appropriate allowance for credit
losses. The allowance for credit losses is maintained at a level considered
adequate to cover losses in the existing portfolios. Collection of past due
accounts is pursued by the Company, and when the characteristics of an
individual account indicates that collection is unlikely, the account is charged
off and turned over to a collection agency. Accounts are generally charged off
when they are between 91 and 150 days past due.
Allowance for loan losses is increased by charges to income and decreased
by chargeoffs, net of recoveries. Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay and current economic conditions. The Company's
customers are typically between the ages of 21 and 45 and earn less than $25,000
per year, have little or no savings and limited short-term employment histories.
In addition, the Company's customers typically have no prior credit histories
and are unable to secure credit from traditional lending sources. The Company
makes its credit decisions primarily on its assessment of a customer's ability
to repay the obligation. In making a credit decision, in addition to the size of
the obligation, the Company generally considers a customer's income level, type
and length of employment, stability of residence, personal references and prior
credit history with the Company. As a result, the Company is more susceptible to
the risk that its customers will not satisfy their repayment obligations than
are less specialized consumer companies or consumer finance companies that have
more stringent underwriting criteria. Because the Company relies on the
creditworthiness of its customers for repayment and does not rely on collateral
securing the debt, the Company experiences actual rates of losses higher than
lenders who have collateral which they can repossess in the event of a
borrower's default.
Deferred insurance revenue arises from the deferral of the recognition of
revenue from certain credit insurance contracts. Insurance premium revenue is
recognized over the life of the related contract using a method that
approximates the interest method.
Property and Equipment -- Property and equipment are carried at cost.
Long-lived property is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such an asset may not be
recoverable. If the carrying amount of the asset exceeds the estimated
undiscounted future cash flows to be generated by the asset, an impairment loss
would be recorded to reduce the asset's carrying
F-9
<PAGE> 103
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
value to its estimated fair value. Depreciation and amortization are computed
primarily using the straight-line method over the estimated lives of the assets,
as follows:
<TABLE>
<S> <C>
Furniture, equipment and software........................... Five to ten years
Leasehold improvements...................................... Life of lease
Building improvements....................................... 7 to 39 years
</TABLE>
Intangible Assets -- Intangible assets primarily arose in connection with
the Company's acquisition of the net assets of certain travel and automobile
insurance businesses during 1996. The excess of the purchase price over the fair
value of net assets acquired is being amortized using the straight-line method
over 30 years. The recoverability of the intangible asset is analyzed annually
based on undiscounted future cash flows. If the carrying value of the intangible
asset exceeds the estimated undiscounted future cash flows, an impairment loss
would be recorded to reduce the asset's carrying value to its estimated fair
value.
Income Recognition -- Interest income on the Consumer Product, Automobile
Finance and Travel Finance Portfolios is deferred and recognized over the lives
of the contracts using the "Rule of 78s," which approximates the interest
method. Interest income on the Small Loan Portfolio and independent retailers is
deferred and recognized using the interest method. Transaction fees on contracts
purchased from a related party are deferred and recognized using the interest
method. Administrative fees are deferred and recognized over the estimated
average life of the Small Loan Portfolio using the "Rule of 78s," which
approximates the interest method. Administrative fees are included in other
income in the consolidated statements of income. Premiums and commissions for
credit life insurance are recognized as revenue using the interest method.
Premiums and commissions for credit accident and health insurance are recognized
over the terms of the contracts based on the means of the straight line and
interest method and are included in other income in the consolidated statements
of income.
Travel Services -- Revenues from the sale of travel tickets represent
airline commissions paid to the Company.
Insurance Liabilities -- The liability for losses and loss-adjustment
expenses includes an amount determined from loss reports and individual cases
and an amount, based on past experience, for losses incurred but not reported.
Such liabilities are necessarily based on estimates and, while management
believes that the amount is adequate, the ultimate liability may be in excess of
or less than the amounts provided. The methods for making such estimates and for
establishing the resulting liability are continually reviewed, and any
adjustments are reflected in earnings in the current period.
Income Taxes -- The Company follows Statement of Financial Accounting
Standards ("SFAS") No. 109. Under SFAS No. 109, income tax expense includes
income taxes payable for the current year and the change in deferred income tax
assets and liabilities for the future tax consequences of events that have been
recognized in the Company's financial statements or income tax returns. A
valuation allowance is recognized to reduce the carrying value of the deferred
tax assets if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Fair Value of Financial Instruments -- The carrying value of the Company's
finance receivables approximates their fair value due to their short term nature
and generally stable rates of interest currently being charged in comparison to
the rates reflected in the existing portfolios. The carrying value of the
Company's notes payable approximates their fair value, as these notes represent
a series of short-term notes at floating interest rates. The carrying value of
the Company's long-term debt approximates its fair value, as the promissory note
bears interest at a floating rate.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
F-10
<PAGE> 104
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
3. EARNINGS PER SHARE
Earnings per common share is computed by dividing net income by the average
number of common shares outstanding during the periods using the treasury stock
method. Stock options were not considered as dilutive in the earnings per share
calculation since they have less than 3% effect in the aggregate.
Supplementary net income per share is based upon 5,150,000 shares of Common
Stock issued by the Company pursuant to the Reorganization and 2,127,000 shares
of Common Stock sold by the Company in its initial public offering as if all
such shares were outstanding as of January 1, 1994, and also gives effect to a
reduction in interest expenses resulting from the reduction of indebtedness upon
application of the net proceeds of the initial public offering as if it has
occurred on January 1, 1994.
4. ACQUISITIONS
During 1994, the Company acquired the receivables portfolio of a furniture
retailer in the San Francisco area that provided installment credit for its
customers. The receivables portfolio was acquired for approximately $6,125,000.
During 1996, the Company acquired the business of, and assumed the leasehold
interest to 80 travel locations, and 10 automobile insurance agencies for an
aggregate purchase price of approximately $7.5 million.
These acquisitions were accounted for as purchases and the results of their
operations, which are not significant, have been included since the applicable
acquisition dates.
5. FINANCE RECEIVABLES
Finance receivables consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Consumer Product Portfolio...................... $ 61,848,000 $ 67,811,000
Small Loan Portfolio............................ 57,671,000 37,868,000
Automobile Finance Portfolio.................... 11,002,000 5,545,000
Travel Finance Portfolio........................ 5,609,000 2,969,000
Other........................................... 9,349,000 0
------------ ------------
145,479,000 114,193,000
Less deferred interest.......................... 17,049,000 13,587,000
Less allowance for credit losses................ 6,786,000 4,955,000
Less deferred administrative fees and insurance
revenues...................................... 978,000 576,000
Less unearned premiums and unpaid claim
liabilities related to finance receivables.... 275,000 401,000
------------ ------------
$ 120,391,000 $ 94,674,000
============ ============
</TABLE>
F-11
<PAGE> 105
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Customers are required to make monthly payments on installment contracts.
The aggregate gross balance of accounts with payments 31 days or more past due
are:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Consumer Product Portfolio:
Past due 31 - 60 days............................. $ 2,393,000 $ 1,943,000
Past due 61 days or more.......................... 2,277,000 2,465,000
---------- ----------
$ 4,670,000 $ 4,408,000
========== ==========
Small Loan Portfolio:
Past due 31 - 60 days............................. $ 1,239,000 $ 500,000
Past due 61 days or more.......................... 1,615,000 649,000
---------- ----------
$ 2,854,000 $ 1,149,000
========== ==========
Travel Finance Portfolio:
Past due 31 - 60 days............................. $ 129,000 $ 39,000
Past due 61 days or more.......................... 213,000 48,000
---------- ----------
$ 342,000 $ 87,000
========== ==========
Other:
Past due 31 - 60 days............................. $ 437,000 $ 0
Past due 61 days or more.......................... 252,000 0
---------- ----------
$ 689,000 $ 0
========== ==========
</TABLE>
The allowance for credit losses in the Consumer Product Portfolio includes
the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Allowance for credit losses,
beginning of year................. $ 3,711,000 $ 3,169,000 $ 2,786,000
Provision for credit losses......... 4,955,000 3,852,000 3,332,000
Write-offs, net of recoveries....... (4,257,000) (3,310,000) (2,949,000)
----------- ----------- -----------
Allowance for credit losses, end of
year.............................. $ 4,409,000 $ 3,711,000 $ 3,169,000
=========== =========== ===========
</TABLE>
The allowance for credit losses in the Small Loan Portfolio includes the
following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Allowance for credit losses,
beginning of year................. $ 1,194,000 $ 543,000 $ 107,000
Provision for credit losses......... 3,349,000 1,547,000 591,000
Write-offs, net of recoveries....... (2,606,000) (896,000) (155,000)
----------- ----------- -----------
Allowance for credit losses, end of
year.............................. $ 1,937,000 $ 1,194,000 $ 543,000
=========== =========== ===========
</TABLE>
F-12
<PAGE> 106
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The allowance for credit losses in the Travel Finance Portfolio, which
began in 1995, includes the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1996 1995
--------- -------
<S> <C> <C>
Allowance for credit losses, beginning of year......... $ 50,000 $ 0
Provision for credit losses............................ 395,000 50,000
Write-offs, net of recoveries.......................... (232,000) 0
--------- -------
Allowance for credit losses, end of year............... $ 213,000 $50,000
========= =======
</TABLE>
The allowance for credit losses in the Other Finance Portfolio, which
businesses began in 1996, includes the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Allowance for credit losses, beginning of year.................. $ 0
Provision for credit losses..................................... 406,000
Write offs, net of receivables.................................. (179,000)
---------
Allowance for credit losses, end of year........................ $ 227,000
=========
</TABLE>
The Automobile Finance Portfolio is financed by the Company with full
recourse back to Banner, and accordingly, no allowance for credit losses is
provided for by the Company.
6. PROPERTY AND EQUIPMENT
Property and equipment, net consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Land................................................ $1,568,000 $1,568,000
Improvements........................................ 507,000 146,000
Furniture, equipment and software................... 1,548,000 417,000
---------- ----------
3,623,000 2,131,000
Less accumulated depreciation and amortization...... 198,000 71,000
---------- ----------
$3,425,000 $2,060,000
========== ==========
</TABLE>
7. INTANGIBLE ASSETS
Intangible assets, net consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Excess of purchase price over the fair value of net
assets acquired................................... $9,085,000 $1,662,000
Less accumulated amortization....................... 360,000 263,000
---------- ----------
$8,725,000 $1,399,000
========== ==========
</TABLE>
F-13
<PAGE> 107
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. NOTES PAYABLE
Notes payable consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Bank of America line of credit.................... $35,208,000 $40,317,000
Wells Fargo line of credit........................ 38,816,000 23,650,000
----------- -----------
$74,024,000 $63,967,000
=========== ===========
</TABLE>
The Company has a line of credit agreement with Bank of America National
Trust and Savings Association (the "Bank of America Line of Credit") that, as
amended, provides for the issuance of notes up to $60,000,000, subject to an
allowable borrowing base. The amounts outstanding under these notes bear
interest at rates that are determined by the type of borrowing. Borrowings under
the notes are collateralized by the Consumer Product Portfolio and Banner is a
guarantor. The Bank of America Line of Credit, as amended, matures on April 30,
1997 and contains certain restrictive covenants that require, among other
things, the maintenance of certain financial ratios and amounts. The Company is
required to maintain specified levels of tangible net worth and cash flow to
interest coverage ratios for one of its subsidiaries and Banner combined, and
cannot exceed a specified ratio of debt to tangible net worth for such
subsidiary and Banner combined, as such terms are defined in the line of credit
agreement. Other ratios related to the performance of the Company's Consumer
Product Portfolio must be maintained within limits, including maximum ratios of
past due accounts to eligible contracts, net write-offs to average net
receivables, and a minimum ratio of the allowance for credit losses to net
receivables, in all cases as such terms are defined in the line of credit
agreement. Borrowings under the facility bore interest at weighted average rates
of 9.13% and 8.21% per annum as of December 31, 1996 and December 31, 1995,
respectively. The amount of unused credit under the facility was limited by the
allowable borrowing base and was approximately $1,572,000 at December 31, 1996.
The Company has a line of credit agreement with Wells Fargo Bank, National
Association (the "Wells Fargo Line of Credit") that, as amended, provides for
the issuance of notes up to $50,000,000, subject to an allowable borrowing base.
The amounts outstanding under these notes bear interest at rates that are
determined by the type of borrowing. Borrowings under the notes are
collateralized by the Small Loan, Automobile Finance and Travel Finance
Portfolios. The Wells Fargo Line of Credit, as amended, expires on April 30,
1997. The credit facility contains certain restrictive covenants that require,
among other things, the maintenance of certain financial ratios and amounts. The
Company is required to maintain specified levels of tangible net worth, net
income, and cash flow to interest coverage ratios for one of its subsidiaries,
and cannot exceed a specified ratio of debt to tangible net worth for such
subsidiary, as such terms are defined in the line of credit agreement. In
addition, the ratio of the net provision for credit losses to net receivables
for the Company's Small Loan, Automobile Finance and Travel Finance Portfolios
must be maintained below a specified level as such terms are defined in the line
of credit agreement. Borrowings under the facility bore interest at weighted
average rates of 7.89% and 8.11% per annum as of December 31, 1996 and December
31, 1995, respectively. The amount of unused credit under the facility was
limited by the allowable borrowing base and was approximately $6,624,000 at
December 31, 1996. The Company believes that the Lines of Credit can be renewed
or that it can obtain alternative financing.
The Company is required to pay a commitment fee of 0.375% per annum for
unused portions of its lines of credit. These fees totaled $179,000 for the
years ended December 31, 1996 and 1995, and $78,000 for the year ended December
31, 1994, and are included in operating expenses in the consolidated statements
of income.
The Company was not in compliance with certain financial covenants as of
December 31, 1996; however, a waiver has been received from each of Bank of
America National Trust and Savings Association and Wells Fargo Bank, National
Association.
F-14
<PAGE> 108
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LONG-TERM DEBT
Long-term debt consists of a promissory note payable to a bank that bears
interest at the bank's reference rate of 8.25% at December 31, 1996. Interest is
payable monthly and the principal is due July 1998. The note is secured by a
deed of trust.
10. INCOME TAXES
The Company has agreed to indemnify Holdings for all federal, state, and
other income taxes for periods prior to July 2, 1996, when it was included as
part of Holdings consolidated tax group.
Subsequent to July 2, 1996, the Company and its subsidiaries will file a
consolidated federal income tax return. For California and certain other states,
the Company will continue to file on a combined or separate company tax basis,
as appropriate. The income tax provisions as presented in the accompanying
financial statements are based upon the amount the Company would have paid as if
it filed separate income tax returns for the entire periods presented.
The provision (benefit) for income taxes from continuing operations
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal............................. $ 4,127,000 $2,121,000 $1,373,000
State............................... 1,081,000 621,000 401,000
----------- ---------- ----------
5,208,000 2,742,000 1,774,000
----------- ---------- ----------
Deferred:
Federal............................. (1,041,000) (521,000) (220,000)
State............................... (188,000) (142,000) (61,000)
----------- ---------- ----------
(1,229,000) (663,000) (281,000)
----------- ---------- ----------
Provision for income taxes............ $ 3,979,000 $2,079,000 $1,493,000
=========== ========== ==========
</TABLE>
A reconciliation of the provision for income taxes from continuing
operations to the statutory rates is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal income taxes at statutory rates................ 35.0% 35.0% 35.0%
State franchise taxes, net of federal benefit.......... 5.8 6.0 6.0
Amortization of the excess purchase price over the fair
value of assets acquired............................. 0.2 0.4 0.5
Other.................................................. (1.0) (1.0) (0.9)
---- ---- ----
40.0% 40.4% 40.6%
==== ==== ====
</TABLE>
F-15
<PAGE> 109
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of temporary differences giving rise to the deferred income
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Deferred income tax assets (liabilities):
Allowance for credit losses....................... $2,908,000 $2,157,000
Deferred revenue.................................. 466,000 162,000
Other............................................. 162,000 (12,000)
---------- ----------
$3,536,000 $2,307,000
========== ==========
</TABLE>
11. RELATED PARTY TRANSACTIONS
In connection with its formation, the Company, Banner and Holdings, entered
into the Reorganization Agreement and certain other agreements (the "Financing
Agreement", the "Option Agreement", and the "Operating Agreement").
The Financing Agreement, as amended, grants the Company exclusive right to
provide financing to Banner customers for a term of fifteen years from the date
of the Reorganization and provides that any contracts purchased pursuant to this
Agreement will be at face value less a transaction fee, which is subject to
renegotiation at six month intervals. The Agreement also provides that for the
years ended December 31, 1996 and 1997, up to $1.5 million of contracts
purchased can be returned to Banner at amortized principal balance. The Company
can terminate the Financing Agreement at any time upon one year's prior written
notice to Banner.
In the accompanying consolidated financial statements the transaction fee
was computed based upon 1.6% of average net receivables in the Consumer Product
Portfolio prior to July 2, 1996, and 2.5% thereafter. During 1996, Banner sold
approximately $55 million of Consumer Product Receivables, net of $1.5 million
which the Company returned pursuant to the Financing Agreement.
Pursuant to the Option Agreement, Holdings granted the Company an option,
exercisable for a two-year period commencing one year from the date of the
Reorganization, to acquire all of the outstanding capital stock of Banner (the
"Option") at an exercise price equal to the book value of Banner for the month
ended immediately preceding the exercise. If the Company exercises the Option,
the exercise price is payable in cash or in shares of the Company's common
stock.
The Operating Agreement provides, among other things, that Banner, Holdings
or their affiliates are obligated to provide to the Company, and the Company is
obligated to utilize certain services, including accounting, management
information systems and employee benefits. If such services involve an
allocation of expenses, such allocation shall be made on a reasonable basis. To
the extent that such services directly relate to the finance portion of the
consumer products business contributed by Banner to the Company, or to the
extent that other costs are incurred by Banner, Holdings or their affiliates
that directly relate to the Company, the Company is obligated to pay Banner,
Holdings' or their affiliates; actual cost of providing such services or
incurring such costs. Employee benefit expenses are allocated to the Company
based on the ratio of actual payroll expenses of employees in the consumer
products business contributed by Banner to the Company compared to total actual
payroll expenses of Banner before such allocation. Accounting expenses are
allocated 50% to the Company. The operating costs of Banner's management
information systems function are allocated initially 50% to the Company for a
period of five years, subject to adjustment from time to time to reflect
changing costs and usage. Except for management information systems services,
the Operating Agreement continues until terminated by either the Company,
Holdings or Banner upon one year's prior written notice.
F-16
<PAGE> 110
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Termination may be made on a service-by-service basis or in total. Such
allocated expenses totaled $1,338,000, $1,000,000, and $559,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
In August 1996, following CFAC's initial public offering, CFAC, Central
Auto Sales, Inc., Central Consumer Finance Company and Banner entered into an
Agreement to Transfer Business Operations (the "Automobile Financing
Agreement"), under which CFAC sold its used car sales business to Banner for
approximately its net book value, or $865,000. Under the provisions of the
Automobile Financing Agreement, Banner will operate the used car sales business
while the Company will have the exclusive right for a fifteen year period to
provide financing for all cars that Banner sells or to purchase automobile
finance contracts generated by Banner. In addition, all financing extended by
the Company on automobiles sold by Banner will be with full recourse back to
Banner in the event of default by the customer. Accordingly, Banner will not
provide any dealers discount for cars sold pursuant to the Automobile Financing
Agreement.
12. PROFIT-SHARING PLAN
The Company participates along with other affiliated companies, in a
profit-sharing plan that covers substantially all employees who meet certain age
and length-of-service requirements. Annual contributions are contingent upon
current and accumulated profits and are at the sole discretion of the Board of
Directors. Profit-sharing expense allocated to the Company for the years ended
December 31, 1996, 1995 and 1994 was $27,000, $55,000 and $48,000, respectively.
13. STOCK OPTION PLAN
In connection with its initial public offering the Company adopted the 1996
Stock Option Plan, under which 700,000 shares of authorized common stock have
been reserved for issuance pursuant to terms and conditions as determined by the
Board of Directors. The options have a maximum duration of ten years and are
subject to certain vesting and cancellation provisions, and may not be granted
at less than the market value of the Company's Common Stock on the date of grant
of the option. During 1996, the Company granted options to acquire an aggregate
of 425,000 shares of common stock with exercise prices ranging from $12.00 to
$18.25 per share which approximates market value. As of December 31, 1996, no
options were exercisable.
In October 1995, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for employee stock compensation plans, but allows for the
continuation of the intrinsic value based method of accounting to measure
compensation cost prescribed by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25"). For companies electing
not to change their accounting, SFAS 123 requires pro-forma disclosures of
earnings and earnings per share as if the change in accounting provision of SFAS
123 has been adopted.
The Company has elected to continue to utilize the accounting method
prescribed by APB 25, under which no compensation cost has been recognized, and
adopt the disclosure requirements of SFAS 123. As a result, SFAS 123 has no
effect on the financial condition or results of operations of the Company at
December 31, 1996.
Had compensation cost for this plan been determined consistent with SFAS
123, the Company's net income and earnings per share would have been reduced to
the following pro forma amounts.
<TABLE>
<S> <C>
Net Income
As Reported.......................................... $5,879,000
Pro Forma............................................ $5,496,000
Primary EPS
As Reported.......................................... $ 0.95
Pro Forma............................................ $ 0.88
</TABLE>
F-17
<PAGE> 111
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following summarizes information about the stock option plan
outstanding as of December 31, 1996:
<TABLE>
<S> <C>
Range of exercise price...................................... $12.00 - $18.25
Number outstanding........................................... 425,000
Weighted average remaining contractual life.................. 9.5 years
Expected life of options..................................... 5 years
Risk-free interest rate...................................... 6.1%
Expected volatility.......................................... 51%
Expected dividend yield...................................... 0%
</TABLE>
14. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
During 1996, the Company adopted a Supplemental Executive Retirement Plan
(the "SERP Plan") which will provide supplemental retirement benefits to certain
key management employees. To vest in the SERP Plan, an employee must have at
least ten years of service with the Company, including five years subsequent to
the adoption of the plan.
The Supplemental Executive Retirement Plan, which is unfunded, expense for
the year ended December 31, 1996 amounted to approximately $80,000.
15. COMMITMENTS AND CONTINGENCIES
The Company is allocated 50% of the cost of various computer equipment
operating leases from Banner. These leases expire at various times from 1997
through 2001. The Company's stand-alone loan and travel centers are leased under
noncancelable operating leases that generally have two to five-year terms with
options to renew.
Aggregate minimum lease commitments under the location leases and one-half
of the computer equipment minimum lease commitments of Banner are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, BANNER OTHERS
---------------------------------------------------- ---------- ----------
<S> <C> <C>
1997................................................ $ 609,000 $1,212,000
1998................................................ 520,000 765,000
1999................................................ 384,000 444,000
2000................................................ 340,000 255,000
2001................................................ 222,000 157,000
Thereafter.......................................... 0 101,000
---------- ----------
$2,075,000 $2,934,000
========== ==========
</TABLE>
Aggregate rental expense for the years ended December 31, 1996, 1995 and
1994 were $1,039,000, $458,000 and $348,000, respectively.
Employment Agreement -- The Company has an agreement with the Chairman of
the Board of Directors for a period of five years at a base salary of $175,000
per year with eligibility to participate in the Company's executive compensation
plans. Any changes to the agreement require approval of the Board of Directors.
The Company is from time to time involved in routine litigation incidental
to the conduct of its business. Management of the Company believes that
litigation currently pending will not have a material adverse effect on the
Company's financial position or results of operations.
* * * * * *
F-18
<PAGE> 112
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Cash................................................................. $ 6,388 $ 5,848
Consumer Finance receivables, net.................................... 104,478 111,663
Automobile Finance receivables....................................... 7,375 8,728
Other receivables.................................................... 1,153 2,289
Prepaid expenses and other current assets............................ 3,461 1,673
Deferred income taxes................................................ 3,536 3,536
Property and equipment, net.......................................... 4,791 3,425
Intangible asset, net................................................ 8,565 8,725
-------- --------
Total assets.................................................... $ 139,747 $145,887
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable........................................................ $ 64,600 $ 74,024
Accrued expenses and other current liabilities....................... 9,087 8,708
Income taxes payable................................................. 325 952
Long term debt....................................................... 850 850
-------- --------
Total liabilities............................................... 74,862 84,534
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no
shares outstanding.............................................. -- --
Common stock, $.01 par value, 20,000,000 shares authorized;
7,277,000 shares issued and outstanding......................... 73 73
Paid-in capital.................................................... 47,903 47,903
Retained earnings.................................................. 16,909 13,377
-------- --------
Total stockholders' equity...................................... 64,885 61,353
-------- --------
Total liabilities and stockholders' equity................. $ 139,747 $145,887
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE> 113
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Revenues:
Interest income
Consumer product portfolio.......................................... $ 6,036 $ 6,364
Small loan portfolio................................................ 6,462 4,261
Automobile finance portfolio........................................ 825 602
Other............................................................... 2,583 418
------- -------
Total interest income.......................................... 15,906 11,645
------- -------
Travel services........................................................ 3,955 605
Transaction fees from affiliate........................................ 575 447
Other income........................................................... 5,596 2,337
------- -------
Total revenues................................................. $26,032 $15,034
======= =======
Costs and Expenses:
Operating expenses..................................................... $12,187 $ 4,380
Provision for credit losses............................................ 5,229 4,279
Interest expense....................................................... 2,874 2,482
------- -------
Total costs and expenses....................................... 20,290 11,141
------- -------
Income before taxes and discontinued operations.......................... 5,742 3,893
Income tax expense....................................................... 2,210 1,559
Loss from discontinued operations, (net of tax).......................... 0 (22)
------- -------
Net income..................................................... $ 3,532 $ 2,312
======= =======
Per Share Data:
Earnings per share from continuing operations.......................... $ 0.49 $ 0.45
Loss per share discontinued operations................................. 0.00 0.00
------- -------
Net income per share................................................... $ 0.49 $ 0.45
======= =======
Weighted average common shares outstanding............................. 7,277 5,150
======= =======
Supplementary net income per share..................................... $ 0.40
=======
Supplementary weighted average number of common shares outstanding..... 7,277
=======
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE> 114
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 3,532 $ 2,312
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 313 80
Provision for credit losses......................................... 5,229 4,279
Changes in assets and liabilities:
Prepaid expenses and other current assets........................... (1,788) (584)
Other receivables................................................... 1,136 0
Net assets of discontinued operations............................... 0 (252)
Accrued expenses and other current liabilities...................... (248) 237
------- -------
Net cash provided by operating activities...................... 8,174 6,072
------- -------
Cash flows from investing activities:
Installment contracts (originated and acquired) collected, net......... 3,309 (7,242)
Acquisition of travel companies........................................ -- (1,611)
Capital expenditures................................................... (1,519) (276)
------- -------
Net cash provided by (used in) investing activities............ 1,790 (9,129)
------- -------
Cash flows from financing activities:
Capital withdrawal..................................................... 0 (615)
Net proceeds (repayments of) notes payable............................. (9,424) 4,113
------- -------
Net cash provided by (used in) financing activities............ (9,424) 3,498
------- -------
Net increase in cash..................................................... 540 441
Cash, beginning of period................................................ 5,848 57
------- -------
Cash, end of period...................................................... $ 6,388 $ 498
======= =======
Cash paid during the period for:
Interest............................................................... $ 2,940 $ 2,396
======= =======
Income taxes........................................................... $ 2,837 $ 2,693
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE> 115
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The accompanying condensed consolidated financial statements of Central
Financial Acceptance Corporation ("CFAC") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation of the Company's financial
condition and operating results for the interim periods presented have been
included. Operating results for the quarter are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997. These
interim financial statements should be read in conjunction with the year ended
December 31, 1996 financial statements and notes contained therein, filed with
the Securities and Exchange Commission.
CFAC was formed in April 1996 and consummated its initial public offering
on July 2, 1996, when it sold 2.127 million shares of common stock, which
resulted in net proceeds to the Company of approximately $22.5 million CFAC was
a wholly owned subsidiary of Banner's Central Electric, Inc. Banner's Central
Electric, Inc. is wholly owned by Banner Holdings, Inc. ("Holdings") and is a
consumer products retailer that provides its customers with financing for the
merchandise it sells. On June 24, 1996, CFAC, Banner's Central Electric, Inc.
and Holdings entered into an agreement (the "Reorganization Agreement") whereby
Holdings contributed to Banner its investments in certain wholly owned
subsidiaries, along with the subsidiaries' operations, (the "Holdings
Subsidiaries") and Banner's Central Electric, Inc. contributed to CFAC its
investments in the Holdings Subsidiaries and the finance portion of its consumer
products business, and cash in such amount so as to leave CFAC with $500,000 of
cash on hand. Pursuant to the Reorganization Agreement, the intercompany
accounts between CFAC, Banner's Central Electric, Inc. and Holdings that arose
as a result of the Reorganization Agreement and from other transactions, except
with respect to income taxes, were forgiven and reclassified as stockholders'
equity.
In addition to the Reorganization Agreement, CFAC, Banner's Central
Electric, Inc. and Holdings entered into certain agreements for the purpose of
defining the ongoing relationships among them. The transactions and agreements
entered into pursuant to the Reorganization Agreement are referred to herein as
the "Reorganization." Management of CFAC believes that such agreements provide
for reasonable allocations of costs between the parties.
The reorganization was accounted for at historical cost in a manner similar
to a pooling of interests. The accompanying condensed consolidated financial
statements reflect the combined historical operations of CFAC and its
subsidiaries as if the Reorganization had taken place at the beginning of the
periods presented, except for the contribution of cash in such amount so as to
leave CFAC with $500,000 upon the Reorganization. CFAC and its subsidiaries, as
reorganized, are referred to herein as "Central" or the "Company." Banner's
Central Electric, Inc., including the operations of Banner's Central Electric,
Inc. that remain after contributing the finance portion of its consumer products
business to CFAC, is referred to herein as "Banner."
On August 1, 1996, the business of Central Auto Sales, Inc. (a wholly owned
subsidiary of CFAC) was sold to CFAC's parent company for net book value. The
condensed consolidated financial statements have been restated to reflect this
business as a discontinued operation. On May 30, 1997, Central Auto Sales, Inc.
stopped selling automobiles and closed its sales lot.
The Company (i) purchases and services consumer finance receivables
generated by the Company's customers for purchases of high quality brand name
consumer products, appliances and furniture sold by Banner, and by independent
retailers; (ii) provided financing for purchases of used automobiles sold by
Banner, (iii) provides small loans to its customers; (iv) originates and
services consumer finance receivables generated by the Company's customers for
purchases of airline tickets sold by the Company; and (v) provides
F-22
<PAGE> 116
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
insurance products and insurance premium financing to its customers. The
majority of the Company's business is focused in Southern California, and the
Company experiences the highest demand for its financial products and services
between October and December.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
See Note 2 of Notes to Consolidated Financial Statements in Central
Financial Acceptance Corporation's Annual Report on 10-K for the year ended
December 31, 1996.
3. ACQUISITIONS
During 1996, the Company acquired the business of, and assumed the
leasehold interests to 80 travel locations, and 10 automobile insurance agencies
for an aggregate purchase price of approximately $7.5 million. Such acquisitions
were accounted for as purchases and the results of their operation are not
material from a financial point of view, and have been included since the
applicable acquisition dates.
4. EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net income by the average
number of common shares outstanding during the periods using the treasury stock
method. Stock options were not considered as dilutive in the earnings per share
calculation since they have less than 3% effect in the aggregate or were
antidilutive.
Supplementary net income per share is based on the number of common shares
issued by the Company pursuant to the Reorganization and the number of shares
sold by the Company in its initial public offering, as if all such shares were
outstanding as of January 1, 1996, and also gives effect to a reduction of
interest expense, net of income tax expense, resulting from the reduction of
indebtedness upon application of the net proceeds of the proposed offering as if
it had occurred on January 1, 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards Number 128 (earnings per share) [SFAS 128] and Statement of
Financial Accounting Standards Number 129 (Disclosure of information about
Capital Structure) [SFAS 129]. The Company will be required to adopt SFAS 128
and SFAS 129 in fiscal year 1997. The Company does not expect that the adoption
of SFAS 128 and SFAS 129 will have a material effect on its financial position
or its results of operations in 1997.
5. FINANCE AND OTHER RECEIVABLES
<TABLE>
<CAPTION>
CONSUMER AUTOMOBILE
FINANCE RECEIVABLES FINANCE RECEIVABLES
------------------------ ------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1997 1996 1997 1996
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Gross receivables........................ $124,006 $134,477 $8,992 $ 11,002
Deferred interest........................ 11,293 14,775 1,617 2,274
-------- -------- ------ -------
Net receivable........................... 112,713 119,702 7,375 8,728
Deferred administrative fee &
insurance.............................. 875 1,253 -- --
Allowance for credit losses.............. 7,360 6,786 -- --
-------- -------- ------ -------
$104,478 $111,663 $7,375 $ 8,728
======== ======== ====== =======
</TABLE>
Other receivables consist of commissions receivables from automobile
insurance companies of $148,000 and $101,000 at June 30, 1997 and December 31,
1996, respectively, receivables from insurance company for insurance products
sold of $34,000 and $2,188,000 at June 30, 1997 and December 31, 1996,
respectively, and $971,000 receivables from an affiliate at June 30, 1997.
F-23
<PAGE> 117
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE
Notes payable consist of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
Bank of America line of credit........................ $ -- $ 35,208
Wells Fargo line of credit............................ 64,600 38,816
------- -------
$ 64,600 $ 74,024
======= =======
</TABLE>
The Company had a credit agreement with Bank of America National Trust and
Savings Association (the "Bank of America Line of Credit") that, as amended,
provided for the issuance of notes up to $60,000,000, subject to an allowable
borrowing base. The Bank of America Line of Credit was repaid on June 13, 1997.
The Company had a credit agreement with Wells Fargo Bank National
Association that provided for the issuance of notes up to $50,000,000 subject to
an allowable borrowing base. The Wells Fargo line of credit was repaid on June
13, 1997.
The Company entered into a credit agreement with several banks and Wells
Fargo Bank National Association, as Agent, (the "Wells Fargo Line of Credit") on
June 13, 1997 that provides for the issuance of notes up to $100,000,000 subject
to an allowable borrowing base. The amounts outstanding under these notes bear
interest at rates that are determined by the type of borrowing. Borrowings under
the notes are collateralized by all receivables in the Company. The Wells Fargo
Line of Credit expires on June 12, 2000. The credit facility contains certain
restrictive covenants that require, among other things, the maintenance of
certain financial ratios and amounts. The amount of unused credit under the
facility was limited by the allowable borrowing base and was approximately
$13,730,000 at June 30, 1997.
7. LONG-TERM DEBT
Long-term debt consists of a promissory note payable to a bank that bears
interest at the bank's reference rate. Interest is payable monthly and the
principal is due July 1998. The note is secured by a deed of trust.
8. RELATED PARTY TRANSACTIONS
In connection with its formation, the Company, Banner and Holdings, entered
into the Reorganization Agreement and certain other agreements (the "Financing
Agreement", the "Option Agreement", and the "Operating Agreement").
The Financing Agreement, as amended, grants the Company exclusive right to
provide financing to Banner customers for a term of fifteen years from the date
of the Reorganization and provides that any contracts purchased pursuant to this
Agreement will be at face value less a transaction fee, which is subject to
renegotiation at six month intervals. The Agreement also provides that for the
years ended December 31, 1996 and 1997, up to $1.5 million of contracts
purchased can be returned to Banner at amortized principal balance. The Company
can terminate the Financing Agreement at any time upon one year's prior written
notice to Banner. Effective July 1, 1997 the Company and Banner have entered
into negotiations to amend the Financing Agreement to permit the Company to
return in excess of the $1.5 million of contracts purchased from Banner for the
year ended December 31, 1997.
In the accompanying condensed consolidated financial statements the
transaction fee was computed based upon 1.6% of average net receivables in the
Consumer Product Portfolio prior to July 2, 1996, and 2.5% thereafter. During
the first six months ended June 30, 1997, Banner sold approximately $19.5
million of
F-24
<PAGE> 118
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Consumer Product Receivables, net of $1.4 million which the Company returned
pursuant to the Financing Agreement.
In August 1996, following CFAC's initial public offering, CFAC, Central
Auto Sales, Inc., Central Consumer Finance Company and Banner entered into an
Agreement to Transfer Business Operations (the "Automobile Financing
Agreement"), under which CFAC sold its used car sales business to Banner for
approximately its net book value, or $865,000. Under the provisions of the
Automobile Financing Agreement, Banner will operate the used car sales business
while the Company will have the exclusive right for a fifteen-year period to
provide financing for all cars that Banner sells or to purchase automobile
finance contracts generated by Banner. In addition, all financing extended by
the Company on automobiles sold by Banner will be with full recourse back to
Banner in the event of default by the customer. Accordingly, Banner will not
provide any dealers discount for cars sold pursuant to the Automobile Financing
Agreement. On May 30, 1997, Central Auto Sales Inc. discontinued its business.
Pursuant to the Option Agreement, Holdings granted the Company an option,
exercisable for a two-year period commencing one year from the date of the
Reorganization, to acquire all of the outstanding capital stock of Banner (the
"Option") at an exercise price equal to the book value of Banner for the month
ended immediately preceding the exercise. If the Company exercises the Option,
the exercise price is payable in cash or in shares of the Company's common
stock.
The Operating Agreement provides, among other things, that Banner, Holdings
or their affiliates are obligated to provide to the Company, and the Company is
obligated to utilize, certain services, including accounting, management
information systems and employee benefits. If such services involve an
allocation of expenses, such allocation shall be made on a reasonable basis. To
the extent that such services directly relate to the finance portion of the
consumer products business contributed by Banner to the Company, or to the
extent that other costs are incurred by Banner, Holdings or their affiliates
that directly relate to the Company, the Company is obligated to pay Banner's,
Holdings' or their affiliates' actual cost of providing such services or
incurring such costs. Employee benefit expenses are allocated to the Company
based on the ratio of actual payroll expenses of employees in the consumer
products business contributed by Banner to the Company compared to total actual
payroll expenses of Banner before such allocation. Accounting expenses are
allocated 50% to the Company. The operating costs of Banner's management
information systems function are allocated initially 50% to the Company for a
period of five years, subject to adjustment from time to time to reflect
changing costs and usage. Except for management information systems services,
the Operating Agreement continues until terminated by either the Company,
Holdings or Banner upon one year's prior written notice. Termination may be made
on a service-by-service basis or in total.
F-25
<PAGE> 119
======================================================
No dealer, salesperson or other person has been authorized to give any
information or to make representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or any of the Underwriters. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstance
create an implication that the information contained herein is correct as of any
time subsequent to the date hereof. This Prospectus does not constitute an offer
or solicitation by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
Summary Selected Consolidated
Financial Data...................... 11
Risk Factors.......................... 13
Use of Proceeds....................... 22
Accounting Treatment.................. 23
Capitalization........................ 24
Selected Consolidated Financial
Data................................ 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
Business.............................. 40
Management............................ 48
Security Ownership of Certain
Beneficial Owners and Management.... 57
Description of the Trust Preferred
Securities.......................... 58
Description of Junior Subordinated
Debentures.......................... 70
Book-Entry Issuance................... 80
Description of Guarantee.............. 81
Expense Agreement..................... 84
Relationship Among the Trust Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee........ 84
Certain Federal Income Tax
Consequences........................ 85
ERISA Considerations.................. 88
Underwriting.......................... 90
Legal Matters......................... 91
Experts............................... 91
Available Information................. 92
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
1,750,000 TRUST
PREFERRED SECURITIES
CFAC CAPITAL I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25
PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
LOGO
FINANCIAL ACCEPTANCE
CORPORATION
------------------------
PROSPECTUS
------------------------
SUTRO & CO. INCORPORATED
, 1997
======================================================
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 15,247
NASD fee.......................................................................... 5,531
Nasdaq fees....................................................................... 9,750
Trustees' fees and expenses....................................................... 11,000
Legal fees and expenses........................................................... 135,000
Blue Sky fees and expenses........................................................ 10,000
Accounting fees and expenses...................................................... 40,000
Printing expenses................................................................. 40,000
Miscellaneous expenses............................................................ 33,472
Total................................................................... $300,000
</TABLE>
All of the above items except the registration fee and NASD fee are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations such as the Registrant are entitled, under certain circumstances,
to be indemnified against all expenses and liabilities (including attorneys'
fees) incurred by them as a result of suits brought against them in their
capacity as a director or officer, if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjusted to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. Article Eight of the
Registrant's Certificate of Incorporation and Article Six of the Registrant's
By-laws entitles officers, directors and controlling persons of the Registrant
to indemnification to the full extent permitted by Section 145 of the DGCL, as
the same may be supplemented or amended from time to time.
Article Seven of the Registrant's Certificate of Incorporation provides
that no director shall have any personal liability to the Registrant or its
stockholders for any monetary damages for breach of fiduciary duty as a
director, provided that such provision does not limit or eliminate the liability
of any director (i) for breach of such director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (involving certain unlawful dividends or stock
repurchases) or (iv) for any transaction from which such director derived an
improper personal benefit. Amendment to such article does not affect the
liability of any director for any act or omission occurring prior to the
effective time of such amendment.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with Registrant's formation in April 1996, as of June 24,
1996, the Registrant issued 5,150,000 shares of Common Stock to Banner's Central
Electric, Inc. in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.
II-1
<PAGE> 121
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<S> <C> <C>
1.1 Form of Underwriting Agreement.*
2.1 Reorganization Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24,
1996(1)
3.1 Certificate of Incorporation of Central Financial Acceptance Corporation.(1)
3.2 By-laws of Central Financial Acceptance Corporation.(1)
4.1 Form of Subordinated Indenture dated , 1997 to be entered into
between the Registrant and Wilmington Trust Company, as Indenture Trustee.
4.2 Form of Officers' Certificate and Company Order, dated , 1997.
4.3 Form of Junior Subordinated Debenture (included as part of Exhibit 4.1).
4.4 Certificate of Trust of CFAC Capital I.
4.5 Trust Agreement of CFAC Capital I dated as of September 26, 1997.
4.6 Form of Amended and Restated Trust Agreement of CFAC Capital I, dated as of
1997.
4.7 Form of Trust Preferred Certificate of CFAC Capital I (included as an exhibit to
Exhibit 4.6).
4.8 Form of Common Securities Certificate of CFAC Capital I (included as an exhibit
to Exhibit 4.6).
4.9 Form of Trust Preferred Securities Guarantee Agreement.
4.10 Form of Agreement as to Expenses and Liabilities (included as an exhibit to
Exhibit 4.6).
5.1 Opinion of Manatt, Phelps & Phillips, LLP.*
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*
8.1 Opinion and Consent of Manatt, Phelps & Phillips, LLP, counsel to Central
Financial Acceptance Corporation, as to certain federal income tax matters.*
10.1 1996 Stock Option Plan dated as of June 24, 1996.+
10.2 Indemnification Agreement between Central Financial Acceptance Corporation and
certain directors and officers of the Company.(1)+
10.3 Employment Agreement between Central Financial Acceptance Corporation and Gary M.
Cypres dated as of June 24, 1996.(1)+
10.4 Financing Agreement between Central Installment Credit Corporation, Banner's
Central Electric, Inc., Central Ram, Inc. and Banner Holdings, Inc. dated as of
June 24, 1996.(1)
10.5 Option Agreement between Central Financial Acceptance Corporation, Banner's
Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24, 1996.
10.6 Operating Agreement between Central Financial Acceptance Corporation, Banner's
Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24, 1996.
10.7 Tax Sharing Agreement between Central Financial Acceptance Corporation, Banner's
Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24, 1996.
10.8 Indemnification Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24,
1996.
10.9 Indemnification Agreement dated June 24, 1996 between Central Financial
Acceptance Corporation and Banner Holdings, Inc.
10.10 Reserved
10.11 Reserved
10.12 Central Financial Acceptance Corporation Supplemental Executive Retirement Plan
dated as of June 24, 1996.+
10.13 Central Financial Acceptance Corporation Executive Deferred Salary and Bonus Plan
dated as of June 24, 1996.+
10.14 Reserved
10.15 Reserved
</TABLE>
II-2
<PAGE> 122
<TABLE>
<S> <C> <C>
10.16 Reserved
10.17 Reserved
10.18 Reserved
10.19 Reserved
10.20 Reserved
10.21 Reserved
10.22 Adoption Agreement for the Qualified Benefits, Inc. Regional Prototype
Non-Standardized Profit Sharing Plan and Trust effective as of November 1,
1989.(1)+
10.23 Reserved
10.24 Reserved
10.25 Reserved
10.26 Employment Agreement between the Company and Anthony Fortunato dated October 25,
1996.(2)+
10.27 Employment Agreement between the Company and Gerard T. McMahon dated August 30,
1996.(2)+
10.28 Reserved
10.29 Agreement to Transfer Business Operations among Banner's Central Electric, Inc.,
Central Consumer Finance Company, Central Financial Acceptance Corporation and
Central Auto Sales, Inc. dated as of July 31, 1996.(2)
10.30 Reserved
10.31 Amendment One to Financing Agreement between Central Installment Credit
Corporation, Banner's Central Electric, Inc., Central Ram, Inc. and Banner
Holdings, Inc., dated as of July 1, 1996.(2)
10.34 Revolving Loan Agreement, dated as of June 13, 1997, by and among the Company,
each Lender who is named therein or who may thereafter become a party to the
Revolving Loan Agreement and Wells Fargo Bank, National Association, as Agent and
Arranger and Notes executed by the Company with each of the Lenders.(3)
10.35 Security Agreement, dated as of June 13, 1997, by and among the Company and each
of the Persons listed on the signature pages thereto, together with other Persons
who may become a party thereto, jointly and severally in favor of Wells Fargo
Bank, National Association, as Agent.(3)
10.36 Pledge Agreement, dated as of June 13, 1997, by and among Banner Holdings, Inc.
Banner's Central Electric, Inc., the Company and each of the Persons listed on
the signature pages thereto, together with other Persons who may become a party
thereto, jointly and severally in favor of Wells Fargo Bank, National Association
as Agent under the Revolving Loan Agreement, and in favor of each of the Lenders
named therein.(3)
10.37 Trademark Collateral Assignment, dated as of June 13, 1997, by Banner Holdings,
Inc. each of the Persons listed on the signature pages thereto, together with
other Persons who may become a party thereto, jointly and severally in favor of
Wells Fargo Bank, National Association, as Agent for the benefit of the Lenders
that are or become a party to the Revolving Loan Agreement.(3)
10.38 Subsidiary Guaranty, dated as of June 13, 1997, by each of the Persons listed on
the signature pages thereto, together with each other Person who may become a
party thereto, jointly and severally in favor of Wells Fargo Bank, National
Association, as Agent for the benefit of the Lenders that are a party to the
Revolving Loan Agreement.(3)
11.1 Statement re Computation of Per Share Earnings.
12.1 Statement re Computation of Ratios.
21.1 Subsidiaries of the Registrants.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP.
</TABLE>
II-3
<PAGE> 123
<TABLE>
<S> <C> <C>
23.6 Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1 above).
23.7 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above)
24.1 A power of attorney is set forth on the signature page of the Registration
Statement.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee
under the Subordinated Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee
under the Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee
under the Trust Preferred Securities Guarantee Agreement.
27.1 Financial Data Schedule of CFAC Capital I
</TABLE>
- ---------------
* To be filed by Amendment.
(1) Incorporated by reference to exhibits filed with the Commission in the
Company's Registration Statement on Form S-1 (Registration No. 333-3790).
(2) Incorporated by reference to exhibits filed with the Commission in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
(3) Incorporated by reference to exhibits filed with the Commission in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit.
ITEM 17. UNDERTAKINGS
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(i) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Commerce, State of
California, on October 3, 1997.
CENTRAL FINANCIAL ACCEPTANCE
CORPORATION
By /s/ GARY M. CYPRES
------------------------------------
Gary M. Cypres
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Central Financial Acceptance
Corporation, do hereby severally constitute and appoint Gary M. Cypress and Neal
E. Gower and each of them singly, our true and lawful attorneys and agents, to
do any and all things and acts in our names in the capacities indicated below
and to execute any all instruments for us and in our names in the capacities
indicated below which said persons, or either of them, may deem necessary or
advisable to enable Central Financial Acceptance Corporation to comply with the
Securities Act of 1993, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the offering
contemplated by this Registration Statement on Form S-1, including specifically,
but not limited to, power and authority to sign for us or any of us in our names
in the capacities indicated below and any and all amendments, including post-
effective amendments to this Registration Statement and any Rule 462(b)
registration statement or amendments thereto; and we hereby ratify and confirm
all that said persons, or either of them, shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------ -----------------
<C> <S> <C>
/s/ GARY M. CYPRES Chairman of the Board of October 3, 1997
- ----------------------------------------------- Directors, Chief
Gary M. Cypres Executive Officer,
President and Chief
Financial Officer
(Principal Executive
Officer and Principal
Financial Officer)
/s/ SALVATORE J. CALTAGIRONE Director October 3, 1997
- -----------------------------------------------
Salvatore J. Caltagirone
/s/ JOSE DE JESUS LEGASPI Director October 1, 1997
- -----------------------------------------------
Jose de Jesus Legaspi
/s/ WILLIAM SWEET Director October 1, 1997
- -----------------------------------------------
William Sweet
/s/ NEAL E. GOWER Principal Accounting October 3, 1997
- ----------------------------------------------- Officer
Neal E. Gower
</TABLE>
II-5
<PAGE> 125
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Commerce, State of
California, on October 3, 1997.
CFAC CAPITAL I
By: /s/ GARY M. CYPRES
------------------------------------
Gary M. Cypres,
Trustee
By: /s/ NEAL E. GOWER
------------------------------------
Neal E. Gower,
Trustee
By: /s/ STEVEN D. OLSON
------------------------------------
Steven D. Olson,
Trustee
II-6
<PAGE> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement*..............................................
2.1 Reorganization Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June
24, 1996(1)..................................................................
3.1 Certificate of Incorporation of Central Financial Acceptance
Corporation(1)...............................................................
3.2 By-laws of Central Financial Acceptance Corporation(1).......................
4.1 Form of Subordinated Indenture dated , 1997 to be entered into
between the Registrant and Wilmington Trust Company, as Indenture Trustee....
4.2 Form of Officers' Certificate and Company Order, dated , 1997....
4.3 Form of Junior Subordinated Debenture (included as part of Exhibit 4.1)......
4.4 Certificate of Trust of CFAC Capital I.......................................
4.5 Trust Agreement of CFAC Capital I dated as of September 26, 1997.............
4.6 Form of Amended and Restated Trust Agreement of CFAC Capital I, dated as of
, 1997........................................................
4.7 Form of Trust Preferred Certificate of CFAC Capital I (included as an exhibit
to Exhibit 4.6)..............................................................
4.8 Form of Common Securities Certificate of CFAC Capital I (included as an
exhibit to Exhibit 4.6)......................................................
4.9 Form of Trust Preferred Securities Guarantee Agreement.......................
4.10 Form of Agreement as to Expenses and Liabilities (included as an exhibit to
Exhibit 4.6).................................................................
5.1 Opinion of Manatt, Phelps & Phillips, LLP*...................................
5.2 Opinion and Consent of Richards, Layton & Finger, P.A.*......................
8.1 Opinion and Consent of Manatt, Phelps & Phillips, LLP, counsel to Central
Financial Acceptance Corporation, as to certain federal income tax
matters*.....................................................................
10.1 1996 Stock Option Plan dated as of June 24, 1996+............................
10.2 Indemnification Agreement between Central Financial Acceptance Corporation
and certain directors and officers of the Company(1)+........................
10.3 Employment Agreement between Central Financial Acceptance Corporation and
Gary M. Cypres dated as of June 24, 1996(1)+.................................
10.4 Financing Agreement between Central Installment Credit Corporation, Banner's
Central Electric, Inc., Central Ram, Inc. and Banner Holdings, Inc. dated as
of June 24, 1996(1)..........................................................
10.5 Option Agreement between Central Financial Acceptance Corporation, Banner's
Central Electric, Inc. and Banner Holdings, Inc. dated as of June 24, 1996...
10.6 Operating Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June
24, 1996.....................................................................
10.7 Tax Sharing Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June
24, 1996.....................................................................
10.8 Indemnification Agreement between Central Financial Acceptance Corporation,
Banner's Central Electric, Inc. and Banner Holdings, Inc. dated as of June
24, 1996.....................................................................
10.9 Indemnification Agreement dated June 24, 1996 between Central Financial
Acceptance Corporation and Banner Holdings, Inc..............................
10.10 Reserved.....................................................................
10.11 Reserved.....................................................................
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
10.12 Central Financial Acceptance Corporation Supplemental Executive Retirement
Plan dated as of June 24, 1996+..............................................
10.13 Central Financial Acceptance Corporation Executive Deferred Salary and Bonus
Plan dated as of June 24, 1996+..............................................
10.14 Reserved.....................................................................
10.15 Reserved.....................................................................
10.16 Reserved.....................................................................
10.17 Reserved.....................................................................
10.18 Reserved.....................................................................
10.19 Reserved.....................................................................
10.20 Reserved.....................................................................
10.21 Reserved.....................................................................
10.22 Adoption Agreement for the Qualified Benefits, Inc. Regional Prototype
Non-Standardized Profit Sharing Plan and Trust effective as of November 1,
1989(1)+.....................................................................
10.23 Reserved.....................................................................
10.24 Reserved.....................................................................
10.25 Reserved.....................................................................
10.26 Employment Agreement between the Company and Anthony Fortunato dated October
25, 1996(2)+.................................................................
10.27 Employment Agreement between the Company and Gerard T. McMahon dated August
30, 1996(2)+.................................................................
10.28 Reserved.....................................................................
10.29 Agreement to Transfer Business Operations among Banner's Central Electric,
Inc., Central Consumer Finance Company, Central Financial Acceptance
Corporation and Central Auto Sales, Inc. dated as of July 31, 1996(2)........
10.30 Reserved.....................................................................
10.31 Amendment One to Financing Agreement between Central Installment Credit
Corporation, Banner's Central Electric, Inc., Central Ram, Inc. and Banner
Holdings, Inc., dated as of July 1, 1996(2)..................................
10.34 Revolving Loan Agreement, dated as of June 13, 1997, by and among the
Company, each Lender who is named therein or who may thereafter become a
party to the Revolving Loan Agreement and Wells Fargo Bank, National
Association, as Agent and Arranger and Notes executed by the Company with
each of the Lenders(3).......................................................
10.35 Security Agreement, dated as of June 13, 1997, by and among the Company and
each of the Persons listed on the signature pages thereto, together with
other Persons who may become a party thereto, jointly and severally in favor
of Wells Fargo Bank, National Association, as Agent(3).......................
10.36 Pledge Agreement, dated as of June 13, 1997, by and among Banner Holdings,
Inc. Banner's Central Electric, Inc., the Company and each of the Persons
listed on the signature pages thereto, together with other Persons who may
become a party thereto, jointly and severally in favor of Wells Fargo Bank,
National Association as Agent under the Revolving Loan Agreement, and in
favor of each of the Lenders named therein(3)................................
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------------------------------------------------------------------------- ----
<C> <S> <C>
10.37 Trademark Collateral Assignment, dated as of June 13, 1997, by Banner
Holdings, Inc. each of the Persons listed on the signature pages thereto,
together with other Persons who may become a party thereto, jointly and
severally in favor of Wells Fargo Bank, National Association, as Agent for
the benefit of the Lenders that are or become a party to the Revolving Loan
Agreement(3).................................................................
10.38 Subsidiary Guaranty, dated as of June 13, 1997, by each of the Persons listed
on the signature pages thereto, together with each other Person who may
become a party thereto, jointly and severally in favor of Wells Fargo Bank,
National Association, as Agent for the benefit of the Lenders that are a
party to the Revolving Loan Agreement(3).....................................
11.1 Statement re Computation of Per Share Earnings...............................
12.1 Statement re Computation of Ratios...........................................
21.1 Subsidiaries of the Registrants..............................................
23.1 Consent of Arthur Andersen LLP...............................................
23.2 Consent of Deloitte & Touche LLP.............................................
23.6 Consent of Manatt, Phelps & Phillips, LLP (included in Exhibit 5.1 above)....
23.7 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2 above)...
24.1 A power of attorney is set forth on the signature page of the Registration
Statement....................................................................
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Subordinated Indenture.....................................
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement.......................
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Trust Preferred Securities Guarantee Agreement.............
27.1 Financial Data Schedule of CFAC Capital I....................................
</TABLE>
- ---------------
* To be filed by Amendment.
(1) Incorporated by reference to exhibits filed with the Commission in the
Company's Registration Statement on Form S-1 (Registration No. 333-3790).
(2) Incorporated by reference to exhibits filed with the Commission in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
(3) Incorporated by reference to exhibits filed with the Commission in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit.
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
TO
WILMINGTON TRUST COMPANY
TRUSTEE
------------------------------------------
JUNIOR SUBORDINATED INDENTURE
DATED AS OF OCTOBER __, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
.....................................................................................................1
Section 1.1. Definitions...............................................................................1
Section 1.2. Compliance Certificate and Opinions.......................................................9
Section 1.3. Forms of Documents Delivered to Trustee..................................................10
Section 1.4. Acts of Holders..........................................................................11
Section 1.5. Notices, Etc. to Trustee and Company.....................................................13
Section 1.6. Notice to Holders; Waiver................................................................13
Section 1.7. Conflict with Trust Indenture Act........................................................13
Section 1.8. Effect of Headings and Table of Contents.................................................14
Section 1.9. Successors and Assigns...................................................................14
Section 1.10. Separability Clause......................................................................14
Section 1.11. Benefits of Indenture....................................................................14
Section 1.12. Governing Law............................................................................14
Section 1.13. Non-Business Days........................................................................14
ARTICLE II SECURITY FORMS.......................................................................................15
Section 2.1. Forms Generally..........................................................................15
Section 2.2. Form of Face of Security.................................................................15
Section 2.3. Form of Reverse of Security..............................................................18
Section 2.4. Additional Provisions Required in Global Security........................................21
Section 2.5. Form of Trustee's Certificate of Authentication..........................................22
ARTICLE III THE SECURITIES.......................................................................................22
Section 3.1. Title and Terms..........................................................................22
Section 3.2. Denominations............................................................................25
Section 3.3. Execution, Authentication, Delivery and Dating...........................................25
Section 3.4. Temporary Securities.....................................................................26
Section 3.5. Registration, Transfer and Exchange......................................................27
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities.........................................28
Section 3.7. Payment of Interest; Interest Rights Preserved...........................................29
Section 3.8. Persons Deemed Owners....................................................................31
Section 3.9. Cancellation.............................................................................31
Section 3.10. Computation of Interest..................................................................31
Section 3.11. Deferrals of Interest Payment Dates......................................................31
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 3.12. Right of Set-Off.........................................................................32
Section 3.13. Agreed Tax Treatment.....................................................................33
Section 3.14. Shortening of Stated Maturity............................................................33
Section 3.15. CUSIP Numbers............................................................................33
ARTICLE IV SATISFACTION AND DISCHARGE...........................................................................33
Section 4.1. Satisfaction and Discharge of Indenture..................................................33
Section 4.2. Application of Trust Money...............................................................34
ARTICLE V REMEDIES.............................................................................................35
Section 5.1. Events of Default........................................................................35
Section 5.2. Acceleration of Maturity; Rescission and Annulment.......................................36
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee..........................37
Section 5.4. Trustee May File Proofs of Claim.........................................................38
Section 5.5. Trustee May Enforce Claim Without Possession of Securities...............................39
Section 5.6. Application of Money Collected...........................................................39
Section 5.7. Limitation on Suits......................................................................39
Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest;
Direct Action by Holders of Preferred Securities.........................................40
Section 5.9. Restoration of Rights and Remedies.......................................................40
Section 5.10. Rights and Remedies Cumulative...........................................................41
Section 5.11. Delay or Omission Not Waiver.............................................................41
Section 5.12. Control by Holders.......................................................................41
Section 5.13. Waiver of Past Defaults..................................................................41
Section 5.14. Undertaking for Costs....................................................................42
Section 5.15. Waiver of Usury, Stay or Extension Laws..................................................42
ARTICLE VI THE TRUSTEE..........................................................................................43
Section 6.1. Certain Duties and Responsibilities......................................................43
Section 6.2. Notice of Defaults.......................................................................44
Section 6.3. Certain Rights of Trustee................................................................44
Section 6.4. Not Responsible for Recitals or Issuance of Securities...................................45
Section 6.5. May Hold Securities......................................................................45
Section 6.6. Money Held in Trust......................................................................46
Section 6.7. Compensation and Reimbursement...........................................................46
Section 6.8. Disqualification; Conflicting Interests..................................................46
Section 6.9. Corporate Trustee Required; Eligibility..................................................47
Section 6.10. Resignation and Removal; Appointment of Successor........................................47
Section 6.11. Acceptance of Appointment by Successor...................................................49
Section 6.12. Merger, Conversion, Consolidation or Succession to Business..............................50
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 6.13. Preferential Collection of Claims Against Company........................................50
Section 6.14. Appointment of Authenticating Agent......................................................50
ARTICLE VII HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND COMPANY................................................................................52
Section 7.1. Company to Furnish Trustee Names and Addresses of Holders................................52
Section 7.2. Preservation of Information, Communications to Holders...................................52
Section 7.3. Reports by Trustee.......................................................................53
Section 7.4. Reports by Company.......................................................................53
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE.................................................................................54
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.....................................54
Section 8.2. Successor Corporation Substituted........................................................54
ARTICLE IX SUPPLEMENTAL INDENTURES..............................................................................55
Section 9.1. Supplemental Indentures without Consent of Holders.......................................55
Section 9.2. Supplemental Indentures with Consent of Holders..........................................56
Section 9.3. Execution of Supplemental Indentures.....................................................58
Section 9.4. Effect of Supplemental Indentures........................................................58
Section 9.5. Conformity with Trust Indenture Act......................................................58
Section 9.6. Reference in Securities to Supplemental Indentures.......................................58
ARTICLE X COVENANTS............................................................................................59
Section 10.1. Payment of Principal, Premium and Interest...............................................59
Section 10.2. Maintenance of Office or Agency..........................................................59
Section 10.3. Money for Security Payments to be Held in Trust..........................................59
Section 10.4. Statement as to Compliance...............................................................61
Section 10.5. Waiver of Certain Covenants..............................................................61
Section 10.6. Additional Sums..........................................................................61
Section 10.7. Additional Covenants.....................................................................62
ARTICLE XI REDEMPTION OF SECURITIES.............................................................................63
Section 11.1. Applicability of This Article............................................................63
Section 11.2. Election to Redeem; Notice to Trustee....................................................63
Section 11.3. Selection of Securities to be Redeemed...................................................63
Section 11.4. Notice of Redemption.....................................................................64
Section 11.5. Deposit of Redemption Price..............................................................65
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Section 11.6. Payment of Securities Called for Redemption..............................................65
Section 11.7. Right of Redemption of Securities Initially Issued to a CFAC Trust.......................65
ARTICLE XII SINKING FUNDS...................................................................................................66
Section 12.1. Applicability of Article.................................................................66
Section 12.2. Satisfaction of Sinking Fund Payments with Securities....................................66
Section 12.3. Redemption of Securities for Sinking Fund................................................66
ARTICLE XIII SUBORDINATION OF SECURITIES....................................................................................68
Section 13.1. Securities Subordinate to Senior and Subordinated Debt...................................68
Section 13.2. Payment Over of Proceeds Upon Dissolution, Etc...........................................68
Section 13.3. Prior Payment to Senior and Subordinated Debt Upon Acceleration of
Securities...............................................................................69
Section 13.4. No Payment When Senior and Subordinated Debt in Default..................................70
Section 13.5. Payment Permitted If No Default..........................................................71
Section 13.6. Subrogation to Rights of Holders of Senior and Subordinated Debt.........................71
Section 13.7. Provisions Solely to Define Relative Rights..............................................71
Section 13.8. Trustee to Effectuate Subordination......................................................72
Section 13.9. No Waiver of Subordination Provisions....................................................72
Section 13.10. Notice to Trustee........................................................................73
Section 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent...........................73
Section 13.12. Trustee Not Fiduciary for Holders of Senior and Subordinated Debt........................74
Section 13.13. Rights of Trustee as Holder of Senior and Subordinated Debt;
Preservation of Trustee's Rights.........................................................74
Section 13.14. Article Applicable to Paying Agents......................................................74
Section 13.15. Certain Conversions or Exchanges Deemed Payment..........................................74
</TABLE>
iv
<PAGE> 6
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of October __, 1997.
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C> <C>
Section310 (a) (1), (2) and (5)........................................... Not Applicable
(a) (3)........................................................ Not Applicable
(a) (4)........................................................ Not Applicable
(b)............................................................ 6.8
............................................................... 6.10
(c)............................................................ Not Applicable
Section311 (a)............................................................ 6.13(a)
(b)............................................................ 6.13(b b) (2)
............................................................... 7.3(a) (2)
............................................................... 7.3(a) (2)
Section312 (a)............................................................ 7.1
............................................................... 7.2(a)
(b)............................................................ 7.2(b)
(c)............................................................ 7.2(c)
Section313 (a)............................................................ 7.3(a)
(b)............................................................ 7.3(b)
(c)............................................................ 7.3(a), 7.3(b)
(d)............................................................ 7.3(c)
Section314 (a) (1), (2) and (3)........................................... 7.4
(a) (4)........................................................ 10.5
(b)............................................................ Not Applicable
(c) (1)........................................................ 1.2
(c) (2)........................................................ 1.2
(c) (3)........................................................ Not Applicable
(d)............................................................ Not Applicable
(e)............................................................ 1.2
(f)............................................................ Not Applicable
Section315 (a)............................................................ 6.1(a)
(b)............................................................ 6.2
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
----------- -------
<S> <C> <C>
............................................................... 7.3(a) (6)
(c)............................................................ 6.1(b)
(d)............................................................ 6.1(c)
(d) (1)........................................................ 6.1(a) (1)
(d) (2)........................................................ 6.1(c) (2)
(d) (3)........................................................ 6.1(c) (3)
(e)............................................................ 5.14
Section316 (a)............................................................ 1.1
(a) (1) (A).................................................... 5.12
(a) (1) (B).................................................... 5.13
(a) (2)........................................................ Not Applicable
(b)............................................................ 5.8
(c)............................................................ 1.4(f)
Section317 (a) (1)........................................................ 5.3
(a) (2)........................................................ 5.4
(b)............................................................ 10.3
Section318 (a)............................................................ 1.7
</TABLE>
- ----------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Junior Subordinated Indenture.
<PAGE> 8
JUNIOR SUBORDINATED INDENTURE, dated as of October __, 1997, between
CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation (hereinafter
called the "Company") having its principal office at 5480 East Ferguson Drive,
Commerce, California 90022, and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "CFAC Trust,"
and, collectively, the "CFAC Trusts") of preferred trust interests in such
Trusts (the Preferred Securities") and common interests in such Trusts (the
"Common Securities" and, collectively with the Preferred Securities, the Trust
Securities), and to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted
<PAGE> 9
accounting principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles which are generally accepted at
the date or time of such computation; provided, that when two or more principles
are so generally accepted, it shall mean that set of principles consistent with
those in use by the Company; and
(4) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and which shall accrue at the rate
per annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which a CFAC Trust has become subject from time to
time as a result of a Tax Event.
"Administrative Trustee" means, in respect of any CFAC Trust, each
Person identified as an "Administrative Trustee" or an "Administrative Agent" in
the related Amended and Restated Trust Agreement, solely in such Person's
capacity as Administrative Trustee or an Administrative Agent, as the case may
be, of such CFAC Trust under such Amended and Restated Trust Agreement and not
in such Person's individual capacity, or any successor administrative trustee or
successor administrative agent, as the case may be, appointed as therein
provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, no CFAC Trust to which
Securities have been issued shall be deemed to be an Affiliate of the Company.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Allocable Amounts," when used with respect to any Senior and
Subordinated Debt, means all amounts due or to become due on such Senior and
Subordinated Debt less, if applicable, any amount which would have been paid to,
and retained by, the holders of such Senior and Subordinated Debt (whether as a
result of the receipt of payments by the holders of such Senior and Subordinated
Debt from the Company or any other obligor thereon or from any holders of, or
trustee in respect of, other indebtedness that is subordinate and junior in
right of payment to such Senior and Subordinated
2
<PAGE> 10
Debt pursuant to any provision of such indebtedness for the payment over of
amounts received on account of such indebtedness to the holders of such Senior
and Subordinated Debt or otherwise) but for the fact that such Senior and
Subordinated Debt is subordinate or junior in right of payment to (or subject to
a requirement that amounts received on such Senior and Subordinated Debt be paid
over to obligees on) trade accounts payable or accrued liabilities arising in
the ordinary course of business.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to a CFAC Trust, the principal office of the Property
Trustee under the related Trust Agreement, is closed for business.
"Capital Treatment Event" means, in the event that the Company becomes
subject to capital adequacy guidelines, the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such prospective change, pronouncement or decision is announced on
or after the date of issuance of the Preferred Securities of such CFAC Trust,
there is more than an insubstantial risk of impairment of the Company's ability
to treat the Preferred Securities (or any substantial portion thereof) as "Tier
I Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the primary federal regulator of the Company, as then in effect
and applicable to the Company.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of
this Indenture.
3
<PAGE> 11
"Common Stock" means the common stock, $.01 par value, of the Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor corporation shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors, the Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Chief Financial Officer, its Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of this
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.1 with respect to such series (or any successor thereto).
"Discount Security" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
4
<PAGE> 12
"Distributions," with respect to the Trust Securities issued by a CFAC
Trust, means amounts payable in respect of such Trust Securities as provided in
the related Trust Agreement and referred to therein as "Distributions."
"Dollar" or "U.S. $" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.
"Event of Default" has the meaning specified in Article V unless
otherwise specified in the supplemental indenture or the Officers' Certificate
delivered pursuant to Section 3.1 hereof creating a series of Securities.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Extension Period" has the meaning specified in Section 3.11.
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.
"CFAC Guarantee" means the guarantee by the Company of distributions on
the Preferred Securities of a CFAC Trust to the extent provided in the related
Guarantee Agreement.
"CFAC Trust" has the meaning specified in the first recital of this
Indenture.
"Guarantee Agreement" means the Guarantee Agreement substantially in the
form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof or
one or more Officers' Certificates delivered pursuant to Section 3.1 and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.
"Interest Payment Date" means as to each series of Securities the Stated
Maturity of an installment of interest on such Securities.
"Investment Company Event" means, in respect of a CFAC Trust, the
receipt by a CFAC Trust of an Opinion of Counsel, rendered by a law firm
experienced in such matters, to the effect that, as a result of change in law or
regulation or a change in interpretation or application of law or
5
<PAGE> 13
regulation by any legislative body, court, governmental agency or regulatory
authority, such CFAC Trust is or will be considered an "investment company" that
is required to be registered under the 1940 Act, which change becomes effective
on or after the date of original issuance of the Preferred Securities of such
CFAC Trust.
"Junior Subordinated Payment" has the meaning specified in Section 13.2.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, the President
or a Vice President, and by the Chief Financial Officer, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust for the
Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented
that any such Securities are held by Holders in whose hands such Securities are
valid, binding and legal obligations of the Company; provided, however, that in
determining whether the Holders of the requisite principal amount of Outstanding
Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
6
<PAGE> 14
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor. Upon the written request of the Trustee, the
Company shall furnish to the Trustee promptly an Officers' Certificate listing
and identifying all Securities, if any, known by the Company to be owned or held
by or for the account of the Company, or any other obligor on the Securities or
any Affiliate of the Company or such obligor, and, subject to the provisions of
Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination.
"Paying Agent" means the Trustee or any Person authorized by the Company
to pay) the principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of (and premium, if any) and interest on
the Securities of such series are payable pursuant to Sections 3.1 and 3.11.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Preferred Securities" has the meaning specified in the first recital of
this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, in respect of any CFAC Trust, the commercial
bank or trust company identified as the "Property Trustee" in the related Trust
Agreement, solely in its capacity as Property Trustee of such CFAC Trust under
such Trust Agreement and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
therein provided.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
7
<PAGE> 15
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of a series, (i) in the case
of Securities of a series represented by one or more Global Securities, the
Business Day next preceding such Interest Payment Date and (ii) in the case of
Securities of a series not represented by one or more Global Securities, the
date which is fifteen days next preceding such Interest Payment Date (whether or
not a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Securities" or "Security" means any debt securities or debt security,
as the case may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Senior and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of this Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Securities, provided,
however, that Senior and Subordinated Debt shall not be deemed to include (a)
any Debt of the Company which, when incurred and without respect to any election
under Section 1111(b) of the Bankruptcy Reform Act of 1978, as amended, was
without recourse to the Company, (b) any Debt of the Company to any of its
Subsidiaries, (c) Debt to any employee of the Company, and (d) any Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.
8
<PAGE> 16
"Tax Event" means the receipt by the Company and the CFAC Trust of an
Opinion of Counsel (as defined in the relevant CFAC Trust Agreement) experienced
in such matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such prospective change,
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities of such CFAC Trust, there is more than an insubstantial
risk that (i) such CFAC Trust is, or will be within 90 days of the date of such
Opinion of Counsel, subject to United States Federal income tax with respect to
income received or accrued on the corresponding series of Securities, (ii)
interest payable by the Company on such corresponding series of Securities is
not, or within 90 days of the date of such Opinion of Counsel, will not be,
deductible by the Company, in whole or in part, for United States Federal income
tax purposes or (iii) such CFAC Trust is, or will be within 90 days of the date
of such Opinion of Counsel, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Trust" has the meaning specified in the first recital of this
Indenture.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex B, or substantially
in such form as may be specified as contemplated by Section 3.1 with respect to
the Securities of any series, in each case as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder and, if at any time there
is more than one such Person, "Trustee" as used with respect to the Securities
of any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
Section 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition
9
<PAGE> 17
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitute a condition precedent), if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.5) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
10
<PAGE> 18
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4. Acts of Holders.
(A) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent or
proxy duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee, and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(B) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(C) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(D) The ownership of Securities shall be proved by the Securities
Register.
(E) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(F) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next
11
<PAGE> 19
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of the relevant series on such record date, and no other
Holders, shall be entitled to take the relevant action, whether or not such
Holders remain Holders after such record date, provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 10.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject
12
<PAGE> 20
to its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
(G) Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
Section 1.5. Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Preferred Securities or
the Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or
(2) the Company by the Trustee, any Holder or any holder of
Preferred Securities shall be sufficient for every purpose (except as otherwise
provided in Section 5.1) hereunder if in writing and mailed, first class,
postage prepaid, to the Company, addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Company.
Section 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
Section 1.7. Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
13
<PAGE> 21
Section 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns, the Holders of Senior and Subordinated Debt, the Holders of the
Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9,
5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 1.12. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of California without regard to conflicts
of laws principles thereof, except that the immunities and standard of care of
the Trustee shall be governed by Delaware law.
Section 1.13. Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day, with the same force
and effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity).
14
<PAGE> 22
ARTICLE II
SECURITY FORMS
Section 2.1. Forms Generally.
The Securities of each series shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently herewith,
be determined by the officers executing such securities, as evidenced by their
execution of the Securities. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.3 with respect to
the authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Section 2.2. Form of Face of Security.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
__% JUNIOR SUBORDINATED DEBENTURE DUE ___________
Registered Principal Amount:
No. CUSIP No.:
Central Financial Acceptance Corporation, a corporation organized and
existing under the laws of Delaware (hereinafter called the "Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to
15
<PAGE> 23
__________, or registered assigns, the principal sum of $_______ Dollars on
________; provided that the Company may shorten the Stated Maturity of the
principal of this Security to a date not earlier than ________. The Company
further promises to pay interest on said principal sum from ________ or from the
most recent interest payment date (each such date, an "Interest Payment Date")
on which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on the last day of _____ and _____ of
each year commencing ________ at the rate of ____% per annum, until the
principal hereof shall have become due and payable, plus Additional Interest, if
any, until the principal hereof is paid or duly provided for or made available
for payment and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the rate of ____% per annum, compounded
quarterly. The amount of interest payable for any period shall be computed on
the basis of twelve 30-day months and a 360-day year. The amount of interest
payable for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on this Security is not a Business Day, then a
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), with the same force and effect as if made on the
date the payment was originally payable. A "Business Day" shall mean any day
other than a Saturday or Sunday a day on which banking institutions in the State
of California are authorized or required by law or executive order to remain
closed or on a day on which the Corporate Trust Office of the Trustee, or the
principal office of the Property Trustee under the Amended and Restated Trust
Agreement (hereinafter referred to) for [NAME OF TRUST] is closed for business.
The interest installment so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
installment, which shall be [insert Record Date] next preceding such Interest
Payment Date. Any such interest installment not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than ____ days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
[If applicable insert--So long as no Event of Default has occurred and
is continuing, the Company shall have the right at any time during the term of
this Security to defer payment of interest on this Security, at any time or from
time to time, for up to 20 consecutive quarterly interest payment periods with
respect to each deferral period (each an "Extension Period"), (during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date, and at the end of which the Company shall
pay all interest then accrued and unpaid (together with Additional Interest
thereon to the extent permitted by applicable law)); provided, however, that no
Extension Period shall extend beyond the Stated Maturity of the principal of
this
16
<PAGE> 24
Security; provided, further, that during any such Extension Period, the Company
shall not, and shall not permit any Subsidiary of the Company to, (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), or (ii) make any payment of principal of
or interest or premium, if any, on or repay, repurchase or redeem any debt
security of the Company (including Securities issued by the Company pursuant to
the Indenture other than the Securities represented by this certificate) that
ranks pari passu with or junior in interest to this Security, (iii) make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any Subsidiaries of the Company (if such guarantee ranks pari
passu in all respects with or junior in interest to this Security (other than
(a) dividends or distributions in capital stock of the Company (which includes
common and preferred stock), (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the CFAC Guarantee related to the
Preferred Securities issued by [NAME OF TRUST], and (d) purchases of Common
Stock related to the issuance of Common Stock or rights under any of the
Company's benefit plans for its directors, officers or employees or (iv) redeem,
purchase or acquire less than all of the Securities of this series or any of the
Preferred Securities. Prior to the termination of any such Extension Period, the
Company may further extend such Extension Period, provided that such extension
does not cause such Extension Period to exceed ___ consecutive interest payment
periods or to extend beyond the Stated Maturity. Upon the termination of any
such Extension Period and upon the payment of all amounts then due on any
Interest Payment Date, and subject to the foregoing limitation, the Company may
elect to begin a new Extension Period. No interest shall be due and payable
during an Extension Period except at the end thereof. The Company shall give the
Trustee, the Property Trustee and the Administrative Trustees of [NAME OF TRUST]
notice of its election to begin any Extension Period at least ___ Business Days
prior to the earlier of (i) the date on which Distributions on the Preferred
Securities would be payable except for the election to begin such Extension
Period, or (ii) the date the Administrative Trustees are required to give notice
to the New York Stock Exchange, the Nasdaq National Market or other applicable
stock exchange or automated quotation system on which the Preferred Securities
are then listed or quoted or to holders of such Preferred Securities of the
record date or (iii) the date such Distributions are payable, but in any event
not less than ___ Business Days prior to such record date. The Trustee shall
give notice of the Company's election to begin a new Extension Period to the
holders of the Preferred Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period.]
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office of
such paying agent or paying agents as the Company may designate from time to
time, maintained for that purpose in the United States, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the person entitled
17
<PAGE> 25
thereto, in immediately available funds, at such place and to such account as
may be designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior and Subordinated
Debt, and this Security is issued subject to the provisions of the Indenture
with respect thereto. Each Holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such actions as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes. Each Holder hereof, by his
acceptance hereof, waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder of Senior and
Subordinated Debt, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Central Financial Acceptance Corporation
By: _____________________________________
[President or Vice President]
Attest:
- ----------------------------------
[Secretary or Assistant Secretary]
Section 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Indenture, dated as of ________, 1997 (herein
called the "Indenture"), between the Company and __________ as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Securities, and of the terms upon which the Securities
18
<PAGE> 26
are, and are to be, authenticated and delivered. This Security is one of the
series designated on the face hereof, limited in aggregate principal amount to
$_________.
All terms used in this Security that are defined in the Indenture and in
the Amended and Restated Trust Agreement, dated as of _____________, ____, as
amended (the "Amended and Restated Trust Agreement"), for [insert name of trust]
among Central Financial Acceptance Corporation, as Depositor, and the Trustees
named therein, shall have the meanings assigned to them in the Indenture or the
Amended and Restated Trust Agreement, as the case may be.
[If applicable, insert--The Company may at any time, at its option, on
or after ________, and subject to the terms and conditions of Article XI of the
Indenture], redeem this Security [in whole at any time] [or in part from time to
time], without premium or penalty, at a redemption price equal to [insert
redemption price] to the Redemption Date.]
[If applicable, insert--Upon the occurrence and during the continuation
of a Tax Event, Investment Company Event or Capital Treatment Event in respect
of a CFAC Trust, the Company may, at its option, at any time within 90 days of
the occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event redeem this Security, [if applicable, insert--in whole but not in part],
subject to the provisions of Section 11.7 and the other provisions of Article XI
of the Indenture, at a redemption price equal to [insert redemption price] to
the Redemption Date.]
[If applicable, insert--In the event of redemption of this Security in
part only, a new Security or Securities of this series for the portion hereof
not redeemed will be issued in the name of the Holder hereof upon the
cancellation hereof.]
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
[If the Security is not a Discount Security,--As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time
19
<PAGE> 27
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of this series may declare the principal amount of all the Securities
of this series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case of
the Securities of this series issued to a CFAC Trust, if upon an Event of
Default, the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities of this series fails to declare the principal of all
the Securities of this series to be immediately due and payable, the holders of
at least 25% in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee; and upon any such declaration the principal amount of and the accrued
interest (including any Additional Interest) on all the Securities of this
series shall become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.]
[If the Security is a Discount Security,--As provided in and subject to
the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a CFAC Trust, if upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series fails to declare the principal of all the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Preferred Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee. Such
amount shall be equal to [insert formula for determining the amount]. Upon any
such declaration, such amount of the principal of and the accrued interest
(including any Additional Interest) on all the Securities of this series shall
become immediately due and payable, provided that the payment of principal and
interest (including any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the Indenture. Upon
payment (i) of the amount of principal so declared due and payable and (ii) of
interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on this Security shall terminate.]
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 10.2 of the Indenture
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the
20
<PAGE> 28
Company and the Securities Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities of this series are issuable only in registered form
without coupons in denominations of minimum denominations of $25 and any
integral multiples of $25 in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of such series
of a different authorized denomination, as requested by the Holder surrendering
the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
Section 2.4. Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY."
21
<PAGE> 29
Section 2.5. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
as Trustee
By: ______________________________
Authorized Officer
ARTICLE III
THE SECURITIES
Section 3.1. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate (such Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:
(A) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(B) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder); provided, however, that the authorized
aggregate principal amount of such series may be increased above such amount by
a Board Resolution to such effect;
(C) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination thereof;
(D) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any
22
<PAGE> 30
Securities of such series, the Interest Payment Dates on which such interest
shall be payable, the right, pursuant to Section 3.11 or as otherwise set forth
therein, of the Company to defer or extend an Interest Payment Date, and the
Regular Record Date for the interest payable on any Interest Payment Date or the
method by which any of the foregoing shall be determined;
(E) the place or places where the principal of (and premium, if any)
and interest on the Securities of such series shall be payable, the place or
places where the Securities of such series may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Securities of such series may be made;
(F) the period or periods within or the date or dates on which, if
any, the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the option of
the Company;
(G) the obligation or the right, if any, of the Company to prepay,
repay or purchase the Securities of such series pursuant to any sinking fund,
amortization or analogous provisions, or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which, the currency
or currencies (including currency unit or units) in which and the other terms
and conditions upon which Securities of the series shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(H) the denominations in which any Securities of such series shall
be issuable, if other than denominations of $25 and any integral multiples of
$25 in excess thereof;
(I) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable, or in which
the Securities of the series shall be denominated;
(J) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(K) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(L) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or facilitate
the issuance of the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
(M) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the manner
in which such amounts will be determined;
23
<PAGE> 31
(N) whether the Securities of the series, or any portion thereof,
shall initially be issuable in the form of a temporary Global Security
representing all or such portion of the Securities of such series and provisions
for the exchange of such temporary Global Security for definitive Securities of
such series;
(O) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities and,
in such case, the respective Depositaries for such Global Securities, the form
of any legend or legends which shall be borne by any such Global Security in
addition to or in lieu of that set forth in Section 2.4 and any circumstances in
addition to or in lieu of those set forth in Section 3.5 in which any such
Global Security may be exchanged in whole or in part for Securities registered,
and any transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the Depositary for such Global
Security or a nominee thereof;
(P) the appointment of any Paying Agent or Agents for the Securities
of such series;
(Q) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the additions
or changes, if any, to this Indenture with respect to the Securities of such
series to permit or facilitate such conversion or exchange;
(R) the form or forms of the Trust Agreement, Amended and Restated
Trust Agreement and Guarantee Agreement, if different from the forms attached
hereto as Annexes A, B and C, respectively;
(S) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities in
right of payment, whether such other series of Securities are Outstanding or
not; and
(T) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided herein or in or
pursuant to such Board Resolution and set forth in such Officers' Certificate or
in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior and
Subordinated Debt as provided in Article XIII.
24
<PAGE> 32
Section 3.2. Denominations.
The Securities of each series shall be in registered form without
coupons and shall be issuable in minimum denominations of $25 and integral
multiples of $25 in excess thereof, unless otherwise specified as contemplated
by Section 3.1.
Section 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
President or one of its Vice Presidents under its corporate seal reproduced or
impressed thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(1) if the form of such Securities has been established by
or pursuant to Board Resolution as permitted by Section 2.1, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 3.1, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered
by the Trustee and issued by the Company in the manner and subject to
any conditions specified in such Opinion of Counsel, will constitute
valid and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the
25
<PAGE> 33
Trustee's own rights, duties or immunities under the Securities and this
Indenture or otherwise in a manner which is not reasonably acceptable to the
Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
Section 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any denomination, substantially of the
tenor of the definitive Securities of such series in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as evidenced
by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of such series to be prepared without unreasonable delay.
After the preparation of definitive Securities, the temporary Securities shall
be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities
of the same series of authorized denominations having the same Original Issue
Date and Stated Maturity and having the same terms as such temporary Securities.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
26
<PAGE> 34
Section 3.5. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. Such register is herein sometimes referred to as the
"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount, of
the same Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall
be the valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and
27
<PAGE> 35
delivered to such Depositary or a nominee thereof or custodian therefor,
and each such Global Security shall constitute a single Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may
be registered, in the name of any Person other than the Depositary for
such Global Security or a nominee thereof unless (A) such Depositary (i)
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (ii) has ceased to be a clearing
agency registered under the Exchange Act at a time when the Depositary
is required to be so registered to act as depositary, in each case
unless the Company has approved a successor Depositary within 90 days,
(B) there shall have occurred and be continuing an Event of Default with
respect to such Global Security, (C) the Company in its sole discretion
determines that such Global Security will be so exchangeable or
transferable or (D) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 3.4, 3.6, 9.6 or 11.6 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the Depositary
for such Global Security or a nominee thereof.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Company or the Trustee to
save each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity, and bearing a number not contemporaneously
outstanding.
28
<PAGE> 36
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity as such destroyed, lost or stolen
Security, and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date, shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of Securities of such series, except that, unless
otherwise provided in the Securities of such series, interest payable on the
Stated Maturity of the principal of a Security shall be paid to the Person to
whom principal is paid. The initial payment of interest on any Security of any
series which is issued between a Regular Record Date and the related Interest
Payment Date shall be payable as provided in such Security or in the Board
Resolution pursuant to Section 3.1 with respect to the related series of
Securities.
Any interest on any Security which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue
29
<PAGE> 37
of having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon, the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class, postage prepaid, to each Holder of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date. The
Trustee may, in its discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the state of California, but such publication shall not be a
condition precedent to the establishment of such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.7, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
30
<PAGE> 38
Section 3.8. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 3.9. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.
Section 3.10. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for any
period shall be computed on the basis of a 360-day year of twelve 30-day months
and interest on the Securities of each series for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months.
Section 3.11. Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, the Company shall have the right, at any time during
the term of such series, from time to time to defer the payment of interest on
such Securities for such period or periods as may be specified as contemplated
by Section 3.1 (each, an "Extension Period") during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law); provided, however, that
no Extension Period shall extend beyond the Stated Maturity of the principal of
the Securities of such series; provided, further, that during any such Extension
Period, the Company shall not, and shall not permit any Subsidiary to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), (ii) make any payment
31
<PAGE> 39
of principal of or interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including Securities other than the
Securities of such series) that ranks pari passu in all respects with or junior
in interest to the Securities of such series or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company if such guarantee rank pari passu in all respects with or junior
in interest to the securities of such series (other than (a) dividends or
distributions in capital stock of the Company (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the redemption or repurchase
of any such rights pursuant thereto, (c) payments under the CFAC Guarantee
related to the Preferred Securities issued by the CFAC Trust holding Securities
of such series, and (d) purchases of Common Stock related to the issuance of
Common Stock or rights under any of the Company's benefit plans for its
directors, officers or employees) or (iii) redeem, purchase or acquire less than
all of the Securities of such series or any of the Preferred Securities. Prior
to the termination of any such Extension Period, the Company may further extend
such Extension Period, provided that such extension does not cause such
Extension Period to extend beyond the Stated Maturity of the principal of such
Securities. Upon termination of any Extension Period and upon the payment of all
accrued and unpaid interest and any Additional Interest then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject to
the above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee, the
Property Trustee and the Administrative Trustees of the CFAC Trust holding
Securities of such series notice of its election of any Extension Period (or an
extension thereof) at least one Business Day prior to the earlier of (i) the
next succeeding date on which Distributions on the Preferred Securities of such
CFAC Trust would be payable except for the election to begin or extend such
Extension Period or (ii) the date the Administrative Trustees are required to
give notice to the New York Stock Exchange, the Nasdaq National Market or other
applicable stock exchange or automated quotation system on which the Preferred
Securities are then listed or quoted or to holders of such Preferred Securities
of the record date or (iii) the date such Distributions are payable, but in any
event not less than one Business Day prior to such record date. The Trustee
shall give notice of the Company's election to begin a new Extension Period to
the holders of the Securities. There is no limitation on the number of times
that the Company may elect to begin an Extension Period.
The Trustee shall promptly give notice of the Company's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.
Section 3.12. Right of Set-Off.
With respect to the Securities of a series issued to a CFAC Trust,
notwithstanding anything to the contrary in the Indenture, the Company shall
have the right to set-off any payment it is otherwise required to make
thereunder in respect of any such Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement relating to such Security or under Section
5.8 of the Indenture.
32
<PAGE> 40
Section 3.13. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.14. Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, the Company shall have the right to
shorten the Stated Maturity of the principal of the Securities of such series at
any time to any date not earlier than the first date on which the Company has
the right to redeem the Securities of such series.
Section 3.15. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
33
<PAGE> 41
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year of the date of deposit, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of Clause (B) (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount in the currency or currencies in which the Securities of
such series are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest (including any Additional
Interest) to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive.
Section 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for the payment of which such money or obligations have been
deposited with or received by the Trustee.
34
<PAGE> 42
ARTICLE V
REMEDIES
Section 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the Securities
of any series, means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in the performance of which or the breach of
which is elsewhere in this Section 5.1 specifically dealt with), and continuance
of such default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such default
or breach and requiring it to be remedied; or
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 90 consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit for creditors, or the admission by
it in writing of its
35
<PAGE> 43
inability to pay its debts generally as they become due and its willingness to
be adjudicated a bankrupt, or the taking of corporate action by the Company in
furtherance of any such action; or
(6) any other Event of Default provided with respect to Securities
of that series.
Section 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case of
the Securities of a series issued to a CFAC Trust, if, upon an Event of Default,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series fail to declare the principal of all the
Securities of that series to be immediately due and payable, the holders of at
least 25% in aggregate liquidation amount of the corresponding series of
Preferred Securities then outstanding shall have such right by a notice in
writing to the Company and the Trustee; and upon any such declaration such
principal amount (or specified portion thereof) of and the accrued interest
(including any Additional Interest) on all the Securities of such series shall
become immediately due and payable. Payment of principal and interest (including
any Additional Interest) on such Securities shall remain subordinated to the
extent provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided. If an Event of Default specified
in Section 5.1(4) or 5.1(5) with respect to Securities of any series at the time
Outstanding occurs, the principal amount of all the Securities of that series
(or, if the Securities of that series are Discount Securities, such portion of
the principal amount of such Securities as may be specified by the terms of that
series) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest (including any Additional
Interest) on all Securities of that series,
36
<PAGE> 44
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series which
has become due solely by such acceleration, have been cured or waived as
provided in Section 5.13.
In the case of Securities of a series issued to a CFAC Trust, the
holders of a majority in aggregate Liquidation Amount (as defined in the Trust
Agreement under which such CFAC Trust is formed) of the related series of
Preferred Securities issued by such CFAC Trust shall also have the right to
rescind and annul such declaration and its consequences by written notice to the
Company and the Trustee subject to the satisfaction of the conditions set forth
in Clauses (1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
37
<PAGE> 45
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest (including any Additional Interest)) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any Additional Interest)
owing and unpaid in respect to the Securities and to file such other papers or
documents as may be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to have the claims of the
Holders and any predecessor to the Trustee under Section 6.7 allowed in any such
judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it and any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
38
<PAGE> 46
Section 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then due
and unpaid upon such series of Securities for principal (and premium, if any)
and interest (including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such series of
Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
Section 5.7. Limitation on Suits.
No Holder of any Securities of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
39
<PAGE> 47
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request:
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest; Direct Action by Holders of Preferred Securities.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right which is absolute and unconditional to receive
payment of the principal of (and premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a CFAC Trust, any holder
of the corresponding series of Preferred Securities issued by such CFAC Trust
shall have the right, upon the occurrence of an Event of Default described in
Section 5.1(1) or 5.1(2), to institute a suit directly against the Company for
enforcement of payment to such holder of principal of (premium, if any) and
(subject to Section 3.7) interest (including any Additional Interest) on the
Securities having a principal amount equal to the aggregate Liquidation Amount
(as defined in the Trust Agreement under which such CFAC Trust is formed) of
such Preferred Securities of the corresponding series held by such holder.
Section 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, the
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
40
<PAGE> 48
Section 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
Section 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding so
directed would be unjustly prejudicial to the Holders not joining in any such
direction or would involve the Trustee in personal liability.
Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series and, in the case of any Securities of a
series issued to a CFAC Trust, the holders of
41
<PAGE> 49
Preferred Securities issued by such CFAC Trust may waive any past default
hereunder and its consequences with respect to such series except a default:
(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities of such series or, in the case of a waiver by holders of
Preferred Securities issued by such CFAC Trust, by all holders of Preferred
Securities issued by such CFAC Trust.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest (including any
Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
Section 5.15. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
42
<PAGE> 50
ARTICLE VI
THE TRUSTEE
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default;
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provisions hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture
with respect to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
43
<PAGE> 51
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
Section 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided, further,
that, in the case of any default of the character specified in Section 5.1(3),
no such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section, the
term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
Section 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
44
<PAGE> 52
(d) the Trustee may consult with counsel and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of the Securities or the proceeds thereof.
Section 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
45
<PAGE> 53
Section 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 6.7. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time compensation for all
services rendered by it hereunder in such amounts as the Company and the Trustee
shall agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall survive the termination of this
Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
Section 6.8. Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing
46
<PAGE> 54
with the Commission the application referred to in the second to last paragraph
of said Section 301(b).
Section 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or District
of Columbia authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.9, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued hereunder.
Section 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
47
<PAGE> 55
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (ii)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee with respect to the Securities of such series and
supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, subject to Section 5.14, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
48
<PAGE> 56
Securities Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
49
<PAGE> 57
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
Section 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
Section 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or
50
<PAGE> 58
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 6.14 the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section 6.14, such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant to
this Section 6.14, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
51
<PAGE> 59
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
As Trustee
By: __________________________________
As Authenticating Agent
By: __________________________________
Authorized Officer
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July 15 in
each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of January 1 and July 1 of such year, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
Section 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
52
<PAGE> 60
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than July 15 in each calendar
year, commencing with the first July 15 after the first issuance of Securities
under this Indenture.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed and also with the Commission. The Company will notify the
Trustee when any Securities are listed on any stock exchange.
Section 7.4. Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of Trust Indenture Act Section
314(a).
53
<PAGE> 61
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of (and premium,
if any) and interest (including any Additional Interest) on all the Securities
and the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with; and the Trustee, subject to Section
6.1, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
Section 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall
54
<PAGE> 62
be discharged from all obligations and covenants under the Indenture and the
Securities and may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, provided, however, that the form and terms of Securities of any series
may be established by a Board Resolution, as set forth in the Officers'
Certificate delivered to the Trustee pursuant to Section 3.1, without entering
into a supplemental indenture for all purposes hereunder, for any of the
following purposes:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities contained; or
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for
the benefit of less than all series of Securities,
55
<PAGE> 63
stating that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred upon the
Company; or
(5) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events of
Default are to be for the benefit of less than all series of Securities, stating
that such additional Events of Default are expressly being included solely for
the benefit of such series); or
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(7) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (7) shall not
adversely affect the interest of the Holders of Securities of any series in any
material respect or, in the case of the Securities of a series issued to a CFAC
Trust and for so long as any of the corresponding series of Preferred Securities
issued by such CFAC Trust shall remain outstanding, the holders of such
Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
6.11(b); or
(9) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act.
Section 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) except to the extent permitted by Sections 3.11 or 3.14 or as
otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect
to the deferral of the payment of interest on the Securities of any series or
the shortening of the Stated Maturity of the Securities of any series,
56
<PAGE> 64
change the Stated Maturity of the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or reduce any premium payable
upon the redemption thereof, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 5.2, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby; or
(4) modify the provisions in Article XIII of this Indenture with respect
to the subordination of Outstanding Securities of any series in a manner adverse
to the Holders thereof; provided, further, that, in the case of the Securities
of a series issued to a CFAC Trust, so long as any of the corresponding series
of Preferred Securities issued by such CFAC Trust remains outstanding, (i) no
such amendment shall be made that adversely affects the holders of such
Preferred Securities in any material respect, and no termination of this
Indenture shall occur, and no waiver of any Event of Default or compliance with
any covenant under this Indenture shall be effective, without the prior consent
of the holders of at least a majority of the aggregate liquidation preference of
such Preferred Securities then outstanding unless and until the principal (and
premium, if any) of the Securities of such series and all accrued and, subject
to Section 3.7, unpaid interest (including any Additional Interest) thereon have
been paid in full and (ii) no amendment shall be made to Section 5.8 of this
Indenture that would impair the rights of the holders of Preferred Securities
provided therein without the prior consent of the holders of each Preferred
Security then outstanding unless and until the principal (and premium, if any)
of the Securities of such series and all accrued and (subject to Section 3.7)
unpaid interest (including any Additional Interest) thereon have been paid in
full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or Preferred
Securities, or which modifies the rights of the Holders of Securities or holders
of Preferred Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities or holders of Preferred Securities of any other series.
57
<PAGE> 65
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional series of Securities created by
any supplemental indenture permitted by this Article or the modifications
thereby of any series of Securities previously created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture, and that all conditions precedent have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX
or delivery to the Trustee of the Officers' Certificate pursuant to Section 3.1
hereof (which Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
Section 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX and
every Officers' Certificate delivered to the trustee pursuant to Section 3.1
hereof shall conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX or delivery to the Trustee of
the Officers' Certificate pursuant to Section 3.1 hereof (which Officers'
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such supplemental
indenture or such Officers' Certificate. If the Company shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture or such Officers's Certificate may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
58
<PAGE> 66
ARTICLE X
COVENANTS
Section 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be presented
or surrendered for payment and an office or agency where Securities of that
series may be surrendered for transfer or exchange and where notices and demands
to or upon the Company in respect of the Securities of that series and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
Section 10.3. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. California time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due,
59
<PAGE> 67
such sum to be held in trust for the benefit of the Persons entitled to such
principal and premium (if any) or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.3,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest:
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable to
it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the state of
California, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days
60
<PAGE> 68
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
Section 10.4. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end
of each calendar year of the Company ending after the date hereof, an Officers'
Certificate covering the preceding calendar year, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance, observance or fulfillment of or compliance with any of the terms,
provisions, covenants and conditions of this Indenture, and if the Company shall
be in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge. For the purpose of this Section 10.4, compliance
shall be determined without regard to any grace period or requirement of notice
provided pursuant to the terms of this Indenture.
Section 10.5. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4) with
respect to the Securities of any series, if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company in respect of any
such covenant or condition shall remain in full force and effect.
Section 10.6. Additional Sums.
In the case of the Securities of a series issued to a CFAC Trust, so
long as no Event of Default has occurred and is continuing and except as
otherwise specified as contemplated by Section 2.1 or Section 3.1, in the event
that (i) such CFAC Trust is the Holder of all of the Outstanding Securities of
such series, (ii) a Tax Event in respect of such CFAC Trust shall have occurred
and be continuing and (iii) the Company shall not have (A) redeemed the
Securities of such series pursuant to Section 11.7 or (B) terminated such CFAC
Trust pursuant to Section 9.2(b) of the related Trust Agreement, the Company
shall pay to such CFAC Trust (and its permitted successors or assigns under the
related Trust Agreement) for so long as such CFAC Trust (or its permitted
successor or assignee) is the registered holder of any Securities of such
series, such additional amounts as may be necessary in order that the amount of
Distributions (including any Additional Amounts (as defined in such Trust
Agreement)) then due and payable by such CFAC Trust on the related Preferred
Securities and Common Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
Additional Taxes (the "Additional Sums"). Whenever in this Indenture or the
Securities there is a reference in any context to the payment of principal of or
interest on the Securities, such mention shall be deemed to include mention of
the payments of the Additional Sums provided for in this paragraph to the extent
that, in such context, Additional Sums
61
<PAGE> 69
are, were or would be payable in respect thereof pursuant to the provisions of
this paragraph and express mention of the payment of Additional Sums (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Sums in those provisions hereof where such express mention is not
made; provided, however, that the deferral of the payment of interest pursuant
to Section 3.11 or the Securities shall not defer the payment of any Additional
Sums that may be due and payable.
Section 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of Securities of any
series that it shall not, and it shall not permit any Subsidiary of the Company
to, (a) declare or pay any dividends or distributions on, or redeem purchase,
acquire or make a liquidation payment with respect to, any shares of the
Company's capital stock (which includes common and preferred stock), (b) make
any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including Securities
other than the Securities of such series) that rank pari passu in all respects
with or junior in interest to the Securities of such series or make any
guarantee payments with respect to any guarantee by the Company of debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
in all respects with or junior in interest to the Securities (other than (i)
dividends or distributions in capital stock of the Company (which includes
common and preferred stock), (ii) any declaration of a dividend in connection
with the implementation of a rights plan or the redemption or repurchase of any
such rights pursuant thereto, (iii) payments under the CFAC Guarantee related to
the Preferred Securities issued by the CFAC Trust holding Securities of such
series, and (iv) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees or (c) redeem, purchase or acquire less than all of the
Securities of such series or any of the Preferred Securities if at such time (a)
there shall have occurred an Event of Default with respect to the Securities of
such series (b) if the Securities of such series are held by a CFAC Trust, the
Company shall be in default with respect to its payment of any obligations under
the CFAC Guarantee relating to the Preferred Securities issued by such CFAC
Trust or (c) the Company shall have given notice of its election to begin an
Extension Period with respect to the Securities of such series as provided
herein and shall not have rescinded such notice, or such Extension Period, or
any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a CFAC Trust (i) to maintain directly or indirectly 100% ownership of
the Common Securities of such CFAC Trust; provided, however, that any permitted
successor of the Company hereunder may succeed to the Company's ownership of
such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate
such CFAC Trust, except (a) in connection with a distribution of the Securities
of such series to the holders of Trust Securities in liquidation of such CFAC
Trust or (b) in connection with certain mergers, consolidations or amalgamations
permitted by the related Trust Agreement and (iii) to use its reasonable
efforts, consistent with the terms and provisions of such Trust Agreement, to
cause such CFAC Trust to remain classified as a grantor trust and not an
association taxable as a corporation for United States federal income tax
purposes.
62
<PAGE> 70
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1. Applicability of This Article.
Redemption of Securities of any series (whether by operation of a
sinking fund or otherwise) as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $25 or, in the case of the
Securities of a series issued to a CFAC Trust, $25, or integral multiples of $25
in excess thereof.
Section 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by or pursuant to a Board Resolution. In case of any redemption at the election
of the Company of less than all of the Securities of any particular series and
having the same terms, the Company shall, not less than 30 nor more than 60 days
prior to the Redemption Date (unless a shorter notice shall be satisfactory to
the Trustee), notify the Trustee of such date and of the principal amount of
Securities of that series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate and an Opinion of Counsel evidencing compliance
with such restriction.
Section 11.3. Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of any Security of such series, provided that
the portion of the principal amount of any Security not redeemed shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.
63
<PAGE> 71
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
Section 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
sixtieth day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of such particular series
and having the same terms are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
thereon, if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
64
<PAGE> 72
Section 11.5. Deposit of Redemption Price.
Prior to 12:00 noon, Eastern time on the Redemption Date specified in
the notice of redemption given as provided in Section 11.4, the Company will
deposit with the Trustee or with one or more Paying Agents (or if the Company is
acting as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including Additional Interest) on, all the
Securities which are to be redeemed on that date.
Section 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price. On presentation and
surrender of such Securities at a Place of Payment in said notice specified, the
said securities or the specified portions thereof shall be paid and redeemed by
the Company at the applicable Redemption Price, together with accrued interest
(including any Additional Interest) to the Redemption Date; provided, however,
that, unless otherwise specified as contemplated by Section 3.1, installments of
interest whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of the same
series, of authorized denominations, in aggregate principal amount equal to the
portion of the Security not redeemed so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
Section 11.7. Right of Redemption of Securities Initially Issued to a CFAC
Trust.
In the case of the Securities of a series initially issued to a CFAC
Trust, except as otherwise specified as contemplated by Section 3.1, the
Company, at its option, may redeem such Securities (i) on or after the date five
years after the Original Issue Date of such Securities, in whole at any time or
in part from time to time, or (ii) upon the occurrence and during the
continuation of a Tax Event, Investment Company Event, or Capital Treatment
Event, at any time within 90 days following the occurrence of such Tax Event,
Investment Company Event or Capital Treatment Event in respect of
65
<PAGE> 73
such CFAC Trust, in whole (but not in part), in each case at a Redemption Price
equal to 100% of the principal amount thereof.
ARTICLE XII
SINKING FUNDS
Section 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms
of any Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any sinking fund payment in excess of such minimum amount
which is permitted to be made by the terms of such Securities of any series is
herein referred to as an "optional sinking fund payment". If provided for by the
terms of any Securities of any series, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 12.2. Each sinking
fund payment shall be applied to the redemption of Securities of any series as
provided for by the terms of such Securities.
Section 12.2. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Company may at its
option, at any time no more than 16 months and no less than 30 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Company, except Securities of such series that have been redeemed through the
application of mandatory or optional sinking fund payments pursuant to the terms
of the Securities of such series, accompanied by a Company Order instructing the
Trustee to credit such obligations and stating that the Securities of such
series were originally issued by the Company by way of bona fide sale or other
negotiation for value; provided that the Securities to be so credited have not
been previously so credited. The Securities to be so credited shall be received
and credited for such purpose by the Trustee at the redemption price for such
Securities, as specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
Section 12.3. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such
66
<PAGE> 74
series are payable (except as provided pursuant to Section 3.1) and the portion
thereof, if any, which is to be satisfied by delivering and crediting Securities
pursuant to Section 12.2 and will also deliver to the Trustee any Securities to
be so delivered. Such Officers' Certificate shall be irrevocable and upon its
delivery the Company shall be obligated to make the cash payment or payments
therein referred to, if any, on or before the succeeding sinking fund payment
date. In the case of the failure of the Company to deliver such Officers'
Certificate (or, as required by this Indenture, the Securities and coupons, if
any, specified in such Officers' Certificate), the sinking fund payment due on
the succeeding sinking fund payment date for such series shall be paid entirely
in cash and shall be sufficient to redeem the principal amount of the Securities
of such series subject to a mandatory sinking fund payment without the right to
deliver or credit securities as provided in Section 12.2 and without the right
to make the optional sinking fund payment with respect to such series at such
time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the Redemption Price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or, if the Company is acting as its own Paying Agent, segregated and
held in trust by the Company as provided in Section 10.3) for such series and
together with such payment (or such amount so segregated) shall be applied in
accordance with the provisions of this Section 12.3. Any and all sinking fund
moneys with respect to the Securities of any particular series held by the
Trustee (or if the Company is acting as its own Paying Agent, segregated and
held in trust as provided in Section 10.3) on the last sinking fund payment date
with respect to Securities of such series and not held for the payment or
redemption of particular Securities of such series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent),
together with other moneys, if necessary, to be deposited (or segregated)
sufficient for the purpose, to the payment of the principal of the Securities of
such series at Maturity. The Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 11.3 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 11.4. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Section 11.6. On or before each sinking fund
payment date, the Company shall pay to the Trustee (or, if the Company is acting
as its own Paying Agent, the Company shall segregate and hold in trust as
provided in Section 10.3) in cash a sum in the currency in which Securities of
such series are payable (except as provided pursuant to Section 3.1) equal to
the principal and any interest accrued to the Redemption Date for Securities or
portions thereof to be redeemed on such sinking fund payment date pursuant to
this Section 12.3.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence
67
<PAGE> 75
of this paragraph) with respect to the Securities of such series, except that if
the notice of redemption shall have been provided in accordance with the
provisions hereof, the Trustee (or the Company, if the Company is then acting as
its own Paying Agent) shall redeem such Securities if cash sufficient for that
purpose shall be deposited with the Trustee (or segregated by the Company) for
that purpose in accordance with the terms of this Article XII. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such default or Event of Default shall occur and any moneys thereafter paid into
such sinking fund shall, during the continuance of such default or Event of
Default, be held as security for the payment of the Securities and coupons, if
any, of such series; provided, however, that in case such default or Event of
Default shall have been cured or waived herein, such moneys shall thereafter be
applied on the next sinking fund payment date for the Securities of such series
on which such moneys may be applied pursuant to the provisions of this Section
12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
Section 13.1. Securities Subordinate to Senior and Subordinated Debt.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior and Subordinated Debt.
Section 13.2. Payment Over of Proceeds Upon Dissolution, Etc.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior and
Subordinated Debt shall be entitled to receive payment in full of Allocable
Amounts of such Senior and Subordinated Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior and Subordinated Debt, before the Holders of the
Securities are entitled to receive or retain any payment or distribution of any
kind or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other Debt of the Company subordinated to the payment of the
Securities, such payment or distribution being hereinafter referred to as a
"Junior Subordinated Payment"), on account of principal of (or premium, if any)
or interest (including any Additional Interest) on the Securities or on account
of the purchase or other acquisition of Securities by the Company or any
Subsidiary and to that end the holders of Senior and Subordinated Debt shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any Junior
68
<PAGE> 76
Subordinated Payment, which may be payable or deliverable in respect of the
Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 13.2, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Allocable Amounts of all Senior and Subordinated Debt are
paid in full or payment thereof is provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior and Subordinated
Debt, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Allocable Amounts of all Senior and Subordinated Debt remaining unpaid, to the
extent necessary to pay all Allocable Amounts of all Senior and Subordinated
Debt in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior and Subordinated Debt.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior and Subordinated Debt to
substantially the same extent as the Securities are so subordinated as provided
in this Article XIII. The consolidation of the Company with, or the merger of
the Company into, another Person or the liquidation or dissolution of the
Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section 13.2 if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale such properties and
assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions set forth in Article
VIII.
Section 13.3. Prior Payment to Senior and Subordinated Debt Upon Acceleration of
Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior and
Subordinated Debt outstanding at the time such Securities so become due and
payable shall be entitled to receive payment in full of all Allocable Amounts
due on or in respect of such Senior and Subordinated Debt (including any amounts
due upon acceleration), or provision shall be made for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
and Subordinated Debt, before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any
69
<PAGE> 77
Subsidiary; provided, however, that nothing in this Section 13.3 shall prevent
the satisfaction of any sinking fund payment in accordance with this Indenture
or as otherwise specified as contemplated by Section 3.1 for the Securities of
any series by delivering and crediting pursuant to Section 12.2 or as otherwise
specified as contemplated by Section 3.1 for the Securities of any series
Securities which have been acquired (upon redemption or otherwise) prior to such
declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.3, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.3 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.4. No Payment When Senior and Subordinated Debt in Default.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior and
Subordinated Debt, or in the event that any event of default with respect to any
Senior and Subordinated Debt shall have occurred and be continuing and shall
have resulted in such Senior and Subordinated Debt becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, unless and until such event of default shall have been cured or
waived or shall have ceased to exist and such acceleration shall have been
rescinded or annulled, or (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or such event or default,
then no payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) shall be
made by the Company on account of principal of (or premium, if any) or interest
(including any Additional Interest), if any, on the Securities or on account of
the purchase or other acquisition of Securities by the Company or any
Subsidiary, in each case unless and until all Allocable Amounts of such Senior
and Subordinated Debt are paid in full; provided, however, that nothing in this
Section 13.4 shall prevent the satisfaction of any sinking fund payment in
accordance with this Indenture or as otherwise specified as contemplated by
Section 3.1 for the Securities of any series by delivering and crediting
pursuant to Section 12.2 or as otherwise specified as contemplated by Section
3.1 for the Securities of any series Securities which have been acquired (upon
redemption or otherwise) prior to such default in payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.4, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
70
<PAGE> 78
The provisions of this Section 13.4 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.5. Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any Proceeding referred to in Section 13.2 or under the
conditions described in Sections 13.3 and 13.4, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article XIII.
Section 13.6. Subrogation to Rights of Holders of Senior and Subordinated Debt.
Subject to the payment in full of all amounts due or to become due on
all Senior and Subordinated Debt, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
and Subordinated Debt, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior and
Subordinated Debt pursuant to the provisions of this Article XIII (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to Senior and Subordinated Debt of the Company to
substantially the same extent as the Securities are subordinated to the Senior
and Subordinated Debt and is entitled to like rights of subrogation by reason of
any payments or distributions made to holders of such Senior and Subordinated
Debt) to the rights of the holders of such Senior and Subordinated Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior and Subordinated Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior and
Subordinated Debt of any cash, property or securities to which the Holders of
the Securities or the Trustee would be entitled except for the provisions of
this Article, and no payments over pursuant to the provisions of this Article
XIII to the holders of Senior and Subordinated Debt by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior and Subordinated Debt, and the Holders of the Securities, be deemed to be
a payment or distribution by the Company to or on account of the Senior and
Subordinated Debt.
Section 13.7. Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior and Subordinated Debt on the other hand.
Nothing contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Company and the
71
<PAGE> 79
Holders of the Securities, the obligations of the Company, which are absolute
and unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than their rights
in relation to the holders of Senior and Subordinated Debt; or (c) prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture including, without
limitation, filing and voting claims in any Proceeding, subject to the rights,
if any, under this Article XIII of the holders of Senior and Subordinated Debt
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
Section 13.8. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article XIII and appoints the Trustee his or her attorney-in-fact for
any and all such purposes.
Section 13.9. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior and Subordinated
Debt to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior and Subordinated Debt may, at any time and from
to time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior and Subordinated Debt, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior and Subordinated Debt, or otherwise amend or supplement in any
manner Senior and Subordinated Debt or any instrument evidencing the same or any
agreement under which Senior and Subordinated Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior and Subordinated Debt; (iii) release any Person liable
in any manner for the collection of Senior and Subordinated Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
72
<PAGE> 80
Section 13.10. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article XIII or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior and Subordinated Debt or from any trustee, agent
or representative therefor; provided, however, that if the Trustee shall not
have received the notice provided for in this Section 13.10 at least two
Business Days prior to the date upon which by the terms hereof any monies may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest (including any Additional
Interest) on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received and
shall not be affected by any notice to the contrary which may be received by it
within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior and Subordinated Debt (or a trustee therefor)
to establish that such notice has been given by a holder of Senior and
Subordinated Debt (or a trustee therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior and Subordinated Debt to participate
in any payment or distribution pursuant to this Article, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior and Subordinated Debt held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
Section 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior and
Subordinated Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIII.
73
<PAGE> 81
Section 13.12. Trustee Not Fiduciary for Holders of Senior and Subordinated
Debt.
The Trustee, in its capacity as trustee under this Indenture, shall not
be deemed to owe any fiduciary duty to the holders of Senior and Subordinated
Debt and shall not be liable to any such holders if it shall in good faith
mistakenly pay over or distribute to Holders of Securities or to the Company or
to any other Person cash, property or securities to which any holders of Senior
and Subordinated Debt shall be entitled by virtue of this Article or otherwise.
Section 13.13. Rights of Trustee as Holder of Senior and Subordinated Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior and
Subordinated Debt which may at any time be held by it, to the same extent as any
other holder of Senior and Subordinated Debt, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder.
Section 13.14. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIII in addition to or in place of the Trustee.
Section 13.15. Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article XIII only, (a) the issuance and
delivery of junior securities upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest (including any Additional
Interest) on Securities or on account of the purchase or other acquisition of
Securities, and (b) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion or exchange of a
Security shall be deemed to constitute payment on account of the principal of
such security. For the purposes of this Section 13.15, the term "junior
securities" means (i) shares of any stock of any class of the Company and (ii)
securities of the Company which are subordinated in right of payment to all
Senior and Subordinated Debt which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article
XIII.
* * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
74
<PAGE> 82
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
CENTRAL FINANCIAL ACCEPTANCE
CORPORATION
By: _______________________________
Its _______________________________
Attest:
By _______________________________
Its ____________________________
WILMINGTON TRUST COMPANY
as Trustee
By ________________________________
Its _______________________________
Attest:
By _______________________________
Its _____________________________
75
<PAGE> 83
STATE OF CALIFORNIA )
) SS.
COUNTY OF )
On the _____ day of ________________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of CENTRAL FINANCIAL ACCEPTANCE CORPORATION, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; and that he signed his name thereto by authority of the
Board of Directors of said corporation.
[SEAL] _______________________________
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF )
On the _____ day of ________________, 1997 before me personally came
______________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of WILMINGTON TRUST COMPANY one of the corporations described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
and that he signed his name thereto by authority of the Board of Directors of
said corporation.
[SEAL] _______________________________
Notary Public
76
<PAGE> 1
EXHIBIT 4.2
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
_____% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE __________, 2027
OFFICERS' CERTIFICATE AND COMPANY ORDER
Pursuant to the Indenture dated as of October __, 1997 (the
"Indenture"), between Central Financial Acceptance Corporation, a Delaware
corporation (the "Company") and Wilmington Trust Company, as Debenture Trustee
(the "Debenture Trustee") and resolutions adopted by the Pricing Committee of
the Company's Board of Directors on October __, 1997; this Officers' Certificate
is being delivered to the Debenture Trustee to establish the terms of one series
of securities (the "Securities") in accordance with Section 3.1 of the
Indenture, to establish the form of the Securities of such series in accordance
with Section 2.1 of the Indenture, to request the authentication and delivery of
the Securities of such series pursuant to Section 3.3 of the Indenture and to
comply with the provisions of Section 1.2 of the Indenture. This Officers'
Certificate shall be treated for all purposes under the Indenture as a
supplemental indenture thereto.
All conditions precedent provided for in the Indenture relating to the
establishment of (i) a series of Securities and (ii) the form of Securities of
such series have been complied with.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Indenture.
I. Establishment of Series of Securities pursuant to Section 3.1 of the
Indenture.
There are hereby established pursuant to Section 3.1 of the Indenture a
series of Securities which shall have the following terms:
A. The Securities of such series shall bear the title "_____%
Junior Subordinated Deferrable Interest Debentures Due ____________, 2027."
B. The aggregate principal amount of such series of Securities
to be issued pursuant to this Officers' Certificate and Company Order shall be
limited to $_________ (except for Securities authenticated and delivered upon
registration of, transfer of, or in exchange for, or in lieu of, other
Securities of such series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 of the
Indenture and except for any Securities which, pursuant to Section 3.3 of the
Indenture, are deemed never to have been authenticated and delivered
thereunder).
C. The date on which the principal of the Securities is due and
payable shall be ______________, 2027.
1
<PAGE> 2
D. The Securities shall bear interest at the rate of _____% per
annum (based upon a 360-day year of twelve 30-day months), from and including
the date of original issuance or from and including the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable quarterly in arrears on the 15th day of March, June, September
and December in each year (each, an "Interest Payment Date"), commencing
________, 1997, until the principal thereof is paid or made available for
payment. The Business Day next preceding an Interest Payment Date shall be the
"Regular Record Date" for the interest payable on such Interest Payment Date.
Accrued interest that is not paid on such applicable Interest Payment Date will
bear additional interest on the amount thereof (to the extent permitted by law)
at a rate per annum of ______% thereof compounded quarterly.
In addition, so long as no Event of Default with respect to the
Securities has occurred or is continuing, the Company has the right under the
Indenture at any time during the term of such Securities to defer the payment of
interest at any time or from time to time for a period not exceeding 20
consecutive quarterly periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity. At the end of
such Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of _____%, compounded
quarterly, to the extent permitted by applicable law).
E. Principal of (and premium, if any) and interest on the
Securities will be payable, and, except as provided in Section 3.5 of the
Indenture with respect to a Global Security (as defined below), the transfer of
the Securities will be registrable and Securities (except as provided in
paragraph (Q) hereof) will be exchangeable for Securities bearing identical
terms and provisions at the corporate trust office of Wilmington Trust Company
in the City of Wilmington, Delaware.
F. The Securities will be redeemable in whole at any time and in
part from time to time, at the option of the Company at any time on or after
__________, 2002, subject to the Company having received prior regulatory
approval if then so required, at a redemption price equal to the accrued and
unpaid interest on the Securities so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof.
In addition, upon the occurrence of a Tax Event, an Investment Company
Event or a Capital Treatment Event (as each such term is defined below) the
Company may, at its option and subject to receipt of prior regulatory approval
if then required under applicable capital guidelines or policies, prepay the
Securities in whole (but not in part) at any time within 90 days of the
occurrence of such Tax Event, Investment Company Event or a Capital Treatment
Event, at a redemption price equal to the accrued and unpaid interest on the
Securities so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof.
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced
2
<PAGE> 3
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities of the Trust, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States Federal income tax with respect to
income received or accrued on the Securities, (ii) interest payable by the
Company on the Securities is not, or within 90 days of the date of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
Federal income tax purposes, or (iii) the Trust is, or will be within 90 days of
the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means, in respect of the Trust, the receipt
by the Trust of an Opinion of Counsel, rendered by a law firm experienced in
such matters, to the extent that, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, the Trust
is or will be considered an "investment company" that is required to be
registered under the 1940 Act, which change becomes effective on or after the
date of original issuance of the Preferred Securities of the Trust.
"Capital Treatment Event" means, in the event that the Company becomes
subject to capital adequacy guidelines, the reasonable determination by the
Company that, as a result of any amendment to, or change (including any
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such prospective change, pronouncement or decision is announced on
or after the date of the issuance of the Preferred Securities of the Trust,
there is more than an insubstantial risk of impairment of the Company's ability
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier I Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the primary federal regulator of the Company, as then in
effect and applicable to the Company.
G. The Company shall not be obligated to redeem or purchase any
Securities pursuant to any sinking fund or analogous provisions or at the option
of the Holder.
H. The Securities will be issued only in fully registered form
and the authorized minimum denomination of the Securities shall be $25.00 and
any integral multiple of $25.00 in excess thereof.
I. The Securities shall be denominated, and payments of
principal of (and premium, if any) and interest on the Securities of such series
will be made, in United States dollars.
3
<PAGE> 4
J. The Securities shall be subject to the Events of Default
specified in Section 5.1, paragraphs (1) through (5), of the Indenture.
K. The portion of the principal amount of the Securities which
shall be payable upon declaration of acceleration of maturity thereof shall not
be other than the principal amount thereof, provided, that, if such acceleration
is declared by the Holders of at least 25% in aggregate liquidation amount of
the Preferred Securities then outstanding, then, upon such declaration of
acceleration, the Securities which shall be payable shall be the principal
amount thereof plus accrued interest (including any Additional Interest).
L. The Securities will be issued in fully registered form,
without coupons. The Securities will not be issued in bearer form.
M. The amount of payments of principal of and any premium or
interest on the Securities will not be determined with reference to an index.
N. The Securities shall not be issued in the form of a temporary
Global Security (as defined below).
O. The Securities will initially be in certificated form
registered in the name of the name of Wilmington Trust Company as Property
Trustee for the Trust (the "Certificated Securities"). The Securities may, in
the sole discretion of the Company, be deposited with, and on behalf of, The
Depository Trust Company, New York, New York, as Depositary, and will be
represented by a global security (a "Global Security") registered in the name of
a nominee of the Depositary. If, and so long as the Depositary or its nominee is
the registered holder of any Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole Holder of the Securities of such
series represented by such Global Security for all purposes under the Indenture
and the Securities. The Certificated Securities or the Global Securities, as the
case may be, shall bear no legends.
P. The Trustee shall be Paying Agent.
Q. The Securities will not be convertible into any other
securities or property of the Company. The Securities of any series may not be
exchanged for Securities of any other series.
R. The Trust Agreement, the Amended and Restated Trust Agreement
and the Guarantee Agreement are in the forms attached hereto as Exhibits A, B,
and C respectively.
S. The Securities are subordinate and subject in right of
payment to the prior payment in full of all amounts then due and payable in
respect of all Senior and Subordinated Debt, as provided in the Indenture.
4
<PAGE> 5
T. The Securities shall have additional terms, which terms shall
not be inconsistent with the provisions of the Indenture.
II. Establishment of Forms of Securities Pursuant to Section 2.1 of
Indenture.
It is hereby established pursuant to Section 2.1 of the Indenture that
the Securities shall be substantially in the form attached as Exhibit D hereto.
III. Order for the Authentication and Delivery of Securities Pursuant to
Section 3.3 of the Indenture.
It is hereby ordered pursuant to Section 3.3 of the Indenture that the
Trustee authenticate, in the manner provided by the Indenture, Securities in the
aggregate principal amount of $__________ registered in the name of Wilmington
Trust Company, as Property Trustee, which Securities have been heretofore duly
executed by the proper officers of the Company and delivered to you as provided
in the Indenture, and to deliver said authenticated Securities to Wilmington
Trust Company or its custodian on or before 9:30 a.m., Los Angeles time, on
__________, 1997.
IV. Other Matters.
Attached as Exhibit E hereto are true and correct copies of resolutions
adopted by the Pricing Committee of the Board of Directors of the Company at a
meeting on _________, 1997. Attached as Exhibit F hereto are true and correct
copies of resolutions adopted by the Board of Directors of the Company at a
meeting on August 6, 1997. Such resolutions have not been further amended,
modified or rescinded and remain in full force and effect; and such resolutions
(together with this Officers' Certificate) are the only resolutions or other
action adopted by the Company's Board of Directors or any committee thereof or
by any Authorized Officers relating to the offering and sale of the Securities.
The undersigned have read the pertinent sections of the Indenture
including the related definitions contained therein. The undersigned have
examined the resolutions adopted by the Board of Directors and the Pricing
Committee of the Board of Directors of the Company. In the opinion of the
undersigned, the undersigned have made such examination or investigation as is
necessary to enable the undersigned to express an informed opinion as to whether
or not the conditions precedent to the establishment of (i) a series of
Securities, (ii) the forms of such Securities and (iii) authentication of such
series of Securities, contained in the Indenture have been complied with. In the
opinion of the undersigned, such conditions have been complied with.
5
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
___ th day of ________ 1997.
Central Financial Acceptance Corporation
By: ___________________________
Name:
Title:
By ___________________________
Name:
Title:
6
<PAGE> 1
EXHIBIT 4.4
CERTIFICATE OF TRUST
OF
CFAC CAPITAL I
THIS CERTIFICATE OF TRUST of CFAC CAPITAL I (the "Trust"), dated
September 26, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. (Section) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is CFAC
CAPITAL I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY
as Trustee
By:_______________________
Name:__________________
Title:_________________
----------------------
Gary M. Cypres,
Administrative Trustee
----------------------
Neal E. Gower,
Administrative Trustee
----------------------
Steven D. Olson,
Administrative Trustee
<PAGE> 1
EXHIBIT 4.5
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of September 26, 1997 (this "Trust
Agreement"), among Central Financial Acceptance Corporation, a Delaware
corporation (the "Depositor"), (ii) Wilmington Trust Company a Delaware banking
corporation, as trustee (the "Delaware Trustee"), and (iii) Gary M. Cypres, Neal
E. Gower, and Steven D. Olson, each an individual, as trustees (the
"Administrative Trustees" and, together with the Delaware Trustee, the
"Trustees"). The Depositor and the Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as "CFAC
Capital I" in which name the Trustees, or the Depositor to the extent provided
herein, may engage in the transactions contemplated hereby, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trustees the sum of Ten Dollars ($10.00). The Trustees hereby acknowledge
receipt of such amount in trust from the Depositor, which amount shall
constitute the initial trust estate. The Trustees hereby declare that they will
hold the trust estate in trust for the Depositor. It is the intention of the
parties hereto that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, et seq.
(the "Business Trust Act"), and that this document constitutes the governing
instrument of the Trust. The parties hereto hereby ratify the Trustees' filing
of a Certificate of Trust with the Delaware Secretary of State under the name
"CFAC Capital I."
3. The Depositor and the Trustees will enter into a amended and restated
Trust Agreement, satisfactory to each such party and substantially in the form
included as an exhibit to the 1933 Act Registration Statement (as defined
below), to provide for the contemplated operation of the Trust created hereby
and the issuance of the Trust Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Trust Preferred Securities
of the Trust and possibly certain other securities and (b) if required, a
Registration Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Trust Preferred Securities of the Trust under the
Securities Exchange Act of 1934, as amended; (ii) to file with the Nasdaq
National Market or a national stock exchange (each, an "Exchange") and execute
on behalf of
1
<PAGE> 2
the Trust one or more listing applications and all other applications,
statements, certificates, agreements and other instruments as shall be necessary
or desirable to cause the Trust Preferred Securities to be listed on any of the
Exchanges; (iii) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Trust Preferred Securities under the securities or
blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust,
may deem necessary or desirable; and (iv) to execute on behalf of the Trust that
certain Underwriting Agreement relating to the Trust Preferred Securities, among
the Trust, the Depositor and the Underwriters named therein, substantially in
the form included as an exhibit to the 1933 Act Registration Statement. In the
event that any filing referred to in clauses (i), (ii) and (iii) above is
required by the rules and regulations of the Commission, an Exchange or state
securities or blue sky laws to be executed on behalf of the Trust by one or more
of the Trustees, each of the Trustees, in such Trustee's capacity as a trustee
of the Trust, is hereby authorized and, to the extent so required, directed to
join in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that the Delaware Trustee in its capacity as a
trustee of the Trust shall not be required to join in any such filing or execute
on behalf of the Trust any such document unless required by the rules and
regulations of the Commission, the Exchange or state securities or blue sky
laws. In connection with the filings referred to above, the Depositor and Gary
M. Cypres, Neal E. Gower and Steven D. Olson, each as Trustees and not in their
individual capacities, hereby constitutes and appoints Gary M. Cypres, Neal E.
Gower and Steven D. Olson, and each of them, as the Depositor's or such
Trustee's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the Depositor or such Trustee or in the
Depositor's or such Trustee's name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to the 1933
Act Registration Statement and the 1934 Act Registration Statement (if required)
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Commission, the Exchange and administrators of
the state securities or blue sky laws, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully and to all
intents and purposes as the Depositor or such Trustee might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their respective substitute or substitutes, shall do
or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be four (4) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Depositor which may increase or decrease the
number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon thirty (30) days' prior notice to the
Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.
CENTRAL FINANCIAL ACCEPTANCE
CORPORATION
as Depositor
By:_______________________________________
Name: Gary M. Cypres
Title: President
WILMINGTON TRUST COMPANY
as Trustee
By:_______________________________________
Name:
Title:
By:______________________________________
Gary M. Cypres, as Administrative Trustee
By:______________________________________
Neal E. Gower, as Administrative Trustee
By:______________________________________
Steven D. Olson, as Administrative Trustee
3
<PAGE> 1
EXHIBIT 4.6
AMENDED AND RESTATED TRUST AGREEMENT
among
Central Financial Acceptance Corporation, as Depositor,
Wilmington Trust Company,
as Property Trustee,
Wilmington Trust Company,
as Delaware Trustee,
and
The Administrative Trustees Named Herein
Dated as of October __, 1997
CFAC CAPITAL I
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I. DEFINED TERMS..............................................................................1
Section 1.1. Definitions...............................................................1
ARTICLE II. ESTABLISHMENT OF THE TRUST................................................................10
Section 2.1. Name.....................................................................10
Section 2.2. Office of the Delaware Trustee; Principal Place of Business..............10
Section 2.3. Initial Contribution of Trust Property; Organizational Expenses..........10
Section 2.4. Issuance of the Preferred Securities.....................................11
Section 2.5. Issuance of the Common Securities; Subscription and
Purchase of Debentures...................................................11
Section 2.6. Declaration of Trust.....................................................11
Section 2.7. Authorization to Enter into Certain Transactions.........................12
Section 2.8. Assets of Trust..........................................................15
Section 2.9. Title to Trust Property..................................................15
ARTICLE III. PAYMENT ACCOUNT.........................................................................15
Section 3.1. Payment Account..........................................................15
ARTICLE IV. DISTRIBUTIONS; REDEMPTION...............................................................16
Section 4.1. Distributions............................................................16
Section 4.2. Redemption...............................................................17
Section 4.3. Subordination of Common Securities.......................................19
Section 4.4. Payment Procedures.......................................................19
Section 4.5. Tax Returns and Reports..................................................19
Section 4.6. Payment of Taxes, Duties, Etc. of the Trust..............................20
Section 4.7. Payments under Indenture or Pursuant to Direct Actions...................20
ARTICLE V. TRUST SECURITIES CERTIFICATES.............................................................20
Section 5.1. Initial Ownership........................................................20
Section 5.2. The Trust Securities Certificates........................................20
Section 5.3. Execution and Delivery of Trust Securities Certificates..................21
Section 5.4. Registration of Transfer and Exchange of Preferred Securities
Certificates.............................................................21
Section 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.............................................................22
Section 5.6. Persons Deemed Securityholders...........................................22
Section 5.7. Access to List of Securityholders' Names and Addresses...................22
Section 5.8. Maintenance of Office or Agency..........................................23
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 5.9. Appointment of Paying Agent..............................................23
Section 5.10. Ownership of Common Securities by Depositor..............................24
Section 5.11. Book-Entry Preferred Securities Certificates; Common
Securities Certificate...................................................24
Section 5.12. Notices to Clearing Agency...............................................25
Section 5.13. Definitive Preferred Securities Certificates.............................25
Section 5.14. Rights of Securityholders................................................25
ARTICLE VI. ACTS OF SECURITYHOLDERS; MEETINGS; VOTING................................................27
Section 6.1. Limitations on Voting Rights.............................................27
Section 6.2. Notice of Meetings.......................................................28
Section 6.3. Meetings of Preferred Securityholders....................................28
Section 6.4. Voting Rights............................................................29
Section 6.5. Proxies, etc.............................................................29
Section 6.6. Securityholder Action by Written Consent.................................29
Section 6.7. Record Date for Voting and Other Purposes................................29
Section 6.8. Acts of Securityholders..................................................30
Section 6.9. Inspection of Records....................................................31
ARTICLE VII. REPRESENTATIONS AND WARRANTIES.........................................................31
Section 7.1. Representations and Warranties of the Bank...............................31
Section 7.2. Representations and Warranties of Depositor..............................32
ARTICLE VIII. THE TRUSTEES...........................................................................32
Section 8.1. Certain Duties and Responsibilities......................................32
Section 8.2. Certain Notices..........................................................34
Section 8.3. Certain Rights of Property Trustee.......................................34
Section 8.4. Not Responsible for Recitals or Issuance of Securities...................36
Section 8.5. May Hold Securities......................................................36
Section 8.6. Compensation; Indemnity; Fees............................................36
Section 8.7. Corporate Property Trustee Required; Eligibility of Trustees.............37
Section 8.8. Conflicting Interests....................................................38
Section 8.9. Co-Trustees and Separate Trustee.........................................38
Section 8.10. Resignation and Removal; Appointment of Successor........................40
Section 8.11. Acceptance of Appointment by Successor...................................41
Section 8.12. Merger, Conversion, Consolidation or Succession to Business..............41
Section 8.13. Preferential Collection of Claims Against Depositor or Trust.............42
Section 8.14. Reports by Property Trustee..............................................42
Section 8.15. Reports to the Property Trustee..........................................43
Section 8.16. Evidence of Compliance with Conditions Precedent.........................43
Section 8.17. Number of Trustees.......................................................43
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 8.18. Delegation of Power......................................................44
Section 8.19. Voting...................................................................44
ARTICLE IX. DISSOLUTION, LIQUIDATION AND MERGER......................................................44
Section 9.1. Dissolution Upon Expiration Date.........................................44
Section 9.2. Early Dissolution........................................................44
Section 9.3. Dissolution..............................................................45
Section 9.4. Liquidation..............................................................45
Section 9.5. Mergers, Consolidations, Amalgamations or Replacements
of the Trust.............................................................46
ARTICLE X. MISCELLANEOUS PROVISIONS..................................................................47
Section 10.1. Limitation of Rights of Securityholders..................................47
Section 10.2. Amendment................................................................48
Section 10.3. Counterparts.............................................................49
Section 10.4. Separability.............................................................49
Section 10.5. Governing Law............................................................49
Section 10.6. Payments Due on Non-Business Day.........................................49
Section 10.7. Successors...............................................................49
Section 10.8. Headings.................................................................50
Section 10.9. Reports, Notices and Demands.............................................50
Section 10.10. Agreement Not to Petition................................................50
Section 10.11. Trust Indenture Act; Conflict with Trust Indenture Act...................51
Section 10.12. Acceptance of Terms of Trust Agreement, Guarantee
and Indenture............................................................51
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A ..........................................................................................53
EXHIBIT B ..........................................................................................54
EXHIBIT C ..........................................................................................59
EXHIBIT D ..........................................................................................60
EXHIBIT E ..........................................................................................64
</TABLE>
iii
<PAGE> 5
CFAC CAPITAL I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
--------------- ---------------
<S> <C> <C>
(Section) 310 (a) (1) 8.7
(a) (2) 8.7
(a) (3) 8.7
(a) (4) 2.7 (a) (ii)
(b)
(Section) 311 (a) 8.13
(b) 8.13
(Section) 312 (a) 5.7
(b) 5.7
(c) 5.7
(Section) 313 (a) 8.14 (a)
(a) (4) 8.14 (b)
(b) 8.14 (b)
(c) 10.8
(d) 8.14 (c)
(Section) 314 (a) 8.15
(b) Not Applicable
(c) (1) 8.16
(c) (2) 8.16
(c) (3) Not Applicable
(d) Not Applicable
(e) 1.1, 8.16
(Section) 315 (a) 8.1 (a), 8.3 (a)
(b) 8.2, 10.8
(c) 8.1 (a)
(d) 8.1, 8.3
(e) Not Applicable
(Section) 316 (a) Not Applicable
(a) (1) (A) Not Applicable
(a) (1) (B) Not Applicable
(a) (2) Not Applicable
(b) 5.14
(c) 6.7
(Section) 317 (a) (1) Not Applicable
(a) (2) Not Applicable
(b) 5.9
(Section) 318 (a) 10.10
</TABLE>
- ----------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"), dated as
of October __, 1997, among (i) Central Financial Acceptance Corporation, a
Delaware corporation (including any successors or assigns, the "Depositor"),
(ii) Wilmington Trust Company, a Delaware banking corporation duly organized and
existing under the laws of the State of Delaware, as property trustee, (in such
capacity, the "Property Trustee" and, in its separate corporate capacity and not
in its capacity as Property Trustee, the "Bank"), (iii) Wilmington Trust
Company, a Delaware banking corporation organized under the laws of the State of
Delaware, as Delaware trustee (the "Delaware Trustee"), (iv) Gary M. Cypres, an
individual, Neal E. Gower, an individual, and Steven D. Olson, an individual,
each of whose address is c/o Central Financial Acceptance Corporation, 5480 East
Ferguson Drive, Commerce, California, 90022 (each an "Administrative Trustee"
and collectively the "Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees are referred to collectively
herein as the "Trustees") and (v) the several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and Gary M. Cypres and Neal
E. Gower, and Steven D. Olson, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by the entering into this certain Trust Agreement,
dated as of September 26, 1997 (the "Original Trust Agreement"), and by the
execution and filing by the Delaware Trustee with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on September 26, 1997,
attached as Exhibit A; and
WHEREAS, the Depositor and the Trustees desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the issuance of the Common Securities by the Trust to
the Depositor, (ii) the issuance and sale of the Preferred Securities by the
Trust pursuant to the Underwriting Agreement, (iii) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures and
(iv) the appointment of the Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby agrees as follows:
ARTICLE I.
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
1
<PAGE> 7
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust created and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable Bankruptcy Law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 90 consecutive
days; or
2
<PAGE> 8
(b) the institution by such Person of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable
Bankruptcy Law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
similar official) of such Person or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Bankruptcy Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial
interest in the Preferred Securities Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the State of California are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust,
the Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Preferred Securities Certificates,
substantially in the form attached as Exhibit B, as the same may be amended and
supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. The Depository Trust
Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
3
<PAGE> 9
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, as amended, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership
of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, and (ii) when used with respect to
the Debenture Trustee, the principal office of the Debenture Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
"Debenture Event of Default" means an "Event of Default" as defined in
the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's
____% Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or both (as
the context requires) of (a) Preferred Securities Certificates issued as
Book-Entry Preferred Securities Certificate as provided in Section 5.11(a) and
(b) Preferred Securities Certificates issued in certificated, fully registered
form as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. (Section) 3801, et seq., as it may be amended from
time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee"
in the preamble to this Trust Agreement solely in its capacity as Delaware
Trustee of the Trust created and continued
4
<PAGE> 10
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Preferred
Securities as provided in Section 4.1.
"Early Dissolution Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of
any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Property Trustee in this Trust Agreement
(other than a covenant or warranty a default in the performance or breach of
which is dealt with in clause (b) or (c) above) and continuation of such default
or breach for a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Property Trustee by the Holders of at least
25% in aggregate liquidation preference of the Outstanding Preferred Securities
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
5
<PAGE> 11
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the holders
of the Preferred Securities, as amended from time to time.
"Holder" means a Securityholder.
"Indenture" means the Junior Subordinated Indenture, dated as of
Octobber __, 1997, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Investment Company Event" means the receipt by the Depositor and the
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date or original
issuance of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of such
Trust Securities, and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Chief
Financial Officer, the Secretary or an Assistant Secretary, of the Depositor,
and delivered to the appropriate Trustee. One of the officers
6
<PAGE> 12
signing an Officers' Certificate given pursuant to Section 8.16 shall be the
principal executive, financial or accounting officer of the Depositor. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
"Option Closing Date" means the date of payment and delivery for any
Preferred Securities issued pursuant to the exercise by Sutro and Co.
Incorporated of the over-allotment option granted to such Persons by the
Underwriting Agrement.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding", when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the Holders of such Trust Securities; provided that, if such
Trust Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in
lieu of which other Trust Securities have been executed and delivered pursuant
to Sections 5.4, 5.5, 5.11 and 5.13; provided, however, that in determining
whether the Holders of the requisite Liquidation Amount of the Outstanding
Preferred Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Preferred Securities owned by the
Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding,
7
<PAGE> 13
except that (a) in determining whether any Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Preferred Securities that such Trustee knows to be so owned shall
be so disregarded and (b) the foregoing shall not apply at any time when all of
the outstanding Preferred Securities are owned by the Depositor, one or more of
the Trustees and/or any such Affiliate. Preferred Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative Trustees the pledgee's
right so to act with respect to such Preferred Securities and that the pledgee
is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures will be held and from which the Property Trustee,
through the Paying Agent, shall make payments to the Securityholders in
accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust designated "___% Cumulative Trust Preferred Securities",
having a Liquidation Amount of $25 and having the rights provided therefor in
this Trust Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the Person identified as the "Property Trustee"
in the preamble to this Trust Agreement solely in its capacity as Property
Trustee of the Trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Preferred Securities.
8
<PAGE> 14
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Preferred Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" means a Person in whose name a Trust Security is
registered in the Securities Register; any such Person shall be deemed to be a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under this Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Depositor on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, will not be, deductible by the Depositor, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits hereto and (ii) for all
purposes of this Amended and Restated Trust Agreement and any such modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Trust Agreement and any such
modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
9
<PAGE> 15
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means that certain Underwriting Agreement dated
as of October ___, 1997, among the Trust, the Depositor, and Sutro & Co.
Incorporated.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 2.1. Name.
The Trust continued hereby shall be known as "CFAC CAPITAL I," as such
name may be modified from time to time by the Administrative Trustees following
written notice to the Holders of Trust Securities and the other Trustees, in
which name the Trustees may engage in the transactions contemplated hereby, make
and execute contracts and other instruments on behalf of the Trust and sue and
be sued.
SECTION 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or such other address in
the State of Delaware as the Delaware Trustee may designate by written notice to
the Securityholders and the Depositor. The principal executive office of the
Trust is c/o Central Financial Acceptance Corporation, 5480 East Ferguson Drive,
Commerce, California, 90022.
SECTION 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Trustees acknowledges receipt in trust from the Depositor in
connection with the Trust Agreement of the sum of $10, which constituted the
initial Trust Property. The Depositor shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Depositor shall
make no claim upon the Trust Property for the payment of such expenses.
10
<PAGE> 16
SECTION 2.4. Issuance of the Preferred Securities.
The Depositor and an Administrative Trustee, on behalf of the Trust and
pursuant to the Trust Agreement, executed and delivered the Underwriting
Agreement. Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Underwriter named in the
Underwriting Agreement, Preferred Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, in an aggregate amount of
_________ Preferred Securities having an aggregate Liquidation Amount of
$__________, plus on either of the Closing Date or the Option Closing Date, up
to an additional _______ Preferred Securities having an aggregate Liquidation
Amount of $_________ solely to cover over-allotments, as provided for in the
Underwriting Agreement (the "Additional Preferred Securities"), against receipt
of such aggregate purchase price of such Preferred Securities of $__________
(or, in the event that Additional Preferred Securities are issued, up to
$__________), which amount the Administrative Trustee shall promptly deliver to
the Property Trustee.
SECTION 2.5. Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
______ Common Securities having an aggregate Liquidation Amount of $__________,
plus on either of the Closing Date or the Option Closing Date, up to an
additional _____ Common Securities having an aggregate Liquidation Amount of
$______ (the "Additional Common Securities") to meet the capital requirements of
the Trust in the event that Additional Preferred Securities are issued, against
payment by the Depositor of such amount, which amount such Administrative
Trustee shall promptly deliver to the Property Trustee. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to
and purchase from the Depositor Debentures, registered in the name of the Trust
and having an aggregate principal amount equal to $__________ (or, in the event
that Additional Preferred Securities and Additional Common Securities are
issued, up to $__________), and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $__________ (or, in the event that Additional Preferred
Securities and Additional Common Securities are issued, up to $__________), such
amount being the sum of the amounts delivered to the Property Trustee pursuant
to (i) the second sentence of Section 2.4 and (ii) the first sentence of this
Section 2.5.
SECTION 2.6. Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures, and (b) to engage in those activities necessary, advisable or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust
11
<PAGE> 17
Property in trust upon and subject to the conditions set forth herein for the
benefit of the Trust and the Securityholders. The Administrative Trustees shall
have all rights, powers and duties set forth herein and in accordance with
applicable law with respect to accomplishing the purposes of the Trust. The
Delaware Trustee shall not be entitled to exercise any powers, nor shall the
Delaware Trustee have any of the duties and responsibilities, of the Property
Trustee or the Administrative Trustees set forth herein. The Delaware Trustee
shall be one of the Trustees of the Trust for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Delaware Business Trust Act.
SECTION 2.7. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section and Section 2.6, and in accordance
with the following provisions (i) and (ii), the Trustees shall have the
authority to enter into all transactions and agreements determined by the
Trustees to be appropriate in exercising the authority, express or implied,
otherwise granted to the Trustees under this Trust Agreement, and to perform all
acts in furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect
to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the Expense
Agreement and the Certificate Depository Agreement and such
other agreements as may be necessary or desirable in connection
with the purposes and function of the Trust;
(C) assisting in the registration (including the
execution of a registration statement on the appropriate form)
of the Preferred Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture under
the Trust Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon such securities exchange or exchanges as shall
be determined by the Depositor and the registration of the
Preferred Securities under the Exchange Act, and the preparation
and filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Debentures to the Securityholders in accordance with
this Trust Agreement;
(F) the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with
this Trust Agreement;
12
<PAGE> 18
(G) registering transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
(I) unless otherwise determined by the Depositor,
the Property Trustee or the Administrative Trustees, or as
otherwise required by the Delaware Business Trust Act or the
Trust Indenture Act, to execute on behalf of the Trust (either
acting alone or together with any or all of the Administrative
Trustees) any documents that the Administrative Trustees have
the power to execute pursuant to this Trust Agreement; and
(J) the taking of any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this Trust
Agreement for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with respect
to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the Payment
Account;
(D) the distribution through the Paying Agent of
amounts owed to the Securityholders in respect of the Trust
Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to
the Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
13
<PAGE> 19
(I) after an Event of Default (other than under
paragraph (b), (c), (d) or (e) of the definition of such term if
such Event of Default is by or with respect to the Property
Trustee) the taking of any action incidental to the foregoing as
the Property Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this Trust
Agreement and protect and conserve the Trust Property for the
benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder);
(J) so long as the Property Trustee is the
Securities Registrar, registering transfers of the Trust
Securities in accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
2.7(a)(ii), the Property Trustee shall have none of the duties,
liabilities, powers or the authority of the Administrative
Trustees set forth in Section 2.7(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution by the Trust of a registration statement on
the appropriate form in relation to the Preferred Securities, including
any amendments thereto;
(ii)) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts,
other than actions which must be taken by or on behalf of the Trust, and
the advice to the Trustees of actions they must take on behalf of the
Trust, and the preparation for execution and filing of any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States;
14
<PAGE> 20
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the New York Stock Exchange or
any other national stock exchange or the Nasdaq National Market for
listing upon notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the Commission
and the execution on behalf of the Trust of a registration statement on
Form 8-A relating to the registration of the Preferred Securities under
Section 12(b) or 12(g) of the Exchange Act, including any amendments
thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be an
"investment company" required to be registered under the 1940 Act, or fail to be
classified as a grantor trust for United States federal income tax purposes and
so that the Debentures will be treated as indebtedness of the Depositor for
United States federal income tax purposes. In this connection, the Depositor and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the Certificate of Trust or this Trust Agreement, that each
of the Depositor and any Administrative Trustee determines in its discretion to
be necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the holders of the
Preferred Securities.
SECTION 2.8. Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
SECTION 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
SECTION 3.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control
15
<PAGE> 21
and sole right of withdrawal with respect to the Payment Account for the purpose
of making deposits in and withdrawals from the Payment Account in accordance
with this Trust Agreement. All monies and other property deposited or held from
time to time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Securityholders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial interests in
the Trust Property, and Distributions (including of Additional Amounts) will be
made on the Trust Securities at the rate and on the dates that payments of
interest (including of Additional Interest, as defined in the Indenture) are
made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be
cumulative, and will accumulate whether or not there are funds of the
Trust available for the payment of Distributions. Distributions shall
accrue from the date of original issuance of the Trust Securities, and,
except in the event (and to the extent) that the Depositor exercises its
right to defer the payment of interest on the Debentures pursuant to the
Indenture, shall be payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing on __________. If
any date on which a Distribution is otherwise payable on the Trust
Securities is not a Business Day, then the payment of such Distribution
shall be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) with
the same force and effect as if made on such date (each date on which
distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(ii) Assuming payments of interest on the Debentures are made
when due (and before giving effect to Additional Amounts, if
applicable), Distributions on the Trust Securities shall be payable at a
rate of _____% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions payable for any full period
shall be computed on the basis of a 360-day year of twelve 30-day
months. The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day year of
twelve 30-day months. The amount of Distributions payable for any period
shall include the Additional Amounts, if any.
16
<PAGE> 22
(iii) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on
each Distribution Date only to the extent that the Trust has funds then
on hand and available in the Payment Account for the payment of such
Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be one Business Day prior to such Distribution Date; provided, however,
that in the event that the Preferred Securities do not remain in book-entry-only
form, the relevant record date shall be the date 15 days prior to the relevant
Distribution Date.
SECTION 4.2. Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of
the Debentures, the Trust will be required to redeem, subject to Section 4.3, a
Like Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Trust has funds then on hand and available in the Payment Account for
the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect
of any Preferred Securities, then, by 12:00 noon, Eastern time, on the
Redemption Date, subject to Section 4.2(c), with respect to Preferred Securities
held in book-entry form, the Property Trustee will irrevocably
17
<PAGE> 23
deposit with the Clearing Agency for the Preferred Securities funds sufficient
to pay the applicable Redemption Price and will give such Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. With respect to Preferred Securities held in certificated form,
the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with
the Paying Agent funds sufficient to pay the applicable Redemption Price and
will give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their Preferred
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest,
and such Securities will cease to be outstanding. In the event that any date on
which any Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), with the same force and effect as if made on such date. In the
event that payment of the Redemption Price in respect of any Trust Securities
called for redemption is improperly withheld or refused and not paid either by
the Trust or by the Depositor pursuant to the Guarantee, Distributions on such
Trust Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price is actually paid, in which case the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the recordholders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date; provided, however, that in the event
that the Preferred Securities do not remain in book-entry-only form, the
relevant record date shall be the date fifteen days prior to the relevant
Redemption Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected on a pro rata basis (based upon Liquidation Amounts) not more
than 60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $25 or an integral multiple of $25 in excess thereof) of
the Liquidation Amount of Preferred Securities of a denomination larger than
$25. The Property Trustee shall promptly notify the Security Registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed
18
<PAGE> 24
or to be redeemed only in part, to the portion of the Liquidation Amount of
Preferred Securities that has been or is to be redeemed.
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 4.2(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional Amounts, if
applicable) on, or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Preferred Securities and not the Holder of the Common Securities, and only
the Holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
SECTION 4.4. Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which shall credit the relevant Persons' accounts at such
Clearing Agency on the applicable Distribution Dates. Payments in respect of the
Common Securities shall be made in such manner as shall be mutually agreed
between the Property Trustee and the Common Securityholder.
SECTION 4.5. Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a)
19
<PAGE> 25
prepare and file (or cause to be prepared and filed) the appropriate Internal
Revenue Service form required to be filed in respect of the Trust in each
taxable year of the Trust and (b) prepare and furnish (or cause to be prepared
and furnished) to each Securityholder the appropriate Internal Revenue Service
form required to be provided on such form. The Administrative Trustees shall
provide the Depositor and the Property Trustee with a copy of all such returns
and reports promptly after such filing or furnishing. The Trustees shall comply
with United States federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
SECTION 4.6. Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the Property
Trustee shall promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the Trust by the
United States or any other taxing authority.
SECTION 4.7. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities shall
be reduced by the amount of any corresponding payment such Holder (and any Owner
with respect thereto) has directly received pursuant to Section 5.8 of the
Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 5.2. The Trust Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $25 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual signature of at
least one Administrative Trustee. Trust Securities Certificates bearing the
manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder
20
<PAGE> 26
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 5.4, 5.11 and 5.13.
SECTION 5.3. Execution and Delivery of Trust Securities Certificates.
At the Closing Date or the Option Closing Date, if applicable, the
Administrative Trustees shall cause Trust Securities Certificates, in an
aggregate Liquidation Amount as provided in Section 2.4, to be executed on
behalf of the Trust and delivered to or upon the written order of the Depositor,
signed by its chairman of the board, its president, any executive vice president
or any vice president, treasurer or assistant treasurer or controller without
further corporate action by the Depositor, in authorized denominations.
SECTION 5.4. Registration of Transfer and Exchange of Preferred
Securities Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees.
The Securities Registrar shall not be required to register the transfer
of any Preferred Securities that have been called for redemption. At the option
of a Holder, Preferred Securities Certificates may be exchanged for other
Preferred Securities Certificates in authorized denominations of the same class
and of a like aggregate Liquidation Amount upon surrender of the Preferred
Securities Certificates to be exchanged at the office or agency maintained
pursuant to Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee in accordance with such Person's customary practice. The
Trust shall not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close business on
the day of such mailing or (ii)
21
<PAGE> 27
register the transfer of or exchange any Preferred Securities so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Preferred Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION 5.6. Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in whose
name any Trust Securities Certificate shall be registered in the Securities
Register as the owner of such Trust Securities Certificate for the purpose of
receiving Distributions and for all other purposes whatsoever, and neither the
Trustees nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 5.7. Access to List of Securityholders' Names and Addresses.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee (a) semi-annually on or before
January 1 and July 1 in each year, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Securityholders as of
the most recent Record Date and (b) promptly after receipt by any Administrative
Trustee or the Depositor of a request therefor from the Property Trustee, such
other information as the Property Trustee may reasonably require in order to
enable the Property Trustee to discharge its obligations under this Trust
Agreement, in each case to the extent such information is in the possession or
control of the Administrative Trustees or the Depositor and is not identical to
a previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar. The rights of Securityholders
to communicate with other Securityholders with respect to their rights under
22
<PAGE> 28
this Trust Agreement or under the Trust Securities, and the corresponding rights
of the Trustee shall be as provided in the Trust Indenture Act. Each
Securityholder, by receiving and holding a Trust Securities Certificate, and
each Owner shall be deemed to have agreed not to hold the Depositor, the
Property Trustee or the Administrative Trustees accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 5.8. Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or
agency or agencies where Preferred Securities Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Trustees in respect of the Trust Securities Certificates may be served.
The Administrative Trustees initially designate the principal corporate trust
office of the Property Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890- 0001, Attention: Corporate Trust Administration, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
SECTION 5.9. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall
apply to the Property Trustee also in its role as Paying Agent, for so long as
the Property Trustee shall act as Paying Agent and, to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Trust
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
23
<PAGE> 29
SECTION 5.10. Ownership of Common Securities by Depositor.
At the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, other than a transfer in connection with a consolidation or merger of
the Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE".
SECTION 5.11. Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities Certificates, upon original issuance,
will be issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full
force and effect;
(ii) the Securities Registrar, the Paying Agent and the
Trustees shall be entitled to deal with the Clearing Agency for all
purposes of this Trust Agreement relating to the Book-Entry Preferred
Securities Certificates (including the payment of the Liquidation Amount
of and Distributions on the Preferred Securities evidenced by Book-Entry
Preferred Securities Certificates) the Book-Entry Preferred Securities
Certificates and shall have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Trust Agreement, the
provisions of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing
Agency and shall be limited to those established by law and agreements
between such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Preferred Securities Certificates are issued
pursuant to Section 5.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments on the Preferred Securities to such Clearing
Agency Participants. Any Clearing Agency designated pursuant here to
will not be deemed an agent of the Trustee for any purpose.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
24
<PAGE> 30
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION 5.13. Definitive Preferred Securities Certificates.
If (a) the Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Preferred Securities Certificates, and the Depositor is
unable to locate a qualified successor, (b) the Depositor at its option advises
the Trustees in writing that it elects to terminate the book-entry system
through the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Property Trustee in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interest of the Owners of Preferred
Securities Certificates, then the Property Trustee shall notify the Clearing
Agency and the Clearing Agency shall notify all Owners of Preferred Securities
Certificates and the other Trustees of the occurrence of any such event and of
the availability of the Definitive Preferred Securities Certificates to Owners
of such class or classes, as applicable, requesting the same. Upon surrender to
the Property Trustee of the typewritten Preferred Securities Certificate or
Certificates representing the Book Entry Preferred Securities Certificates by
the Clearing Agency, accompanied by registration instructions, the
Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Preferred Securities Certificates, the Trustees shall recognize
the Holders of the Definitive Preferred Securities Certificates as
Securityholders. The Definitive Preferred Securities Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrative Trustees, as evidenced by the
execution thereof by the Administrative Trustees or any one of them.
SECTION 5.14. Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 2.9,
and the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights and when issued and delivered to
Securityholders against payment of the purchase price therefor will be fully
paid and nonassessable by the Trust. The Holders of the Trust Securities, in
their capacities as such, shall be entitled to the same limitation of personal
25
<PAGE> 31
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) or so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in principal amount of the outstanding Debentures fail to
declare the principal of all of the Debentures to be immediately due and
payable, the Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right by a notice in writing to the
Depositor and the Debenture Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Debentures shall
become immediately due and payable, provided that the payment of principal and
interest on such Debentures shall remain subordinated to the extent provided in
the Indenture.
At any time after such a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including
any Additional Interest (as defined in the Indenture)) on all of
the Debentures,
(B) the principal of (and premium, if any, on) any
Debentures which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Debentures, and
(C) all sums paid or advanced by the Debenture
Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee
and the Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
The Holders of a majority in aggregate Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
26
<PAGE> 32
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Preferred
Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to
the fullest extent permitted by law and subject to the terms of this Trust
Agreement and the Indenture, upon a Debenture Event of Default specified in
Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 5.8 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or interest on Debentures having a principal
amount equal to the Liquidation Amount of the Preferred Securities of such
Holder (a "Direct Action"). Except as set forth in Section 5.14(b) and this
Section 5.14(c), the Holders of Preferred Securities shall have no right to
exercise directly any right or remedy available to the holders of, or in respect
of, the Debentures.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and
10.2 and in the Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 5.13 of
the Indenture,
27
<PAGE> 33
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the Holders of at least a majority in Liquidation Amount of all Outstanding
Preferred Securities, provided, however, that where a consent under the
Indenture would require the consent of each Holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of Preferred Securities, except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that such action shall not
cause the Trust to fail to be classified as a grantor trust for United States
federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for,
or the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States federal income tax purposes.
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.8 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 6.3. Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of Holders of
record of 25% of the Outstanding Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
28
<PAGE> 34
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their Liquidation
Amount) held by the Preferred Securityholders of record present, either in
person or by proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 6.4. Voting Rights.
Securityholders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
SECTION 6.5. Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid more
than three years after its date of execution.
SECTION 6.6. Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding a majority of all Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing (based upon their aggregate Liquidation Amount).
SECTION 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more
29
<PAGE> 35
than 90 days prior to the date of any meeting of Securityholders or the payment
of a Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.8. Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder
30
<PAGE> 36
or Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
SECTION 6.9. Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Bank.
The Bank hereby represents and warrants for the benefit of the Depositor
and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Bank and constitutes the valid and legally binding agreement of
the Bank enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(d) the execution, delivery and performance of this Trust Agreement
has been duly authorized by all necessary corporate or other action on the part
of the Bank and does not require any approval of stockholders of the Bank and
such execution, delivery and performance will not (i) violate the charter or
bylaws of the Bank, (ii) violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Bank is a party or by
which it is bound, or (iii) violate any law, governmental rule or regulation of
the United States or the State
31
<PAGE> 37
of Delaware, as the case may be, governing the banking, trust or general powers
of the Bank or any order, judgment or decree applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank of
this Trust Agreement nor the consummation of any of the transactions by the
Property Trustee or the Delaware Trustee (as appropriate in context)
contemplated herein or therein requires the consent or approval of, the giving
of notice to, the registration with or the taking of any other action with
respect to any governmental authority or agency under any existing federal law
governing the banking, trust or general powers of the Bank, as the case may be,
under the laws of the United States or the State of Delaware;
(f) there are no proceedings pending or, to the best the Bank's
knowledge, threatened against or affecting the Property Trustee or the Delaware
Trustee in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and authority of
the Bank to enter into or perform its obligations as one of the Trustees under
this Trust Agreement.
SECTION 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on
behalf of the Trust have been duly authorized and will have been, duly and
validly executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of each such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee or the
Delaware Trustee, as the case may be, of Bank, this Trust Agreement.
ARTICLE VIII.
THE TRUSTEES
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
32
<PAGE> 38
reasonably assured to it. Whether or not therein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustees shall be subject to the
provisions of this Section. No Administrative Trustee or the Delaware Trustee
shall be subject to any liability under this Trust Agreement except for its own
grossly negligent action, its own grossly negligent failure to act, or its own
willful misconduct. To the extent that, at law or in equity, a Trustee has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Securityholders, such Trustee shall not be liable to the Trust
or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Trustees
otherwise existing at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 8.1(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of the Trust Securities
given in accordance with this Trust Agreement relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred upon
the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such Property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
33
<PAGE> 39
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Depositor; and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the Payment
Account maintained by the Property Trustee pursuant to Section 3.1 and
except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or misconduct of
the Administrative Trustees or the Depositor.
SECTION 8.2. Certain Notices.
(a) Within 5 Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property Trustee, the
Property Trustee shall transmit, in the manner and to the extent provided in
Section 10.9, notice of such Event of Default to the Securityholders, the
Administrative Trustees and the Depositor, unless the Event of Default shall
have been cured or waived. For purposes of this Section the term "Event of
Default" means any event that is, or after notice or lapse of time or both would
become, and Event of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in Section 10.9, notice
of the Depositor's election to begin or further extend an Extension Period on
the Debentures (unless such election shall have been revoked) within the time
specified for transmitting such notice to the holders of the Debentures pursuant
to the Indenture as originally executed.
SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting
or refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with any other provisions
contained herein or (iii) the Property Trustee is unsure of the application of
any provision of this Trust Agreement, then, except as to any matter as to which
the Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the
34
<PAGE> 40
Property Trustee shall be instructed in writing to take, or to refrain from
taking, by the Depositor; provided, however, that if the Property Trustee does
not receive such instructions of the Depositor within ten Business Days after it
has delivered such notice, or such reasonably shorter period of time set forth
in such notice (which to the extent practicable shall not be less than two
Business Days), it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall deem
advisable and in the best interests of the Securityholders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Depositor or
the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(f) the Property Trustee may consult with counsel (which counsel may
be counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice, such counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees; the Property Trustee shall
have the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more
Securityholders, but the Property Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the
35
<PAGE> 41
Property Trustee shall be responsible for its own negligence or recklessness
with respect to selection of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 8.5. May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, except as provided in the definition of the term "Outstanding"
in Article I and subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation
for all services rendered by them hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) as specified in a separate agreement between any of the Trustees
and the Depositor;
36
<PAGE> 42
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willfulness;
and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or dissolution of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or ordinary negligence in the case of the Property Trustee), bad
faith or willful misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may (subject to Section 8.8) engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no rights by
virtue of this Trust Agreement in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Depositor, nor any Trustee, shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and the Depositor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Trustee may
engage or be interested in any financial or other transaction with the Depositor
or any Affiliate of the Depositor, or may act as depository for, trustee or
agent for, or act on any committee or body of holders of, securities or other
obligations of the Depositor or its Affiliates.
SECTION 8.7. Corporate Property Trustee Required; Eligibility of
Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this
Section, the combined capital and
37
<PAGE> 43
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Property Trustee with respect to the Trust Securities shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware or (ii)
a legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
SECTION 8.8. Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Depositor and the Administrative Trustees, by agreed
action of the majority of such Trustees, shall have power to appoint, and upon
the written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Depositor does not join
in such appointment within 15 days after the receipt by it of a request so to
do, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any co-trustee
or separate trustee appointed pursuant to this Section shall either be (i) a
natural person who is at least 21 years of age and a resident of the United
States or (ii) a legal entity with its principal place of business in the United
States that shall act through one or more persons authorized to bind such
entity.
38
<PAGE> 44
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act of
a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
39
<PAGE> 45
SECTION 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Common
Securityholder. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after the giving of such notice of resignation, the Relevant
Trustee may petition, at the expense of the Trust, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). In no event will the Holders of
the Preferred Securities have the right to vote to appoint, remove or replace
the Administrative Trustee. An Administrative Trustee may be removed by the
Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
40
<PAGE> 46
The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.8 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any corporation
41
<PAGE> 47
succeeding to all or substantially all the corporate trust business of such
Relevant Trustee, shall be the successor of such Relevant Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against Depositor or
Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.14. Reports by Property Trustee.
(a) Not later than March 31 of each year commencing with the year
commencing January 1, 1998, the Property Trustee shall transmit to all
Securityholders in accordance with Section 10.8, and to the Depositor, a brief
report dated as of the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof,
if to the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect;
42
<PAGE> 48
(ii) a statement that the Property Trustee has complied with
all of its obligations under this Trust Agreement during the
twelve-month period (or, in the case of the initial report, the period
since the Closing Date) ending with such December 31 or, if the Property
Trustee has not complied in any material respect with such obligations,
a description of such noncompliance; and
(iii) any change in the property and funds in its possession
as Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties hereunder
which it has not previously reported and which in its opinion materially
affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each national
stock exchange, the Nasdaq National Market or such other interdealer quotation
system or self-regulatory organization upon which the Trust Securities are
listed or traded, with the Commission and with the Depositor.
SECTION 8.15. Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
SECTION 8.16. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314 (c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.17. Number of Trustees.
(a) The number of Trustees shall be five (5) provided that the
Holder of all of the Common Securities by written instrument may increase or
decrease the number of Administrative Trustees. The Property Trustee and the
Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased
43
<PAGE> 49
pursuant to Section 8.17(a), a vacancy shall occur. The vacancy shall be filled
with a Trustee appointed in accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 8.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Trust Agreement), shall have all the
powers granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 8.18. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Trust Agreement, as set
forth herein.
SECTION 8.19. Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX.
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless dissolved earlier, the Trust shall automatically dissolve on
December 31, 2028 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
SECTION 9.2. Early Dissolution.
The first to occur of any of the following events is an "Early
Dissolution Event," upon the occurrence of which the Trust shall dissolve:
44
<PAGE> 50
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the Depositor
at any time to dissolve the Trust and distribute Debentures to Securityholders
in exchange for a Like Amount of the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
SECTION 9.3. Dissolution.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall dissolve upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders, and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Business Trust Act.
SECTION 9.4. Liquidation.
(a) If an Early Dissolution Event specified in clause (a), (b) or
(d) of Section 9.2 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to each Securityholder a Like Amount of
Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid mailed not later than
30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust
Securities at such Holder's address appearing in the Securities Register. All
notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for
certificates representing the Like Amount of the Debentures, or if
Section 9.4(d) applies receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
45
<PAGE> 51
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Administrative Trustees shall establish a record date for
such distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange, (iii)
the Depositor shall use its best efforts to have the Debentures listed on the
Nasdaq National Market or on such other exchange, interdealer quotation system
or self-regulatory organization as the Preferred Securities are then listed,
(iv) any Trust Securities Certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal will be made to Holders of Debentures
represented by such certificates) and (v) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
a Like Amount of Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
wound-up or terminated, by the Property Trustee in such manner as the Property
Trustee determines. In such event, on the date of the dissolution of the Trust,
Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such winding up or termination, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then, subject
to the next succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation Amounts).
The Holder of the Common Securities will be entitled to receive Liquidation
Distributions upon any such winding-up or termination pro rata (determined as
aforesaid) with Holders of Preferred Securities, except that, if a Debenture
Event of Default has occurred and is continuing, Holders of the Preferred
Securities shall have a priority over the Holders of Common Securities.
SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of
the Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body,
46
<PAGE> 52
except pursuant to this Section 9.5 or Section 9.4. At the request of the
Depositor, with the consent of the Administrative Trustees and without the
consent of the Holders of the Preferred Securities, the Property Trustee or the
Delaware Trustee, the Trust may merge with or into, consolidate, amalgamate, or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to a trust organized as such under the laws of any
State; provided, that (i) such successor entity either (a) expressly assumes all
of the obligations of the Trust with respect to the Preferred Securities or (b)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as the Preferred Securities rank in
priority with respect to distributions and payments upon liquidation, redemption
and otherwise, (ii) the Depositor expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed or traded,
or any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Preferred
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be required
to register as an investment company under the 1940 Act and (viii) the Depositor
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in Liquidation Amount of
the Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Securityholders.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives
47
<PAGE> 53
or heirs of such person or any Securityholder for such person, to claim an
accounting, take any action or bring any proceeding in any court for a partition
or winding up of the arrangements contemplated hereby, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee, the Administrative Trustees and the Depositor, without the
consent of any Securityholders, (i) to cure any ambiguity, correct or supplement
any provision herein which may be inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, which shall not be inconsistent with the other
provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any such amendments of this Trust Agreement
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any provision of
this Trust Agreement may be amended by the Administrative Trustees and the
Property Trustee with (i) the consent of Trust Securityholders representing not
less than a majority (based upon Liquidation Amounts) of the Trust Securities
then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status of an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Administrative Trustee shall enter into or consent to any amendment to this
Trust Agreement which would cause the Trust to fail or cease to qualify for the
exemption from status of an investment company under the 1940 Act or fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Delaware Trustee or the Depositor, as the
case may be, this Trust Agreement may not be
48
<PAGE> 54
amended in a manner which imposes any additional obligation on the Depositor or
the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
SECTION 10.3. Counterparts.
This Trust Agreement may be executed in one or more counterparts, each
of which shall be an original and all of which shall constitute one and the same
instrument.
SECTION 10.4. Separability.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 10.5. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 10.6. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no interest shall
accrue thereon for the period after such date.
SECTION 10.7. Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee,
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
49
<PAGE> 55
Article Eight of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
SECTION 10.8. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 10.9. Reports, Notices and Demands.
Any report, notice, demand or other communication which by any provision
of this Trust Agreement is required or permitted to be given or served to or
upon any Securityholder or the Depositor may be given or served in writing by
deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Central Financial
Acceptance Corporation, 5480 East Ferguson Drive, Commerce, California, 90022,
Attention: Gary M. Cypres, facsimile number: (818) ___-____. Such notice, demand
or other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees
shall be given in writing addressed (until another address is published by the
Trust) as follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington , Delaware
19890- 0001; (b) with respect to the Delaware Trustee, to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration; and (c) with respect to
the Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention Administrative Trustees of CFAC CAPITAL I." Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
SECTION 10.10. Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any Bankruptcy Laws or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 10.10, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
the Depositor against the Trust or the commencement of such action and raise the
defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom and such other
50
<PAGE> 56
defenses, if any, as counsel for the Trustee or the Trust may assert. The
provisions of this Section 10.9 shall survive the termination of this Trust
Agreement.
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 10.12. Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By:____________________________________
Name:
Title:
51
<PAGE> 57
WILMINGTON TRUST COMPANY,
as Property Trustee
By:____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:____________________________________
Name:
Title:
_______________________________________
Gary M. Cypres,
as Administrative Trustee
_______________________________________
Neal E. Gower,
as Administrative Trustee
_______________________________________
Steven D. Olson,
as Administrative Trustee
52
<PAGE> 58
EXHIBIT A
CERTIFICATE OF TRUST
OF
CFAC CAPITAL I
THIS CERTIFICATE OF TRUST of CFAC CAPITAL I (the "Trust"), dated
__________, 1997, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. (Section) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is CFAC
CAPITAL I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:____________________________________
Name:
Title:
_______________________________________
Gary M. Cypres,
Administrative Trustee
_______________________________________
________________,
Administrative Trustee
_______________________________________
________________,
Administrative Trustee
53
<PAGE> 59
EXHIBIT B
The Depository Trust Company,
55 Water Street, 49th Floor,
New York, New York 10041-0099
__________, 1997
Attention: _______________
General Counsel's Office
Re: CFAC CAPITAL I ____% Cumulative Trust Preferred Securities
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters relating to
the issuance and deposit with The Depository Trust Company ("DTC") of the CFAC
CAPITAL I ____% Cumulative Trust Preferred Securities, (the "Trust Preferred
Securities"), of CFAC CAPITAL I, a Delaware business trust (the "Issuer"),
formed pursuant to an Amended and Restated Trust Agreement between Central
Financial Acceptance Corporation ("Central") and Wilmington Trust Company, as
Property Trustee, Wilmington Trust Company, as Delaware Trustee, and the
Administrative Trustees named therein. The payment of distributions on the Trust
Preferred Securities, and payments due upon liquidation of the Issuer or
redemption of the Trust Preferred Securities, to the extent the Issuer has funds
available for the payment thereof are guaranteed by Central to the extent set
forth in a Guarantee Agreement dated ____________, 1997 by Central with respect
to the Trust Preferred Securities. Central and the Issuer propose to sell the
Trust Preferred Securities to certain Underwriters (the "Underwriters") pursuant
to a Underwriting Agreement dated ____________, 1997 by and among the
Underwriters, the Issuer and Central, and the Underwriters wish to take delivery
of the Trust Preferred Securities through DTC. Wilmington Trust Company is
acting as transfer agent and registrar with respect to the Trust Preferred
Securities (the "Transfer Agent and Registrar").
To induce DTC to accept the Trust Preferred Securities as eligible for
deposit at DTC, and to act in accordance with DTC's rules with respect to the
Trust Preferred Securities, the Issuer, the Transfer Agent and Registrar and DTC
agree among each other as follows:
1. Prior to the closing of the sale of the Trust Preferred Securities to
the Underwriters, which is expected to occur on or about ____________, 1997,
there shall be deposited with DTC one or more global certificates (individually
and collectively, the "Global Certificate") registered in the name
54
<PAGE> 60
of DTC's Trust Preferred Securities nominee, Cede & Co., representing an
aggregate of ____________ Trust Preferred Securities and bearing the following
legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Issuer or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede
& Co., has an interest herein.
2. The Amended and Restated Trust Agreement of the Issuer provides for
the voting by holders of the Trust Preferred Securities under certain limited
circumstances. The Issuer shall establish a record date for such purposes and
shall, to the extent possible, give DTC notice of such record date not less than
15 calendar days in advance of such record date.
3. In the event of a stock split, conversion, recapitalization,
reorganization or any other similar transaction resulting in the cancellation of
all or any part of the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice of such event at least 5
business days prior to the effective date of such event.
4. In the event of distribution on, or an offering or issuance of rights
with respect to, the Trust Preferred Securities outstanding, the Issuer or the
Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount
of and conditions, if any, applicable to the payment of any such distribution or
any such offering or issuance of rights; (b) any applicable expiration or
deadline date, or any date by which any action on the part of the holders of
Trust Preferred Securities is required; and (c) the date any required notice is
to be mailed by or on behalf of the Issuer to holders of Trust Preferred
Securities or published by or on behalf of the Issuer (whether by mail or
publication, the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before the
Publication Date. The Issuer or the Transfer Agent and Registrar will forward
such notice either in a separate secure transmission for each CUSIP number or in
a secure transmission of multiple CUSIP numbers (if applicable) that includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 calendar days nor more than 60 calendar days prior to the payment of any
such distribution or any such offering or issuance of rights with respect to the
Trust Preferred Securities. After establishing the amount of payment to be made
on the Trust Preferred Securities, the Issuer or the Transfer Agent and
Registrar will notify DTC's Dividend Department of such payment 5 business days
prior to payment date. Notices to DTC's Dividend Department by telecopy shall be
sent to (212) 709-1723. Such notices by mail or by any other means shall be sent
to:
55
<PAGE> 61
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
The Issuer or the Transfer Agent and Registrar shall confirm DTC's
receipt of such telecopy by telephoning the Dividend Department at (212)
709-1270.
5. In the event of a redemption by the Issuer of the Trust Preferred
Securities, notice specifying the terms of the redemption and the Publication
Date of such notice shall be sent by the Issuer or the Transfer Agent and
Registrar to DTC not less than 30 calendar days prior to such event by a secure
means in the manner set forth in paragraph 4. Such redemption notice shall be
sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190,
and receipt of such notice shall be confirmed by telephoning (516) 227-4070.
Notice by mail or by any other means shall be sent to:
Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, New York 11530-4719
6. In the event of any invitation to tender the Trust Preferred
Securities, notice specifying the terms of the tender and the Publication Date
of such notice shall be sent by the Issuer or the Transfer Agent and Registrar
to DTC by a secure means and in a timely manner as described in paragraph 4.
Notices to DTC pursuant to this paragraph and notices of other corporate actions
(including mandatory tenders, exchanges and capital changes) shall be sent,
unless notification to another department is expressly provided for herein, by
telecopy to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094
and receipt of such notice shall be confirmed by telephoning (212) 709-6884, or
by mail or any other means to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
7. All notices and payment advices sent to DTC shall contain the CUSIP
number or numbers of the Trust Preferred Securities and the accompanying
designation of the Trust Preferred Securities, which, as of the date of this
letter, is "CFAC CAPITAL I ____% Cumulative Trust Preferred Securities.
8. Distribution payments or other cash payments with respect to the
Trust Preferred Securities evidenced by the Global Certificate shall be received
by Cede & Co., as nominee of DTC, or its registered assigns in next day funds on
each payment date (or in accordance with existing arrangements between the
Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be made
payable to the order of Cede & Co., and shall be addressed as follows:
56
<PAGE> 62
NDFS Redemption Department
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004-2695
9. DTC may by prior written notice direct the Issuer and the Transfer
Agent and Registrar to use any other telecopy number or address of DTC as the
number or address to which notices or payments may be sent.
10. In the event of a conversion, redemption, or any other similar
transaction (e.g., tender made and accepted in response to the Issuer's or the
Transfer Agent and Registrar's invitation) necessitating a reduction in the
aggregate number of Trust Preferred Securities outstanding evidenced by Global
Certificates, DTC, in its discretion: (a) may request the Issuer or the Transfer
Agent and Registrar to issue and countersign a new Global Certificate; or (b)
may make an appropriate notation on the Global Certificate indicating the date
and amount of such reduction.
11. DTC may discontinue its services as a securities depositary with
respect to the Trust Preferred Securities at any time by giving at least 90
days' prior written notice to the Issuer and the Transfer Agent and Registrar
(at which time DTC will confirm with the Issuer or the Transfer Agent and
Registrar the aggregate number of Trust Preferred Securities deposited with it)
and discharging its responsibilities with respect thereto under applicable law.
Under such circumstances, the Issuer may determine to make alternative
arrangements for book-entry settlement for the Trust Preferred Securities, make
available one or more separate global certificates evidencing Trust Preferred
Securities to any Participant having Trust Preferred Securities credited to its
DTC account, or issue definitive Trust Preferred Securities to the beneficial
holders thereof, and in any such case, DTC agrees to cooperate fully with the
Issuer and the Transfer Agent and Registrar, and to return the Global
Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
12. In the event that the Issuer determines that beneficial owners of
Trust Preferred Securities shall be able to obtain definitive Trust Preferred
Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of
the availability of certificates. In such event, the Issuer or the Transfer
Agent and Registrar shall issue, transfer and exchange certificates in
appropriate amounts, as required by DTC and others, and DTC agrees to cooperate
fully with the Issuer and the Transfer Agent and Registrar and to return the
Global Certificate, duly endorsed for transfer as directed by the Issuer or the
Transfer Agent and Registrar, together with any other documents of transfer
reasonably requested by the Issuer or the Transfer Agent and Registrar.
13. This letter may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
57
<PAGE> 63
Nothing herein shall be deemed to require the Transfer Agent and
Registrar to advance funds on behalf of CFAC CAPITAL I.
Very truly yours,
CFAC CAPITAL I
(as Issuer)
By:____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee, Paying Agent and Registrar
By:____________________________________
Name:
Title:
RECEIVED AND ACCEPTED:
THE DEPOSITORY TRUST COMPANY
By:_______________________
Authorized Officer
58
<PAGE> 64
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES ____
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
CFAC CAPITAL I
____% COMMON SECURITIES
(LIQUIDATION AMOUNT $25 PER COMMON SECURITY)
CFAC CAPITAL I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that Central Financial
Acceptance Corporation (the "Holder") is the registered owner of ________ common
securities of the Trust representing beneficial interests of the Trust and
designated the ____% Common Securities (liquidation amount $25 per Common
Security) (the "Common Securities"). In accordance with Section 5.10 of the
Trust Agreement (as defined below) the Common Securities are not transferable
and any attempted transfer hereof shall be void. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of ___________,1997, as the same may be amended from time to time
(the "Trust Agreement") including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of ______________,1997.
CFAC CAPITAL I
By:______________________________________
Name:
Administrative Trustee
59
<PAGE> 65
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement"), dated as of
____________, 1997, between Central Financial Acceptance Corporation, a
California corporation ("Central"), and CFAC CAPITAL I, a Delaware business
trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from Central and to issue and sell ____%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities") with
such powers, preferences and special rights and restrictions as are set forth in
the Amended and Restated Trust Agreement of the Trust dated as of _________,
1997 as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, Central will directly or indirectly own all of the Common
Securities of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Trust Preferred Securities, which purchase Central hereby agrees shall benefit
Pacific and which purchase Central acknowledges will be made in reliance upon
the execution and delivery of this Agreement, Central and the Trust hereby agree
as follows:
ARTICLE I
SECTION 1.1. Guarantee by Central.
Subject to the terms and conditions hereof, Central hereby irrevocably
and unconditionally guarantees to each person or entity to whom the Trust is now
or hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to holders
of any Trust Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Trust Preferred Securities
or such other similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
SECTION 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Trust Preferred Securities (whether
upon redemption, liquidation, exchange or otherwise) and (b) the date on which
there are no Beneficiaries remaining; provided, however, that this Agreement
shall continue to be effective or shall be reinstated, as the case may be, if at
any time any holder of Trust Preferred Securities or any Beneficiary must
restore payment of any sums paid under the Trust Preferred Securities, under any
Obligation, under the Guarantee Agreement dated the date hereof by Central
60
<PAGE> 66
and Wilmington Trust Company, a Delaware banking corporation, as guarantee
trustee or under this Agreement for any reason whatsoever. This Agreement is
continuing, irrevocable, unconditional and absolute.
SECTION 1.3. Waiver of Notice.
Central hereby waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply, and Central hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 1.4. No Impairment.
The obligations, covenants, agreements and duties of Central under this
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the obligations;
(b) any failure, omission, delay or lack of diligence on the part of the
Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, Central with respect to the happening of any of the foregoing.
SECTION 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against Central and
Central waives any right or remedy to require that any action be brought against
the Trust or any other person or entity before proceeding against Central.
SECTION 1.6. Subrogation.
Central shall be subrogated to all (if any) rights of the Trust in
respect of any amounts paid to the Beneficiaries by Central under this
Agreement; provided, however, that Central shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Agreement, if, at the time of any such payment, any amounts are due and unpaid
under this Agreement.
61
<PAGE> 67
ARTICLE II
SECTION 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives of Central and
shall inure to the benefit of the Beneficiaries.
SECTION 2.2. Amendment.
So long as there remains any Beneficiary or any Trust Preferred
Securities of any series are outstanding, this Agreement shall not be modified
or amended in any manner adverse to such Beneficiary or to the holders of the
Trust Preferred Securities.
SECTION 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail), telex or by registered
or certified mail, addressed as follows (and if so given, shall be deemed given
when mailed or upon receipt of an answer-back, if sent by telex):
CFAC CAPITAL I
c/o Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
Facsimile No.: (818) 720-8607
Attention: Gary M. Cypres
Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
Facsimile No.: (818) 720-8607
Attention: Gary M. Cypres
SECTION 2.4. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES).
62
<PAGE> 68
THIS AGREEMENT is executed as of the day and year first above written.
CENTRAL FINANCIAL ACCEPTANCE
CORPORATION
By:______________________________________
Name:
Title:
CFAC CAPITAL I
By:______________________________________
Name:
Administrative Trustee
63
<PAGE> 69
EXHIBIT E
This Preferred Security is a Global Certificate within the meaning of the Trust
Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depository") or a nominee of the Depository. This
Preferred Security is exchangeable for Trust Preferred Securities registered in
the name of a person other than the Depository or its nominee only in the
limited circumstances described in the Trust Agreement and no transfer of this
Preferred Security (other than a transfer of this Preferred Security as a whole
by the Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to CFAC CAPITAL I or
its agent for registration of transfer, exchange or payment, and any Preferred
Security issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
CERTIFICATE NUMBER P-1 NUMBER OF TRUST PREFERRED SECURITIES _______
CUSIP NO.
----------
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
OF
CFAC CAPITAL I
____% CUMULATIVE TRUST PREFERRED SECURITIES,
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
CFAC CAPITAL I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), hereby certifies that ________________ (the
"Holder") is the registered owner of ________ ( ) Trust Preferred Securities of
the Trust representing an undivided beneficial interest in the assets of the
Trust and designated the CFAC CAPITAL I ____% Cumulative Trust Preferred
Securities, (liquidation amount $25 per Preferred Security) (the "Trust
Preferred Securities"). The Trust Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer as
provided in Section 5.4 of the Trust Agreement (as defined below). The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Trust Preferred Securities are set forth in, and this
certificate and the Trust Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended and
64
<PAGE> 70
Restated Trust Agreement of the Trust dated as of __________, 1997, as the same
may be amended from time to time (the "Trust Agreement") including the
designation of the terms of Trust Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Guarantee Agreement entered into by
Central Financial Acceptance Corporation, a Delaware corporation, and [insert
name of Guarantee Trustee], as guarantee trustee, dated as of ___________, 1997,
(the "Guarantee"), to the extent provided therein. The Trust will furnish a copy
of the Trust Agreement and the Guarantee to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ___ day of ___________, 1997.
CFAC CAPITAL I
By:__________________________________
Name:
Administrative Trustee
65
<PAGE> 71
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: ________________
Signature: ___________________________________________________________________
(Sign exactly as your name appears on the other side of this
Preferred Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
SEC Rule 17Ad-15.
66
<PAGE> 1
EXHIBIT 4.9
GUARANTEE AGREEMENT
BETWEEN
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
(AS GUARANTOR)
AND
WILMINGTON TRUST COMPANY
(AS TRUSTEE)
DATED AS OF
OCTOBER ___, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................................................................1
SECTION 1.1. Definitions.............................................................................1
ARTICLE II. TRUST INDENTURE ACT..............................................................................................4
SECTION 2.1. Trust Indenture Act; Application........................................................4
SECTION 2.2. List of Holders.........................................................................4
SECTION 2.3. Reports by the Guarantee Trustee........................................................4
SECTION 2.4. Periodic Reports to the Guarantee Trustee...............................................5
SECTION 2.5. Evidence of Compliance with Conditions Precedent........................................5
SECTION 2.6. Events of Default; Waiver...............................................................5
SECTION 2.7. Event of Default; Notice................................................................5
SECTION 2.8. Conflicting Interests...................................................................6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE..............................................................6
SECTION 3.1. Powers and Duties of the Guarantee Trustee..............................................6
SECTION 3.2. Certain Rights of Guarantee Trustee.....................................................7
SECTION 3.3. Indemnity...............................................................................9
ARTICLE IV. GUARANTEE TRUSTEE................................................................................................9
SECTION 4.1. Guarantee Trustee: Eligibility..........................................................9
SECTION 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee......................................................................10
ARTICLE V. GUARANTEE........................................................................................................10
SECTION 5.1. Guarantee..............................................................................10
SECTION 5.2. Waiver of Notice and Demand............................................................10
SECTION 5.3. Obligations Not Affected...............................................................11
SECTION 5.4. Rights of Holders......................................................................12
SECTION 5.5. Guarantee of Payment...................................................................12
SECTION 5.6. Subrogation............................................................................12
SECTION 5.7. Independent Obligations................................................................12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI. COVENANTS AND SUBORDINATION.....................................................................................13
SECTION 6.1. Subordination..........................................................................13
SECTION 6.2. Pari Passu Guarantees..................................................................13
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE..................................................................................13
SECTION 7.1. Guarantor May Consolidate, Etc., Only on Certain Terms.................................13
SECTION 7.2. Successor Guarantor Substituted........................................................14
ARTICLE VIII. TERMINATION...................................................................................................14
SECTION 8.1. Termination............................................................................14
ARTICLE IX. MISCELLANEOUS...................................................................................................14
SECTION 9.1. Successors and Assigns.................................................................14
SECTION 9.2. Amendments.............................................................................14
SECTION 9.3. Notices................................................................................15
SECTION 9.4. Benefit................................................................................16
SECTION 9.5. Interpretation.........................................................................16
SECTION 9.6. Governing Law..........................................................................16
</TABLE>
<PAGE> 4
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
- --------------------------------- -------------------
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Inapplicable
314(c) 2.5
314(d) Inapplicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1 (d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
316(c) 9.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
</TABLE>
- ------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE> 5
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of October ___, 1997, is executed and
delivered by CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation
(the "Guarantor") having its principal office at 5480 East Ferguson Drive,
Commerce, California, 90022, and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders from time to time of the Preferred Securities (as defined herein) of
CFAC Capital I, a Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of October ___, 1997 (the "Trust Agreement"), among the Guarantor, as Depositor,
Wilmington Trust Company as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, the Administrative Trustees named therein and the Holders from
time to time of undivided beneficial interests in the assets of the Trust, the
Trust issued $__________ aggregate Liquidation Amount (as defined in the Trust
Agreement) of its _____% Cumulative Trust Preferred Securities, Liquidation
Amount $25 per Trust Preferred Security (the "Preferred Securities"), [and may
issue up to an additional $_________ aggregate Liquidation Amount of the
Preferred Securities, representing preferred undivided beneficial interests in
the assets of the Trust and having the terms set forth in the Trust Agreement;]
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which was deposited with
Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets;
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement and
pursuant to Section 5.1 hereof extends the Guarantee for the benefit of the
Holders from time to time of the Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but
1
<PAGE> 6
not otherwise defined herein shall have the meanings assigned to such terms in
the Trust Agreement and the Indenture (as defined herein), each as in effect on
the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Trust. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 90 days after receipt of such notice.
"Guarantee" has the meaning set forth in Section 5.1.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Trust: (i) any accrued and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Trust shall have funds on hand available
therefor at such time, (ii) the applicable Redemption Price (as defined in the
Trust Agreement), to the extent the Trust shall have funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary termination,
winding up or liquidation of the Trust, unless Debentures are distributed to the
Holders, the lesser of (a) the aggregate of the Liquidation Distribution (as
defined in the Trust Agreement) and (b) the amount of assets of the Trust
remaining available for distribution to Holders of Preferred Securities after
satisfaction of liabilities to creditors of the Trust as required by applicable
law.
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Trust, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder,
2
<PAGE> 7
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of October
___, 1997, as supplemented and amended between the Guarantor and Wilmington
Trust Company, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the Liquidation Amount of all then
outstanding Preferred Securities issued by the Trust.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman or a Vice Chairman of the Board of Directors of such
Person or the President or a Vice President of such Person, and by the Chief
Financial Officer, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.
"Other Guarantees" means any guarantees similar to the Guarantee issued,
from time to time, by the Guarantor on behalf of holders of one or more series
of Preferred Securities issued by any CFAC Trust (as defined in the Indenture)
other than the Trust.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer of the Corporate Trust Department of the Guarantee Trustee and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
3
<PAGE> 8
"Securities Act" means the Securities Act of 1933, as amended.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of each
year, a list, in such form as the Guarantee Trustee may reasonably require, of
the names and addresses of the Holders ("List of Holders") as of a date not more
than 15 days prior to the delivery thereof, and (b) at such other times as the
Guarantee Trustee may request in writing, within 30 days after the receipt by
the Guarantor of any such request, a List of Holders as of a date not more than
15 days prior to the time such list is furnished, in each case to the extent
such information is in the possession or control of the Guarantor and is not
identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than July 15 of each year, commencing on the year beginning
January 1, 1998, the Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
4
<PAGE> 9
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee, on an annual
basis, such evidence of compliance with such conditions precedent, if any,
provided for in this Guarantee Agreement that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default known to the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided, that,
except in the case of a default in the payment of a Guarantee Payment, the
Guarantee Trustee shall be protected in withholding such notice if and so long
as the Board of Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
5
<PAGE> 10
SECTION 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee to any Person except to a Holder exercising his or her rights pursuant
to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor, Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement; and
6
<PAGE> 11
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be
furnished to the Guarantee Trustee, the Guarantee Trustee shall
be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee Agreement;
(ii) The Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority
in Liquidation Amount of the Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if the Guarantee Trustee
shall have reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Guarantee Agreement or adequate indemnity against such risk or
liability is not reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document reasonably believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
7
<PAGE> 12
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officers' Certificate which, upon receipt
of such request from the Guarantee Trustee, shall be promptly delivered
by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or opinion of such legal counsel with respect to
legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such Holder
shall have provided to the Guarantee Trustee such adequate security and
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(v) shall be taken to relieve
the Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking
8
<PAGE> 13
such other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold
it harmless against, any loss, liability or expense incurred without negligence
or bad faith on the part of the Guarantee Trustee, arising out of or in
connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee: Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(a) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority,
then, for the purposes of this Section 4.1(a)(ii) and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
9
<PAGE> 14
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full on a
subordinated basis to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert other than the defense of payment (the "Guarantee"). The
Guarantee is a continuing guarantee, and the Guarantor fully, knowingly and
unconditionally waives any right the Guarantor may have to revoke the Guarantee
as to any future transactions under Section 2815 of the California Civil Code or
otherwise. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Trust to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Guarantee Trustee, Trust or
any other Person before proceeding against the
10
<PAGE> 15
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
11
<PAGE> 16
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee on behalf of
the Holders; (iii) the Holders of a Majority in Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee Agreement or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder
may institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Guarantee Trustee, the Trust or any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee creates, a guarantee of payment and not of collection.
This Guarantee will not be discharged except by payment of the Guarantee
Payments in full (without duplication of amounts theretofore paid by the Trust)
or upon distribution of Debentures to Holders as provided in the Trust
Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Trust in respect of any amounts paid to the Holders by the Guarantor
under this Guarantee Agreement and shall have the right to waive payment by the
Trust pursuant to Section 5.1; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
12
<PAGE> 17
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior in
right of payment to all Senior and Subordinated Debt (as defined in the
Indenture) in the same manner as Debentures (as defined in the Trust Agreement).
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee shall rank pari
passu with the obligations of the Guarantor under all Other Guarantees.
ARTICLE VII. CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 7.1. Guarantor May Consolidate, Etc., Only on Certain Terms.
The Guarantor shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Guarantor or convey, transfer or lease its properties and assets substantially
as an entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the Person formed by such consolidation or into which
the Guarantor is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Guarantor substantially as an
entirety shall be a corporation, partnership or trust organized and existing
under the laws of the United States of America or any State or the District of
Columbia, and shall expressly assume the Guarantor's obligations under this
Guarantee;
(2) immediately after giving effect thereto, no Event of Default, and no
event which, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be continuing;
(3) such consolidation, merger, conveyance, transfer or lease is
permitted under the Trust Agreement and the Indenture and does not give rise to
any breach or violation of the Trust Agreement or the Indenture; and
(4) the Guarantor has delivered to the Guarantee Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and assumption of the Guarantor's
obligations under this Guarantee Agreement comply with this Article
13
<PAGE> 18
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Guarantee Trustee, subject to
Section 3.1 hereof, may rely upon such Officers' Certificate and Opinion of
Counsel as conclusive evidence that such transaction complies with this Section
7.1.
SECTION 7.2. Successor Guarantor Substituted.
Upon any consolidation or merger by the Guarantor with or into any other
Person, or any conveyance, transfer or lease by the Guarantor of its properties
and assets substantially as an entirety to any Person in accordance with Section
7.1, the successor Person formed by such consolidation or into which the
Guarantor is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Guarantor under this Guarantee Agreement with the same effect as if such
successor Person had been named as the Guarantor herein; and in the event of any
such conveyance, transfer or lease the Guarantor shall be discharged from all
obligations and covenants under this Guarantee Agreement.
ARTICLE VIII. TERMINATION
SECTION 8.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon the earliest of (i) full payment of the applicable Redemption Price
of all Preferred Securities, (ii) the distribution of Debentures to the Holders
in exchange for all of the Preferred Securities or (iii) full payment of the
amounts payable in accordance with the Trust Agreement upon liquidation of the
Trust. Notwithstanding the foregoing clauses (i) through (iii), this Guarantee
Agreement will continue to be effective or will be reinstated if it has been
terminated pursuant to one of such clauses (i) through (iii), as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or this Guarantee Agreement.
ARTICLE IX. MISCELLANEOUS
SECTION 9.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VII hereof and
Article VIII of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 9.2. Amendments.
Except with respect to any changes which do not adversely affect the
rights of the Holders in any material respect (in which case no vote will be
required), this Guarantee Agreement may not
14
<PAGE> 19
be amended without the prior approval of the Holders of not less than a Majority
in Liquidation Amount of the Preferred Securities. The provisions of Article VI
of the Trust Agreement concerning meetings of the Holders shall apply to the
giving of such approval.
SECTION 9.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
Facsimile No.: (213) 720-8607
Attention: Gary M. Cypres
(b) if given to the Trust, in care of the Guarantee Trustee, at the
Trust's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Trust may give notice to the
Holders:
CFAC Capital I
c/o Central Financial Acceptance Corporation
5480 East Ferguson Drive
Commerce, California 90022
Facsimile No.: (213) 720-8607
Attention: Gary M. Cypres
with a copy to:
Wilmington Trust Company
1100 North Market
Wilmington, Delaware 19890
Facsimile No.: (302) 651-1000
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
15
<PAGE> 20
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4. Benefit.
This Guarantee is solely for the benefit of the Holders and is not
separately transferable from the Preferred Securities.
SECTION 9.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined
in the preamble hereto have the respective meanings assigned to them in Section
1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include
the masculine, feminine and neuter genders.
SECTION 9.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
16
<PAGE> 21
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
Central Financial Acceptance Corporation
By: ___________________________________
Name:
Title:
Wilmington Trust Company
as Guarantee Trustee
By: ___________________________________
Name:
Title:
17
<PAGE> 1
EXHIBIT 10.1
1996 STOCK OPTION PLAN
OF
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
1. Purpose. The purpose of this Stock Option Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by key employees and
directors of, and consultants to, the Corporation, its Parent and its
Subsidiaries upon whose judgment and keen interest the Corporation is largely
dependent for the successful conduct of its operations and by providing such key
employees, directors and consultants with incentives to put forth maximum
efforts for the success of the Corporation's business. It is anticipated that
the acquisition of such proprietary interest in the Corporation and such
incentives will stimulate the efforts of such key employees, directors and
consultants on behalf of the Corporation, its Parent and its Subsidiaries and
strengthen their desire to remain with the Corporation and its Subsidiaries. It
is also expected that such incentives and the opportunity to acquire such a
proprietary
<PAGE> 2
interest will enable the Corporation, its Parent and its Subsidiaries to attract
desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
(a) "Board of Directors" or "Board" shall mean the Board of
Directors of the Corporation, as constituted at any time.
(b) "Chairman of the Board" shall mean the person who at the
time shall be Chairman of the Board of Directors.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(d) "Committee" shall mean the Committee hereinafter
described in Section 3.
(e) "Consummation Date" shall mean the date of the
consummation of the Corporation's initial public offering.
(f) "Corporation" shall mean Central Financial
Acceptance Corporation, a Delaware corporation.
-2-
<PAGE> 3
(g) "Eligible Persons" shall mean those persons described in
Section 4 who are potential recipients of Options.
(h) "Fair Market Value" on a specified date shall mean the
average of the high and low sales prices at which a Share is traded on
the stock exchange, if any, on which Shares are primarily traded or, if
the Shares are not then traded on a stock exchange, the average of the
high and low sales prices of a Share as reported on the Nasdaq Stock
Market's National Market or, if the Shares are not then traded on the
Nasdaq Stock Market's National Market, the average of the high and low
sales prices at which a Share is traded on the over-the-counter market,
but if no Shares were traded on such date, then on the last previous
date on which a Share was so traded, or, if none of the above are
applicable, the value of a Share as established by the Committee for
such date using any reasonable method of valuation.
(i) "Initial Public Offering Price" shall mean the price per
Share at which Shares are offered to the public in the Corporation's
initial public offering as set forth on the cover page of the
prospectus relating thereto.
(j) "Options" shall mean the Stock Options granted
pursuant to this Plan.
-3-
<PAGE> 4
(k) "Parent" shall mean a corporation (other than the
Corporation) owning 50% or more of stock having general voting power of
the Corporation.
(l) "Plan" shall mean this 1996 Stock Option Plan of Central
Financial Acceptance Corporation, as adopted by the Board of Directors
on June 24, 1996, and approved by stockholders on June 24, 1996, as
such Plan from time to time may be amended.
(m) "President" shall mean the person who at the time
shall be the President of the Corporation.
(n) "Share" shall mean a share of common stock of the
Corporation.
(o) "Subsidiary" shall mean any corporation 50% or more of
whose stock having general voting power is owned by the Corporation, or
by another Subsidiary, as herein defined, of the Corporation.
3. Committee. The Plan shall be administered by the Board of
Directors or a Committee appointed by the Board of Directors; provided, however,
that from and after the effective date of the
-4-
<PAGE> 5
registration of the Corporation's Shares pursuant to the Securities Exchange Act
of 1934, as amended from time to time (the "Exchange Act"), the Plan shall be
administered by a Committee which shall consist of two or more directors of the
Corporation, each of whom shall be a "disinterested person" within the meaning
of Rule 16b-3(c)(2) under the Exchange Act and an "outside director" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. During such time as the Plan is administered by the Board of
Directors, all references herein to the Committee shall be deemed to refer to
the Board of Directors.
4. Participants. All key employees of, and consultants to, the
Corporation, the Parent or a Subsidiary, as determined by the Committee, shall
be eligible to receive Options under the Plan. The parties to whom Options are
granted under this Plan, and the number of Shares subject to each such Option,
shall be determined by the Committee in its sole discretion, subject, however,
to the terms and conditions of this Plan. Employees to whom Options may be
granted include key employees who are also directors of the Corporation, the
Parent or a Subsidiary. Each director of the Corporation who is not also an
employee of the Corporation, and/or its Parent and/or its Subsidiaries
(hereinafter referred to as a "Non-Employee Director") shall be eligible to
receive Options in accordance with the provisions of Section 14 hereof.
-5-
<PAGE> 6
5. Shares. Subject to the provisions of Section 15 hereof, the
Committee may grant Options with respect to an aggregate of up to 700,000
Shares, all of which Shares may be either Shares held in treasury or authorized
but unissued Shares. The maximum number of Shares which may be the subject of
Options granted to any individual during the duration of the Plan shall not
exceed 350,000 Shares. If the Shares that would be issued or transferred
pursuant to any Option are not issued or transferred and cease to be issuable or
transferable for any reason, the number of Shares subject to such Option will no
longer be charged against the limitation provided for herein and may again be
made subject to Options; provided, that the counting of Shares subject to
Options granted under the Plan against the number of Shares available for
further Options shall in all cases conform to the requirements of Rule 16b-3
under the Exchange Act; and provided, further, that with respect to any Option
granted to any Eligible Person who is a "covered employee" as defined in Section
162(m) of the Code and the regulations promulgated thereunder that is canceled
or repriced, the number of Shares subject to such Option shall continue to count
against the maximum number of Shares which may be the subject of Options granted
to such Eligible Person and such maximum number of Shares shall be determined in
accordance with Section 162(m) of the Code and the regulations promulgated.
6. Grant of Options. The number of any Options to be granted to any
Eligible Person shall be determined by the Committee
-6-
<PAGE> 7
in its sole discretion. At the time an Option is granted, the Committee may, in
its sole discretion, designate whether such Option (a) is to be considered as an
incentive stock option within the meaning of Section 422 of the Code, or (b) is
not to be treated as an incentive stock option for purposes of this Plan and the
Code. No Option which is intended to qualify as an incentive stock option shall
be granted under this Plan to any individual who, at the time of such grant, is
not an employee of the Corporation, the Parent, or a Subsidiary.
Notwithstanding any other provision of this Plan to the contrary, to
the extent that the aggregate Fair Market Value (determined as of the date an
Option is granted) of the Shares with respect to which Options which are
designated as (or deemed to be) incentive stock options granted to an employee
(and any incentive stock options granted to such employee under any other
incentive stock option plan maintained by the Corporation, the Parent or any
Subsidiary that meets the requirements of Section 422 of the Code) first become
exercisable in any calendar year exceeds $100,000, such Options shall be treated
as Options which are not incentive stock options. Options with respect to which
no designation is made by the Committee shall be deemed to be incentive stock
options to the extent that the $100,000 limitation described in the preceding
sentence is met. This paragraph shall be applied by taking Options into account
in the order in which they are granted.
-7-
<PAGE> 8
Nothing herein contained shall be construed to prohibit the issuance of
Options at different times to the same person.
The form of an Option shall be determined from time to time by the
Committee. A certificate of Option signed by the Chairman of the Board or the
President or a Vice President of the Corporation, attested by the Treasurer or
an Assistant Treasurer, or Secretary or an Assistant Secretary of the
Corporation and bearing the seal of the Corporation affixed thereto, shall be
issued to each person to whom an Option is granted. The certificate of Option
for an Option shall be legended to indicate whether or not the Option is an
incentive stock option.
7. Purchase Price. The purchase price per Share for the Shares
purchased pursuant to the exercise of an Option shall be fixed by the Committee
at the time of grant of the Option; provided, however, that the purchase price
per Share for the Shares to be purchased pursuant to the exercise of an
incentive stock option shall not in any event be less than 100% of the Fair
Market Value of a Share on the date of grant of the Option.
8. Duration of Options. The duration of each Option shall be determined
by the Committee at the time of grant; provided, however, that the duration of
any Option shall not be more than ten years from the date upon which the Option
is granted.
-8-
<PAGE> 9
9. Ten Percent Stockholders. Notwithstanding any other provision of
this Plan to the contrary, no Option which is intended to qualify as an
incentive stock option may be granted under this Plan to any employee who, at
the time the Option is granted, owns Shares possessing more than 10 percent of
the total combined voting power or value of all classes of stock of the
Corporation, unless the exercise price under such Option is at least 110% of the
Fair Market Value of a Share on the date such Option is granted and the duration
of such Option is no more than five years.
10. Exercise of Options. Except as otherwise provided herein, Options,
after the grant thereof, shall be exercisable by the holder at such rate, times
and subject to such conditions as may be fixed by the Committee at the time of
grant. Notwithstanding the foregoing, all or any part of any remaining
unexercised Options granted to any person may be exercised in the following
circumstances (but in no event during the six-month period commencing on the
date granted): (a) subject to the provisions of Section 13 hereof, immediately
upon (but prior to the expiration of the term of the Option) the holder's
retirement from the Corporation, the Parent and all Subsidiaries on or after his
65th birthday, (b) subject to the provisions of Section 13 hereof, upon the
disability (to the extent and in a manner as shall be determined by the
Committee in its sole discretion) or death of the holder, (c) upon a Change of
Control (as hereinafter defined) while
-9-
<PAGE> 10
the holder is in the employ or service of the Corporation, the Parent or
Subsidiary or (d) upon the occurrence of such special circumstance or event as
in the opinion of the Committee merits special consideration; provided, however,
that the estate of the deceased holder of an Option may exercise it prior to the
expiration of the six-month period described above.
For purposes of the Plan, a "Change of Control" shall be deemed to
occur if (x) both (i) any "person" or group of "persons" (as the term "person"
is used in Sections 13(d) and 14(d) of the Exchange Act) ("Person"), acquires
(or has acquired during the twelve-month period ending on the date of the most
recent acquisition by such Person) direct or indirect beneficial ownership of
securities of the Corporation representing 40% or more of the combined voting
power of the then outstanding securities of the Corporation and (ii) on the date
of the most recent acquisition by any Person referred to in the preceding clause
(i), the direct and indirect beneficial ownership by Banner Holdings, Inc. of
the securities of the Corporation represents in the aggregate less than 40% of
the combined voting power of the then outstanding securities of the Corporation
or (y) a Person acquires (or has acquired during the twelve-month period ending
on the date of the most recent acquisition by such Person) assets from the
Corporation that have a total fair market value equal to or more than one-third
of the total fair market value of all of the assets of the Corporation
immediately prior to such acquisition;
-10-
<PAGE> 11
provided, however, that if any transaction or event or series of transactions or
events resulting in a Change in Control is approved by a majority of the members
of the Board of Directors holding office prior to the transaction or event or
series of transactions or events, then the transaction or event or series of
transactions or events shall not be deemed to be a Change in Control.
Notwithstanding the foregoing, for purposes of subsection (x), a Change in
Control will not be deemed to have occurred if the power to control (directly or
indirectly) the management and policies of the Corporation is not transferred
from a Person to another Person; and, for purposes of subsection (y), a Change
in Control will not be deemed to occur if the assets of the Corporation are
transferred: (i) to a shareholder in exchange for his stock, (ii) to an entity
in which the Corporation has (directly or indirectly) 50% Ownership, or (iii) to
a Person that has (directly or directly) at least 50% Ownership of the
Corporation with respect to its stock outstanding, or to any entity in which
such Person possesses (directly or indirectly) 50% Ownership.
An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect ("Exercise Notice"), together with
the Option certificate and the full purchase price of the Shares purchased
pursuant to the exercise of the Option, to the Chairman of the Board or an
officer of the Corporation appointed by the Chairman of the Board for the
purpose of receiving the same. Payment of the full purchase price shall be made
as follows: in cash
-11-
<PAGE> 12
or by check payable to the order of the Corporation; by delivery to the
Corporation of Shares which shall be valued at their Fair Market Value on the
date of exercise of the Option (provided, that a holder may not use any Shares
acquired pursuant to this Plan or any other plan maintained by the Company or a
Subsidiary unless the holder has beneficially owned such Shares for at least six
months); by a combination of the methods of payment previously described; or by
such other method of payment as the Committee in its discretion may permit.
Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto, a
certificate for the Shares purchased pursuant to the exercise of the Option. If
the Option shall have been exercised with respect to less than all of the Shares
subject to the Option, the Corporation shall also cause to be delivered to the
person entitled thereto a new Option certificate in replacement of the
certificate surrendered at the time of the exercise of the Option, indicating
the number of Shares with respect to which the Option remains available for
exercise, or the original Option certificate shall be endorsed to give effect to
the partial exercise thereof.
Notwithstanding any other provision of the Plan or of any Option, no
Option granted pursuant to the Plan may be exercised at
-12-
<PAGE> 13
any time when the Option or the granting or exercise thereof violates any law or
governmental order or regulation.
11. Consideration for Options. The Corporation shall obtain such
consideration for the grant of an Option as the Committee in its discretion may
determine.
12. Non-transferability of Options. Options and all other rights
thereunder shall be non-transferable or non-assignable by the holder thereof
except to the extent that the estate of a deceased holder of an Option may be
permitted to exercise them. Options may be exercised or surrendered during the
holder's lifetime only by the holder thereof.
13. Termination of Employment or Service. All or any part of any
Option, to the extent unexercised, shall terminate immediately, upon the
cessation or termination for any reason of the holder's employment by, or
service with, the Corporation, the Parent or any Subsidiary, except that the
holder shall have until the end of the thirtieth day following the cessation of
his employment or service with the Corporation, the Parent or its Subsidiaries,
and no longer, to exercise any unexercised Option that he could have exercised
on the day on which such employment or service terminated; provided, that such
exercise must be accomplished prior to the expiration of the term of such
Option. Notwithstanding the foregoing, if the cessation of
-13-
<PAGE> 14
employment or service is due to retirement on or after attaining the age of
sixty-five (65) years, or to disability (to an extent and in a manner as shall
be determined in each case by the Committee in its sole discretion) or to death,
the holder or the representative of the estate of a deceased holder shall have
the privilege of exercising the Options which are unexercised at the time of
such retirement, or of such disability or death; provided, however, that such
exercise must be accomplished prior to the expiration of the term of such Option
and (a) within three months of the holder's retirement or (b) within one year of
the holder's disability or death, as the case may be. If the employment or
service of any holder of an Option with the Corporation, the Parent or a
Subsidiary shall be terminated because of the holder's violation of the duties
of such employment or service with the Corporation, the Parent or a Subsidiary
as he may from time to time have, the existence of which violation shall be
determined by the Committee in its sole discretion (which determination by the
Committee shall be conclusive) all unexercised Options of such holder shall
terminate immediately upon such termination of the holder's employment or
service with the Corporation,the Parent and all Subsidiaries, and a holder of
Options whose employment or service with the Corporation, the Parent and any
Subsidiaries is so terminated, shall have no right after such termination to
exercise any unexercised Option he might have exercised prior to the termination
of his employment or service with the Corporation, the Parent and Subsidiaries.
-14-
<PAGE> 15
14. Grants of Options to Non-Employee Directors. Each Non-Employee
Director who is serving on the Board of Directors as of the Consummation Date
shall be granted an Option on the Consummation Date. Commencing on January 1,
1997, each Non- Employee Director who is serving on the Board of Directors as of
the first business day of the Corporation's fiscal year shall be granted an
Option under the Plan on the first business day of such fiscal year. Each Option
granted pursuant to this Section 14 shall entitle the Non-Employee Director to
purchase 7,000 Shares at a purchase price per share equal to the Fair Market
Value of a Share on the date of grant; provided, however, that with respect to
any Options granted to any Non-Employee Director as of the Consummation Date,
the exercise price under the Option granted to such Non-Employee Director on the
Consummation Date shall be the Initial Public Offering Price. Each Option
granted pursuant to this Section 14 shall have a duration of ten years from the
date of grant and shall become exercisable cumulatively as to 20% of the Shares
on the date of grant and on each of the first, second, third and fourth
anniversaries of the date of grant; provided, however, that no such Option may
be exercised during the six-month period commencing on the date of grant.
Notwithstanding the preceding, all or any part of any remaining unexercised
Options granted pursuant to this Section 14 may be exercised (but in no event
during the six-month period commencing on the date of grant) in the event of the
holder's cessation
-15-
<PAGE> 16
of service as a member of the Board on or after his 65th birthday, the holder's
permanent disability (within the meaning of Section 22(e)(3) of the Code), or
the holder's death, during the period beginning on the date of such event and
ending three months after the holder's cessation at or after age 65, or one year
after the holder's disability or death, as the case may be, but in no event
after the expiration of the term of the Option. All or any part of any remaining
unexercised Options granted pursuant to this Section 14 also may be exercised
(but in no event during the six-month period commencing on the date of grant)
upon the occurrence of a Change of Control while the holder is serving as a
member of the Board. Any Option granted pursuant to this Section 14, to the
extent unexercised, shall terminate immediately upon the holder's ceasing to
serve as a member of the Board (for reasons other than deciding to no longer
serve as such at or after age 65, permanent disability (within the meaning of
Section 22(e)(3) of the Code) or death), except that the holder shall have until
the end of the thirtieth day following the cessation of such service to exercise
any unexercised Option that he could have exercised on the day on which such
service terminated; provided that such exercise must be accomplished prior to
the expiration of the term of such Option. Notwithstanding the preceding, if the
service of any holder of an Option granted pursuant to this Section 14 shall be
terminated because of the holder's (a) fraud or intentional misrepresentation,
or (b) embezzlement, misappropriation or conversion of assets or opportunities
of the
-16-
<PAGE> 17
Corporation, the Parent or any Subsidiary, then all such unexercised Options of
the holder shall terminate immediately upon such termination of the holder's
service.
Upon the exercise of any Option granted pursuant to this Section 14,
payment of the full purchase price shall be made in cash, by check payable to
the order of the Corporation, or by delivery to the Corporation of Shares which
shall be valued at their Fair Market Value on the date of exercise of the
Option; provided, however, that the holder may not use any Shares acquired
pursuant to an Option granted under this Plan or any other stock option plan
maintained by the Corporation or any subsidiary, unless the holder has
beneficially owned such Shares for at least six months; or by a combination of
the methods of payment previously described.
No Option may be granted to a Non-Employee Director other than in
accordance with this Section 14. Notwithstanding any other provision of the Plan
to the contrary, the provisions of this Section 14 shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder.
15. Adjustment Provision. If prior to the complete exercise of any
Option there shall be declared and paid a stock dividend upon
-17-
<PAGE> 18
the Shares or if the Shares shall be split up, converted, exchanged,
reclassified, or in any way substituted for, then the Option, to the extent that
it has not been exercised, shall entitle the holder thereof upon the future
exercise of the Option to such number and kind of securities or cash or other
property subject to the terms of the Option to which he would have been entitled
had he actually owned the Shares subject to the unexercised portion of the
Option at the time of the occurrence of such stock dividend, split-up,
conversion, exchange, reclassification or substitution, and the aggregate
purchase price upon the future exercise of the Option shall be the same as if
the originally optioned Shares were being purchased thereunder.
Any fractional shares or securities issuable upon the exercise of the
Option as a result of such adjustment shall be payable in cash based upon the
Fair Market Value of such shares or securities at the time of such exercise. If
any such event should occur, the number of Shares with respect to which Options
remain to be issued, or with respect to which Options may be reissued, shall be
adjusted in a similar manner.
Notwithstanding any other provision of the Plan, in the event of a
recapitalization, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the corporate structure or
outstanding shares, the Committee may make such equitable adjustments to the
number of Shares and the class of shares
-18-
<PAGE> 19
available hereunder or to any outstanding Options as it shall deem appropriate
to prevent dilution or enlargement of rights.
16. Issuance of Shares and Compliance with Securities Act. The
Corporation may postpone the issuance and delivery of Shares pursuant to the
grant or exercise of any Option until (a) the admission of such Shares to
listing on any stock exchange on which Shares of the Corporation of the same
class are then listed, and (b) the completion of such registration or other
qualification of such Shares under any State or Federal law, rule or regulation
as the Corporation shall determine to be necessary or advisable. Any holder of
an Option shall make such representations and furnish such information as may,
in the opinion of counsel for the Corporation, be appropriate to permit the
Corporation, in the light of the then existence or non-existence with respect to
such Shares of an effective Registration Statement under the Securities Act of
1933, as from time to time amended (the "Securities Act"), to issue the Shares
in compliance with the provisions of the Securities Act or any comparable act.
The Corporation shall have the right, in its sole discretion, to legend any
Shares which may be issued pursuant to the grant or exercise of any Option, or
may issue stop transfer orders in respect thereof.
17. Income Tax Withholding. If the Corporation, the Parent or a
Subsidiary shall be required to withhold any amounts by reason
-19-
<PAGE> 20
of any Federal, State or local tax rules or regulations in respect of the
issuance of Shares pursuant to the exercise of any Option, the Corporation, the
Parent or the Subsidiary shall be entitled to deduct and withhold such amounts
from any cash payments to be made to the holder of such Option. In any event,
the holder shall make available to the Corporation, the Parent or Subsidiary,
promptly when requested by the Corporation, the Parent or such Subsidiary,
sufficient funds to meet the requirements of such withholding; and the
Corporation, the Parent or Subsidiary shall be entitled to take and authorize
such steps as it may deem advisable in order to have such funds made available
to the Corporation, the Parent or Subsidiary out of any funds or property due or
to become due to the holder of such Option.
18. Administration and Amendment of the Plan. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Option not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any outstanding Option. Notwithstanding the foregoing, any
amendment by the Board of Directors or the Committee which would increase the
number of Shares issuable under the Plan or to any individual or change the
-20-
<PAGE> 21
class of Eligible Persons shall be subject to the approval of the stockholders
of the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall be
final. The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
deem advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose.
The Plan is intended to comply with Rule l6b-3 under the Exchange Act.
Any provision inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan.
19. No Right of Employment or Service. Nothing contained herein or in
an Option shall be construed to confer on any employee, consultant or director
any right to be continued in the employ or service of the Corporation, the
Parent or any Subsidiary or derogate from any right of the Corporation, the
Parent and any Subsidiary to retire, request the resignation of or discharge or
otherwise cease its service arrangement with any employee, consultant or
director (without or with pay), at any time, with or without cause.
-21-
<PAGE> 22
20. Final Issuance Date. No Option shall be granted under
the Plan after June 24, 2006.
-22-
<PAGE> 1
EXHIBIT 10.5
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is dated as of June 24, 1996
among CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation
("Central"), BANNER'S CENTRAL ELECTRIC, INC., a California corporation
("Banner"), and BANNER HOLDINGS, INC., a Delaware corporation ("Holdings").
WHEREAS, concurrently herewith, Central, Banner and Holdings
have entered into a Reorganization Agreement dated as of the date hereof
pursuant to which Central will acquire the consumer finance business of Holdings
and Banner (the "Reorganization");
WHEREAS, Central has filed a registration statement with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, covering
the issuance and sale by Central of up to 2,127,000 shares of its common stock,
par value of $.01 per share;
WHEREAS, concurrently herewith, Central, Banner and Holdings have
entered into various additional agreements for the purpose of defining the
ongoing relationship among the parties following the Reorganization;
WHEREAS, Holdings desires to grant to Central an option (the "Option")
to purchase all of the outstanding capital stock of Banner (the "Shares"), which
Shares are owned beneficially and of record by Holdings.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the parties agree as follows:
1. Option. Holdings hereby grants to Central the Option to purchase
the Shares at any time commencing with the first anniversary of the
Reorganization and terminating on the third anniversary of the Reorganization
(the "Option Termination Date"). Central may exercise the option by delivering
to Holdings a written notice of exercise.
2. Exercise Price. The exercise price for the Shares shall be equal to
the book value of Banner as reflected on Banner's balance sheet for the month
ended immediately preceding the exercise of the Option (the "Exercise Price").
The balance sheet shall be prepared in accordance with generally accepted
accounting principles on a basis consistent with prior periods.
3. Payment of Exercise Price. The Exercise Price is payable, at
Central's option, in cash or in shares of common stock, par value $0.01 per
share, of Central (the "Common Stock"). If Central chooses to pay the Exercise
Price in shares of Common Stock, the number of shares of Common Stock that
Central shall deliver shall be equal to the quotient of the Exercise Price
divided by the average last sales, close, or bid and asked price of the
Common Stock as reported
<PAGE> 2
by the Nasdaq National Market or such other market on which the Common Stock is
traded, listed or quoted during the ten trading days preceding the date on which
Central delivers its notice of exercise or, if the Common Stock is not so
traded, listed or quoted, as reasonably determined by the Board of Directors of
Central.
4. Representations and Warranties of Banner and Holdings. All of the
Shares have been duly and validly authorized and issued and are fully paid and
nonassessable and were not issued and are not now in violation of or subject to
any preemptive rights. The Shares are owned of record and beneficially by
Holdings free and clear of any security interests, liens, encumbrances, equities
or claims.
5. Covenants of Banner and Holdings.
(a) From the date hereof up to and including the Option Termination
Date, Banner will not, without Central's prior written consent, (i) issue, sell,
offer or agree to sell, grant any option for the sale of or otherwise dispose of
any capital stock of Banner (or any securities convertible into, exercisable for
or exchangeable for capital stock of Banner), or (ii) sell all or substantially
all of its assets.
(b) From the date hereof up to and including the Option Termination
Date, Holdings will not, without Central's prior written consent, sell, offer or
agree to sell, grant any option for the sale of or otherwise dispose of any of
the Shares.
6. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned or delegated by any party
without the consent of the other parties.
7. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the appropriate party at 5480
East Ferguson Drive, Commerce, California 90022, Attention: Secretary, or to
such changed address as such party may have fixed by notice or, if given by
telecopier, when such telecopy is transmitted and the appropriate answerback is
received.
8. Governing Law. This Agreement shall be governed by the laws of the
State of California without giving effect to the principles of conflicts of law.
9. Entire Agreement. This Agreement sets forth the entire agreement
among the parties with respect to its subject matter. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the party against which
enforcement of such waiver is sought. A waiver by any party of any
-2-
<PAGE> 3
breach or violation of this Agreement shall not be deemed or construed as a
waiver of any subsequent breach or violation thereof.
10. Severability. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
12. Headings. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provisions of
this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER'S CENTRAL ELECTRIC, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER HOLDINGS, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
-3-
<PAGE> 1
EXHIBIT 10.6
OPERATING AGREEMENT
This OPERATING AGREEMENT (the "Agreement") is dated as of June 24, 1996
among CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation
("Central"), BANNER'S CENTRAL ELECTRIC, INC., a California corporation
("Banner"), and BANNER HOLDINGS, INC., a Delaware corporation ("Holdings").
WHEREAS, concurrently herewith, Central, Banner and Holdings have
entered into a Reorganization Agreement dated as of the date hereof pursuant to
which Central will acquire the consumer finance business of Holdings and Banner
(the "Reorganization");
WHEREAS, Central has filed a registration statement with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, covering
the issuance and sale by Central of up to 2,127,000 shares of its common stock,
par value of $.01 per share;
WHEREAS, concurrently herewith, Central, Banner and Holdings have
entered into various additional agreements for the purpose of defining the
ongoing relationship among the parties following the Reorganization;
WHEREAS, in order to avoid a possible conflict of interest in the
operation of the businesses of Central and its subsidiaries (individually and
collectively, the "Central Group") and Holdings and its subsidiaries
(individually and collectively, the "Holdings Group") following the
Reorganization, the parties desire that Holdings follow certain procedures
as set forth herein; and
WHEREAS, in order to provide cost savings and operating efficiencies
following the Reorganization, the parties desire that the Holdings Group perform
various administrative functions for the Central Group upon the terms and
conditions set forth herein following the Reorganization.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the parties agree as follows:
1. Allocation of Business Opportunities.
(a) Restricted Businesses. The Holdings Group will not, without the
prior written consent of Central, directly or indirectly engage in or enter into
any business competing with the Central Group that involves consumer finance
lending, including, but not limited to, the financing of consumer products,
travel products, small loans, automobiles or insurance (the "Restricted
Businesses"). If, notwithstanding the foregoing, any member of the Holdings
Group shall acquire a company engaged in a Restricted Business or shall
otherwise directly or indirectly engage in a Restricted Business, Holdings shall
be obligated to sell to Central, at Central's election, such Restricted Business
at a purchase price equal to the fair market value of such Restricted Business
as determined in accordance with Section 1(b). The foregoing restriction shall
terminate on the earlier of December 31, 2002 or
<PAGE> 2
the date on which Holdings ceases to own, directly or indirectly, at least 25%
of the outstanding voting stock of Central.
(b) Valuation. The fair market value of a Restricted Business shall
be determined by an independent qualified and recognized investment banking firm
agreed to by Central, on the one hand, and Banner and Holdings, on the other
hand. If the parties are unable to mutually agree on a single appraiser within a
seven day period, then Central, on the one hand, and Banner and Holdings, on the
other hand, shall each immediately appoint an independent qualified appraiser of
the type set forth above. Within seven days of such appointment, the two
appointed appraisers shall appoint a third independent qualified appraiser of
the type set forth above who shall determine the current value of the Restricted
Business within 30 days of appointment. The cost of this appointment process and
the appraisal fees shall be divided equally between Central, on the one hand,
and Banner and Holdings, on the other hand.
2. Services to be Performed by the Holdings Group and Allocation of
Costs and Benefits.
(a) Services. Each of the following services shall be performed by,
and the Central Group agrees to utilize the following services of, the Holdings
Group:
(1) Accounting. To the extent requested by the Central Group,
the Holdings Group shall provide accounting services to the Central
Group in connection with the preparation of quarterly, annual and other
financial statements.
(2) Management Information Systems. The Holdings Group shall
provide the Central Group with information processing, data retrieval
and other management information systems services. If the Central Group
elects to discontinue receiving such services from the Holdings Group,
the Holdings Group shall return all information pertaining to the
business and operations of the Central Group and shall use its best
efforts in the transition of all data processing functions in a manner
that does not unduly disrupt the business or operation of the Central
Group.
(3) Employee Benefit Plans. The Holdings Group shall
administer all health plans and any other benefits offered
for the benefit of the employees of the Central Group.
(4) Legal. The Holdings Group shall provide to the Central
Group all legal assistance provided in the ordinary course of business
to the Holdings Group.
(5) Insurance. The Holdings Group shall include every member
of the Central Group under any insurance policy maintained by the
Holdings Group. The Holdings Group shall cause each member of the
Central Group to be named as an additional insured under any such
policies. The Holdings Group shall agree to deliver to Central any
insurance proceeds received by it or one of the other members of the
Holdings Group if such
-2-
<PAGE> 3
proceeds relate to any claim relating to the business of the Central
Group. The Holdings Group shall make appropriate cost allocations to
the Central Group for any policy which provides joint coverage to the
Holdings Group, or any other member of the Holdings Group, and to the
Central Group.
(6) Purchasing. The Holdings Group shall provide purchasing
services, including warehousing, to the Central Group for all products
Central may request. Central shall either reimburse the Holdings Group
for, or pay directly, the actual cost of all products acquired for its
account (after giving effect to its ratable share of any discounts,
allowances, rebates or other similar benefits realized by the Holdings
Group).
(7) Advertising. The Holdings Group shall provide advertising
services to the Central Group. Such services shall include the
purchasing of broadcast, newspaper or other advertising in accordance
with the specifications and requirements provided by the Central Group.
Each party to this Agreement agrees not to utilize any form of
advertising that would be reasonably likely to be detrimental to the
business or prospects of the other party.
(8) Other Services. To the extent requested by Central and
approved by the members of its board of directors, the Holdings Group
may provide the Central Group with such other administrative services
as may be deemed necessary or appropriate.
(b) Payment of Costs. The Central Group shall be responsible for the
actual cost of any goods or services provided for their account by the Holdings
Group. Except as provided herein with respect to management information systems,
the allocable share of such costs for each member of the Central Group shall be
determined on the basis of its percentage utilization of the applicable service
or management's best estimate thereof. Fifty percent of the expenses of the
costs and expenses of operating the Holdings Group's management information
systems shall be allocated to each of Banner and Central for a period of five
years, subject to adjustment from time to time to reflect changing costs and
usage and prior termination pursuant to Section 4 below. The Central Group
shall either pay such costs directly or reimburse the Holdings Group for its
prior payment (after giving effect to its ratable share of any discounts,
allowances, rebates or other similar benefits realized by such member of the
Holdings Group). The Holdings Group shall maintain appropriate records to
substantiate the costs associated with the services provided to the Central
Group.
3. Employee Benefits. Central hereby agrees to assume all
liabilities of Banner, Holdings and the subsidiaries thereof that become
subsidiaries of Central pursuant to the Reorganization under existing employee
welfare benefit and profit sharing plans with respect to the employees of Banner
and Holdings who have become employees of the Central Group pursuant to the
Reorganization. The employment by the Central Group of individuals who were
employees of Banner, Holdings or the subsidiaries thereof that become
subsidiaries of Central pursuant to the Reorganization prior to the
Reorganization will not be deemed a severance of employment from Banner or
Holdings for purposes of any policy, plan, program or agreement of Banner or
Holdings that provides for the payment of severance, salary continuation or
similar benefits.
-3-
<PAGE> 4
4. Term. Except as provided in Section 1, this Agreement or any
service provided herein may be terminated by any party hereto upon one year's
prior written notice.
5. Independent Parties. The parties are independent parties engaged
in the operation of their respective businesses. No party has the authority to
enter into contracts or assume any obligations for any other party or is to be
considered as the agent or employee of any other party for any purpose
whatsoever. Nothing in this Agreement shall be construed to establish a
relationship of partners or joint venturers among the parties.
6. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned or delegated by any party
without the consent of the other parties.
7. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the appropriate party at 5480
East Ferguson Drive, Commerce, California 90022, Attention: Secretary, or to
such changed address as such party may have fixed by notice or, if given by
telecopier, when such telecopy is transmitted and the appropriate answerback is
received.
8. Governing Law. This Agreement shall be governed by the laws of
the State of California without giving effect to the principles of conflicts of
law.
9. Entire Agreement. This Agreement sets forth the entire agreement
among the parties with respect to its subject matter. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the party against which
enforcement of such waiver is sought. A waiver by any party of any breach or
violation of this Agreement shall not be deemed or construed as a waiver of any
subsequent breach or violation thereof.
10. Severability. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
-4-
<PAGE> 5
12. Headings. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provisions of
this Agreement.
[Remainder of Page Intentionally Left Blank]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By
---------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER'S CENTRAL ELECTRIC, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER HOLDINGS, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
-6-
<PAGE> 1
EXHIBIT 10.7
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (the "Agreement") is dated as of June 24,
1996 among CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation
("Central"), BANNER'S CENTRAL ELECTRIC, INC., a California corporation
("Banner"), and BANNER HOLDINGS, INC., a Delaware corporation ("Holdings").
WHEREAS, concurrently herewith, Central, Banner and Holdings have
entered into a Reorganization Agreement dated as of the date hereof pursuant to
which Central will acquire the consumer finance businesses of Holdings and
Banner (the "Reorganization");
WHEREAS, Central has filed a registration statement with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, covering the issuance and sale by Central of up to 2,127,000 shares of
its common stock, par value of $.01 per share (the "Offering");
WHEREAS, concurrently herewith, Central, Banner and Holdings have
entered into various additional agreements for the purpose of defining the
ongoing relationship among the parties following the Reorganization;
WHEREAS, the consumer finance businesses of Central will be included
in the consolidated federal, state and other income tax returns of Holdings
until the consummation of the Offering;
WHEREAS, effective upon the consummation of the Offering, Central and
its subsidiaries (collectively with Central and any predecessor of any
subsidiary, the "Subsidiaries," and individually, a "Subsidiary") will not be
included in Holdings' consolidated federal, state and other income tax returns.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the parties agree as follows:
1. Remittance to Holdings. For all periods during which the
Subsidiaries were included in the consolidated federal, state and other income
tax returns of Holdings, Central shall remit to
<PAGE> 2
Holdings in a timely manner all taxes that would have been due the respective
governmental entities from each of the Subsidiaries if such Subsidiary had
filed separate income tax returns for the applicable period. For purposes of
this Agreement, the tax which would have been payable by a Subsidiary if it had
filed separate returns shall be computed as if such Subsidiary had filed
separate returns for all years during which such Subsidiary is includible in
the consolidated income tax returns of Holdings.
2. Refunds. Holdings shall remit to each Subsidiary in a timely
manner all refunds, together with interest thereon, that would be due the
Subsidiary if the Subsidiary had filed separate income tax returns.
3. Indemnification; Audits. The Subsidiaries shall indemnify
Holdings for all income tax liabilities for periods during which the
Subsidiaries were included in Holdings' consolidated income tax returns. In
the event of any changes to such consolidated income tax returns upon audit by
the Internal Revenue Service, a recalculation of the tax liability of each
Subsidiary shall be made and appropriate payments (including any interest and
penalties) shall be made by the Subsidiary based on the result of such audit.
4. Filing of Consolidated Returns; Taxes Due. Holdings shall be
responsible for filing the consolidated federal, state and other income tax
returns, for making all elections with respect thereto and for the payment of
all taxes due in respect thereof for all periods during which the Subsidiaries
were members of the affiliated group of which Holdings is the common parent.
The parties agree to cooperate with each other in the preparation of all
required tax returns and in connection with the audit of such tax returns
including making available to each other all applicable records and other
documents pertinent thereto. Holdings shall not consent to any adjustments
which would increase the tax liability of a Subsidiary without the consent of
such Subsidiary, provided that Holdings may consent to such adjustments if it
has the right to and does file a refund claim which preserves the right of such
Subsidiary to contest the adjustment.
5. Use of Accountants. For the purposes of this Agreement, all
computations or recomputations of income tax
- 2 -
<PAGE> 3
liability, and all determinations of payments or repayments, or determinations
of any other nature required to be made by this Agreement, shall be based on
the conclusions of the independent public accountants for Holdings and Central.
6. Dispute Resolution. In an effort to resolve informally and
amicably any claim or controversy arising out of or related to the
interpretation or performance of this Agreement without resorting to
litigation, the parties shall first notify the other parties of any difference
or dispute hereunder that requires resolution. The disputing parties shall
each designate an employee to investigate, discuss and seek to settle the
matter between them. If such parties are unable to settle the matter within 30
days after such notification, the matter shall be submitted to an independent
director of each for consideration. If settlement cannot be reached through
their efforts within an additional 30 days, or such longer time period as they
shall agree upon, the parties shall consider arbitration or other alternative
means to resolve the dispute. If they are unable to agree on an alternative
dispute resolution mechanism, any party may initiate legal proceedings to
resolve such matter.
7. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned or delegated by any
party without the consent of the other parties.
8. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing (including
telecopier or similar writing) and shall be deemed to have been given at the
time when mailed in any general or branch office of the United States Postal
Service, enclosed in a registered or certified postpaid envelope, or sent by
Federal Express or other similar overnight courier service, addressed to the
appropriate party at 5480 East Ferguson Drive, Commerce, California, 90022,
attention: Secretary, or to such changed address as such party may have fixed
by notice or, if given by telecopier, when such telecopy is transmitted and the
appropriate answerback is received.
9. Governing Law. This Agreement shall be governed by the laws
of the State of California without giving effect to the principles of conflicts
of law.
- 3 -
<PAGE> 4
10. Entire Agreement. This Agreement sets forth the entire
agreement among the parties with respect to its subject matter. This Agreement
may not be amended or otherwise modified except in writing duly executed by all
of the parties. No waiver of any provision or breach of this Agreement shall
be effective unless such waiver is in writing and signed by the party against
which enforcement of such waiver is sought. A waiver by any party of any
breach or violation of this Agreement shall not be deemed or construed as a
waiver of any subsequent breach or violation thereof.
11. Severability. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
12. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
13. Headings. Section headings are for convenience only and do
not control or affect the meaning or interpretation of any terms or provisions
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first above written.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By ______________________________________
Gary M. Cypres
Chief Executive Officer and President
BANNER'S CENTRAL ELECTRIC, INC.
By___________________________
- 4 -
<PAGE> 5
Gary M. Cypres
Chief Executive Officer and President
BANNER HOLDINGS, INC.
By___________________________
Gary M. Cypres
Chief Executive Officer and President
- 5 -
<PAGE> 1
EXHIBIT 10.8
FORM OF
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement") is dated as of June
24, 1996 among CENTRAL FINANCIAL ACCEPTANCE CORPORATION, a Delaware corporation
("CFAC"), BANNER'S CENTRAL ELECTRIC, INC., a California corporation ("BCE"),
and BANNER HOLDINGS, INC., a Delaware corporation ("BHI").
WHEREAS, concurrently herewith, CFAC, BCE and BHI have entered into
a Reorganization Agreement dated as of the date hereof pursuant to which CFAC
will acquire the consumer finance business of BHI and BCE (the
"Reorganization");
WHEREAS, CFAC has filed a registration statement with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, covering
the issuance and sale by CFAC of up to 2,127,000 shares of its common stock,
par value of $.01 per share;
WHEREAS, concurrently herewith, CFAC, BCE and BHI have entered into
various additional agreements for the purpose of defining the ongoing
relationship among the parties following the Reorganization;
WHEREAS, CFAC, BCE and BHI desire to enter into this Agreement to
indemnify one another (and provide for contribution to one another)
against liabilities arising from the operation of the parties' respective
businesses after the Reorganization.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the parties agree as follows:
1. Indemnification.
(a) CFAC agrees to indemnify and hold harmless BCE and its subsidiaries
following the Reorganization (collectively and individually, "Banner") and BHI
and its subsidiaries following the Reorganization (collectively and
individually, "Holdings") against any and all claims, losses, damages,
liabilities, costs and expenses, joint or several (including reasonable
attorneys' fees and costs of investigation), to which Banner or Holdings may
become subject insofar as such claims, losses, damages, liabilities, costs and
expenses (or actions in respect thereof) arise from or are based on the
operations of the business of CFAC and its subsidiaries following the
Reorganization (collectively and individually, "Central"); provided, however,
that neither Banner nor Holdings shall be indemnified hereunder for liabilities
arising from either party's intentional misconduct or gross negligence or to the
extent any liability arises from a breach by Banner or Holdings of a fiduciary
duty owed by Banner or Holdings to other stockholders of CFAC.
(b) BCE and BHI, jointly and severally, agree to indemnify and hold
harmless Central against any and all claims, losses, damages, liabilities, costs
and expenses, joint or several (including reasonable attorneys' fees and costs
of investigation), to which Central may become
<PAGE> 2
subject insofar as such claims, losses, damages, liabilities, costs or expenses
(or actions in respect thereof) arise from or are based on the operations of the
businesses of Banner or Holdings, other than the business of Central before or
after the Reorganization.
(c) CFAC agrees to indemnify and hold harmless each of Banner and
Holdings against any all claims, losses, damages, liabilities, costs and
expenses, joint or several (including reasonable attorneys' fees and costs of
investigation) to which Banner or Holdings may become subject insofar as such
claims, losses, damages, liabilities, costs or expenses (or actions in respect
thereof) arise from or are based on guarantees or undertakings made by Banner or
Holdings to third parties in respect of liabilities or obligations of Central,
whether such guarantees or undertakings are made by Banner or Holdings before or
after the Reorganization; provided, however, that neither Banner nor Holdings
shall be indemnified hereunder for liabilities arising from either party's
intentional misconduct or gross negligence or to the extent any liability arises
from a breach by Banner or Holdings of a fiduciary duty owed by Banner or
Holdings to other stockholders of Central; provided, further, however, that if
the events giving rise to a particular claim, loss, damage, liability, cost or
expense occurred prior to the Reorganization, neither Banner nor Holdings shall
be indemnified pursuant to this Section.
2. Substitution.
(a) With respect to any litigation, proceeding or investigation by or
before any court or governmental agency or body which may be commenced or
threatened against Banner or Holdings after the date hereof which arises out of
or is based upon the business or operations of Central following the
Reorganization, at the option of Banner or Holdings, as the case may be, Central
and Banner or Holdings shall use their best efforts to have Central substituted
in the place of and for Banner or Holdings and to have Banner or Holdings
removed as a party as promptly as is reasonably practicable. Pending such
substitution, and in cases where such substitution cannot be effected, Central
shall promptly assume and direct the defense, prosecution and/or settlement of
the claims involved, employing for this purpose counsel satisfactory to each of
Banner and Holdings, and shall pay all expenses related thereto. To the extent
that any such expenses are paid by Banner or Holdings, Central shall promptly
reimburse such party therefor.
(b) With respect to any litigation, proceeding or investigation by or
before any court or governmental agency or body which may be commenced or
threatened against Central after the date hereof which arises out of or is based
upon the past, present or future business or operations of Banner or Holdings,
at Central's option, Central and Banner and Holdings shall use their best
efforts to have Banner or Holdings or both substituted in the place of and for
Central and to have Central removed as a party as promptly as is reasonably
practicable. Pending such substitution, and in cases where such substitution
cannot be effected, Banner or Holdings shall promptly assume and direct the
defense, prosecution and/or settlement of the claims involved, employing for
this purpose counsel satisfactory to Central, and shall pay all
-2-
<PAGE> 3
expenses related thereto. To the extent that any such expenses are paid by
Central, Banner or Holdings shall promptly reimburse Central therefor.
3. Notice and Payment of Claims. If any party entitled to
indemnification hereunder (an "Indemnified Party") is threatened in writing with
any claim, or any claim is presented in writing to, or any action or proceeding
formally commenced against, an Indemnified Party which may give rise to the
right of indemnification hereunder, the Indemnified Party will promptly give
written notice thereof to the other party (the "Indemnifying Party"), provided
that any delay by the Indemnified Party in so notifying the Indemnifying Party
shall not relieve the Indemnifying Party of any liability to the Indemnified
Party hereunder except to the extent the Indemnifying Party is materially and
adversely prejudiced by such delay. The Indemnifying Party, by delivery of
written notice to the Indemnified Party within 30 days of receipt of notice of
claim to indemnity from the Indemnified Party, may elect to contest such claim,
action or proceeding at the Indemnifying Party's expense and by counsel of its
own choosing. If the Indemnified Party requests in writing that such claim,
action or proceeding not be contested, then it shall not be contested but shall
not be covered by the indemnities provided herein. The Indemnifying Party may
settle an indemnifiable matter which it has duly elected to contest with the
consent of the Indemnified Party after delivering a written description of the
proposed settlement to, and receiving consent from, the Indemnified Party. In
the event that the Indemnified Party declines to consent to a bona fide
settlement acceptable to the claimant, then the Indemnified Party shall have no
right to indemnification beyond the amount of the proposed settlement.
4. Dispute Resolution. In an effort to resolve informally and
amicably any claim or controversy arising out of or related to the
interpretation or performance of this Agreement without resorting to litigation,
each party shall first notify the others of any difference or dispute hereunder
that requires resolution. BCE, BHI and CFAC shall each designate an employee to
investigate, discuss and seek to settle the matter among them. If they are
unable to settle the matter within 30 days after such notification, the matter
shall be submitted to a director of each of BCE, BHI and CFAC for consideration.
If settlement cannot be reached through their efforts within an additional 30
days, or such longer time period as they shall agree upon, CFAC, on the one
hand, or BCE and BHI, on the other hand, may initiate legal proceedings to
resolve such matter.
5. Cooperation. So long as any books, records and files retained by
either Banner or Holdings relating to the business operations or assets of
Central remain in existence and available, Central shall have the right upon
prior notice to inspect and copy the same at any time during business hours for
any proper purpose. Neither Banner nor Holdings shall destroy or permit the
destruction of (without first having offered to deliver to the other) any such
books, records and files for the time period during which they would be required
to retain such books, records or files by applicable law. Banner, Holdings and
Central shall cooperate with one another in a timely manner in any
administrative or judicial proceeding involving any matter affecting the
potential liability of any such party or with respect to any governmental
authority. Such
-3-
<PAGE> 4
cooperation shall include, without limitation, making available to each of the
other parties, during normal business hours, all books, records and information,
officers and employees (without substantial interruption of employment)
necessary or useful in connection with any inquiry, audit, investigation or
dispute, any litigation or any other matter requiring any such books, records,
information, officers or employees for any reasonable business purpose. The
party requesting or otherwise entitled to any books, records, information,
officers or employees pursuant to this Section shall bear all reasonable
out-of-pocket costs and expenses (except reimbursement of salaries, employee
benefits and general overhead) incurred in connection with providing such books,
records, information, officers or employees.
6. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned or delegated by any party
without the consent of the other parties.
7. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the appropriate party at 5480
East Ferguson Drive, Commerce, California 90022, Attention: Secretary, or to
such changed address as such party may have fixed by notice or, if given by
telecopier, when such telecopy is transmitted and the appropriate answerback is
received.
8. Governing Law. This Agreement shall be governed by the laws of
the State of California without giving effect to the principles of conflicts of
law.
9. Entire Agreement. This Agreement sets forth the entire agreement
among the parties with respect to its subject matter. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the party against which
enforcement of such waiver is sought. A waiver by any party of any breach or
violation of this Agreement shall not be deemed or construed as a waiver of any
subsequent breach or violation thereof.
10. Severability. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
-4-
<PAGE> 5
12. Headings. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provisions of
this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER'S CENTRAL ELECTRIC, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
BANNER HOLDINGS, INC.
By
----------------------------------------
Gary M. Cypres
Chief Executive Officer and President
-5-
<PAGE> 1
EXHIBIT 10.9
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
5480 East Ferguson Drive
Commerce, California 90022
(213) 720-8600
June 24, 1996
Banner Holdings, Inc.
5480 East Ferguson Drive
Commerce, California 90022
Dear Sirs:
Central Financial Acceptance Corporation ("Central") has filed
a registration statement on Form S-1 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), covering the sale by Central of shares of its common stock, par
value of $.01 per share, pursuant to the Registration Statement (the
"Offering"). In connection with the Offering, Central desires to enter into an
underwriting agreement substantially in the form of Exhibit A attached hereto
(the "Underwriting Agreement"). At the request of the underwriters named in the
Underwriting Agreement (the "Underwriters"), you have agreed to become a party
to the Underwriting Agreement and, as such, to jointly and severally with
Central indemnify the Underwriters as provided in Section 10 of the Underwriting
Agreement. In addition, by becoming a party to the Underwriting Agreement at the
request of the Underwriters, you also will agree to the contribution provisions
set forth in Section 10 of the Underwriting Agreement. Notwithstanding that the
indemnification and contribution provisions set forth in Section 10 of the
Underwriting Agreement provide for the joint and several liability of you and
Central, Central hereby agrees that between you and Central it is intended that
Central will be the primary obligor under the Underwriting Agreement and that
your liability thereunder is intended to be that of a guarantor.
In consideration of your execution and delivery of the
Underwriting Agreement and other good and valuable consideration, Central hereby
agrees with you as follows:
1. Indemnification. Central agrees to indemnify and hold harmless you
and each person, if any, who controls you (a "Control Person") within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), against any and all losses, claims,
damages, liabilities and expenses (including but limited to reasonable
attorneys' fees and all costs whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), to which you or any such Control Person may become subject insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise from or are based on the indemnification and contribution
provisions set forth in Section 10 in the Underwriting Agreement.
<PAGE> 2
This indemnity agreement will be in addition to any liability which Central may
otherwise have, including under the Underwriting Agreement.
2. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity provided for in Section
1 hereof is for any reason held to be unenforceable by you although applicable
in accordance with its terms, you and Central shall contribute to the aggregate
claims, losses, damages, liabilities, costs and expenses of the nature
contemplated by such indemnity incurred by you and Central in such proportion
that is appropriate to reflect the relative fault of Central and you in
connection with the matters which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
For purposes of this Section 2, each Control Person, if any, shall have the same
rights to contribution as you.
3. Notice and Payment of Claims. Central agrees that you shall not be
required to give Central any notice with respect to an event which may give rise
to the right of indemnification or contribution hereunder. Central agrees that
you shall have the right to settle any indemnifiable matter without Central's
prior consent.
4. Dispute Resolution. In order to resolve informally and amicably any
claim or controversy arising out of or related to the interpretation or
performance of this Agreement without resorting to litigation, each party shall
first notify the other of any difference or dispute hereunder that requires
resolution. You and Central shall each designate an employee to investigate,
discuss and seek to settle the matter between them. If the two are unable to
settle the matter within 30 days after such notification, the matter shall be
submitted to an independent director of each of you and Central for
consideration. If settlement cannot be reached through their efforts within an
additional 30 days, or such longer time period as they shall agree upon, either
party may initiate legal proceedings to resolve such matter.
5. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned or delegated by any party
without the consent of the other party.
6. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the address of the parties set
forth above or to such changed address as such party may have fixed by notice
or, if given by telecopier, when such telecopy is transmitted and the
appropriate answerback is received.
7. Governing Law. This agreement shall be governed by the laws of the
State of California without giving effect to principles of conflicts of laws.
-2-
<PAGE> 3
8. Entire Agreement. This Agreement sets forth the entire agreement
among the parties with respect to its subject matter. This Agreement may not be
amended or otherwise modified except in writing duly executed by all of the
parties. No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the party against which
enforcement of such waiver is sought. A waiver by any party of any breach or
violation of this Agreement shall not be deemed or construed as a waiver of any
subsequent breach or violation thereof.
9. Severability. Should any part, term or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
10. Effectiveness. This Agreement shall become effective upon the
execution by you and Central of the Underwriting Agreement.
11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
12. Headings. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provisions of
this Agreement.
[Remainder of Page Intentionally Left Blank]
-3-
<PAGE> 4
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to Central a counterpart hereof, whereupon
this instrument will become a binding agreement between you and Central in
accordance with its terms.
Very truly yours,
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By
--------------------------------------
Gary M. Cypres
Chief Executive Officer and President
Confirmed and accepted as of
the date first above written:
BANNER HOLDINGS, INC.
By
-----------------------------------
Gary M. Cypres
Chief Executive Officer and President
-4-
<PAGE> 1
EXHIBIT 10.12
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE> 2
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. Purpose - The purpose of this Plan is to provide key executives with
an incentive to become or remain long-term employees of the Company. This Plan
is intended to be a "tophat" plan within the meaning of Sections 201(2),
301(a)(3), 401(a)(1) and 4021(b)(6) of the Employee Retirement Income Security
Act of 1974, as amended.
2. Definitions - As used in this Plan, the following terms shall have
the meanings set forth below, unless the context requires otherwise:
(a) "Accrued Benefit" shall mean a Participant's Target
Benefit Level adjusted by: (i) multiplying it by a fraction not to exceed one,
the numerator of which is the Participant's active Years of Service and the
denominator of which is the Years of Service the Participant would have had at
his Normal Retirement Date if he continued in employment with the Company until
such date, and (ii) reducing it by the annuity value (as determined by an
actuary who is selected by the Board of Directors) of the Participant's Profit
Sharing Plan Account.
(b) "Actuarial Equivalent" shall mean equality in
<PAGE> 3
value of the aggregate sums expected to be received under the form of payment
under the Plan, or equality in value of the same form of payment under the Plan
if payments begin as of a different date, or both, determined in each case by
actuarial assumptions determined by an actuary who is selected by the Board of
Directors.
(c) "Affiliate" shall mean (i) the Company, (ii) any
corporation of which the Company or any other Affiliate owns more than 50% of
the outstanding shares or (iii) any corporation which owns more than 50% of the
outstanding shares of the Company or any other Affiliate.
(d) "Surviving Spouse" shall mean the person determined in
accordance with Section 8.
(e) "Board of Directors" shall mean the Board of Directors of
the Company.
(f) "Company" shall mean Central Financial Acceptance
Corporation, a Delaware corporation, and any successor thereto.
(g) "Compensation" shall mean the Participant's fixed salary
or base pay which is paid to the Participant in consideration for his personal
services actually rendered to the Company, including any amount contributed by
the Company pursuant to a salary reduction agreement which is not includible
<PAGE> 4
in the gross income of the Participant under Section 125 or 402(e)(3) of the
Internal Revenue Code of 1986, as amended, and any bonuses accrued by the
Company with respect to such Participant.
(h) "Effective Date" shall mean June __, 1996.
(i) "Employee" shall mean any key employee on the payroll of
the Company whose wages are subject to withholding for Federal income tax
purposes.
(j) "Final Average Compensation" shall mean the average
monthly Compensation earned by a Participant during those 36 consecutive
calendar months out of the last 60 calendar months preceding the Participant's
termination of employment with the Company which produces the highest monthly
average.
(k) "Normal Retirement Date" shall mean the first day of the
month following the date the Participant attains his 60th birthday.
(l) "Participant" shall mean each Employee who is eligible to
participate in the Plan in accordance with the provisions of Section 3.
(m) "Plan" shall mean the Central Financial Acceptance
Corporation Supplemental Executive Retirement Plan, as embodied herein and as
amended from time to time.
<PAGE> 5
(n) "Post-Effective Date Year of Service" shall mean each Year
of Service completed after the Effective Date.
(o) "Profit Sharing Plan Account" shall mean a Participant's
Company contribution account, including earnings thereon, under the Banner's, a
California corporation, dba Central Electric Profit Sharing Plan and any
successor plan thereto.
(p) "Surviving Spouse" shall mean the person determined in
accordance with Section 8.
(q) "Target Benefit Level" shall mean a monthly benefit
beginning at the Participant's Normal Retirement Date, equal to a percentage
designated by the Board of Directors of a Participant's Final Average
Compensation, but in no event more than 50% of the Participant's Final Average
Compensation.
(q) "Year of Service" shall mean each twelve consecutive month
period or fraction thereof (to the nearest whole month) beginning with the date
the Participant is hired by the Company or its Affiliates (whether completed
before or after the Effective Date and before or after the Employee becomes a
Participant in this Plan).
3. Eligibility. The Board of Directors shall designate, from time to
time, the Employees who are eligible to participate
<PAGE> 6
in the Plan. An Employee shall cease to be a Participant in the Plan upon his
termination of employment.
4. Benefit Agreement. Upon his designation, each Participant shall
enter into a written agreement (the "Agreement") with the Company, which shall
be executed for the Company by the Chairman of the Board of Directors or the
President, and which shall include the Target Benefit Level and such other terms
as the Board of Directors shall deem appropriate. The Board of Directors may
amend the Agreement to provide for an increase or decrease of the Target Benefit
Level for an eligible Employee; provided that any decrease shall apply only to
Years of Service after the date of such decrease.
5. Normal Retirement Benefit. If a Participant terminates his
employment with the Company on or after his Normal Retirement Date and after
having completed at least ten Years of Service (at least five of which are
Post-Effective Date Years of Service), he shall be entitled to receive a benefit
in a monthly amount equal to his Accrued Benefit , or the Actuarial Equivalent
of such Accrued Benefit if the Participant's termination of employment occurs
after his Normal Retirement Date. Such Benefit shall be paid monthly in the form
of a straight life annuity for the Participant's life, commencing on
<PAGE> 7
the later of the Participant's Normal Retirement Date or the first day of the
month following the Participant's termination of employment.
6. Death Benefits. In the event a Participant dies after completing at
least ten Years of Service (at least five of which are Post-Effective Date Years
of Service), while either an Employee or after having retired under Section 5 or
having terminated employment under Section 7 but before having received any
payment of his Accrued Benefit and he is survived by a Surviving Spouse, the
Company shall pay a death benefit to his Surviving Spouse, in an amount equal to
the Actuarial Equivalent of the Participant's Accrued Benefit as of the date of
his death determined on the basis of his Final Average Compensation and Years of
Service as of such date. Such amount shall be paid monthly for the life of the
Participant's Surviving Spouse, commencing as of the first day of the month
following the Participant's death.
7. Termination of Employment. If a Participant's employment with the
Company and its Affiliates is involuntarily terminated (other than by reason of
death) prior to his Normal Retirement Date, he will receive a benefit under the
Plan, provided he completed at least ten Years of Service (at least
<PAGE> 8
five of which are Post-Effective Date Years of Service). The benefit payable
pursuant to this Section 7 shall be a monthly amount equal to the Participant's
Accrued Benefit determined on the basis of his Final Average Compensation and
Years of Service as of the date of his termination of employment and shall be
paid monthly in the form of a straight life annuity for the Participant's life,
commencing on the Participant's Normal Retirement Date. Notwithstanding the
preceding, a Participant shall not be entitled to any benefits under the Plan if
his employment with the Company and its Affiliates is terminated for "cause".
For purposes of this Plan, a Participant shall be terminated for "cause" if his
employment is terminated because of the Participant's fraud, misappropriation of
funds or property of the Company or its Affiliates for his own use, embezzlement
of the property of the Company or its Affiliates or a material and intentional
breach by the Participant of the provisions of his employment.
8. Surviving Spouse. Any amount payable pursuant to this Plan upon the
death of a Participant shall be payable to the spouse, if any, to whom the
Participant was married at the time of his death.
<PAGE> 9
9. Funding. Benefits under this Plan shall be unfunded, shall be
payable out of the general assets of the Company, and no special or separate
fund shall be established to assure payment of such amounts. No Participant or
Surviving Spouse shall have any rights under the terms of the Plan or a Benefit
Agreement greater than the rights of an unsecured general creditor of the
Company.
10. Other Retirement Benefits. The benefits and payments provided under
this Plan are independent of any and all retirement benefits provided to the
Participant from any other source, except that in determining the amount of the
Participant's Accrued Benefit pursuant to Section 2(a), the value of the
Participant's Profit Sharing Plan Account shall be taken into account as
provided in Section 2(a).
11. Incapacity. In the event that the Board of Directors determines
that the Participant or his Surviving Spouse is unable to care for his affairs
due to any physical or mental condition, any payment due the Participant or
Surviving Spouse under this Plan may be made to his duly appointed legal
representative. The Board of Directors may, in its discretion, make such payment
to a child, parent or spouse of such Participant or Surviving Spouse or to any
other person with whom
<PAGE> 10
he resides or who is charged with his care. Any such payment so made shall be in
complete discharge of the liability of the Company under this Plan to each and
every person with respect to the amount so paid.
12. Assignment. The interest in this Plan of a Participant or Surviving
Spouse shall not be subject to assignment or transfer or otherwise be alienable
either by voluntary or involuntary acts of such person, or by operation of law,
nor shall it be subject to attachment, execution, garnishment, sequestration or
other seizure under any legal, equitable or other process. If any Participant or
Surviving Spouse shall attempt to or shall alienate, sell, transfer, pledge or
otherwise encumber any amount to which he is or might become entitled, or if by
reason of the bankruptcy or insolvency of any such person or the issuance of any
garnishment, writ of execution or other court process, or other event happening
at any time, any amount otherwise payable hereunder to such person should
devolve upon anyone other than him or would not be enjoyed by him, the Board of
Directors, in its absolute discretion, may terminate such interest and may hold
or apply it to or for the benefit of such Participant, or Surviving Spouse, as
the case may be, or the spouse, children or other dependents
<PAGE> 11
of such person, in such manner as the Board of Directors may deem proper.
13. No Employment Contract. This Plan shall not be construed as
creating any contract of employment between the Company and the Participant nor
shall it change any rights or obligations under any existing employment contract
between the Company and the Participant. The Company shall have the same right
with respect to, and control over, its Employees as though this Plan had never
been executed.
14. Covenant Not to Compete.
(a) If a Participant shall, during the 24-month period
immediately following his termination of employment with the Company, engage in
"Competition" with the Company (as hereinafter defined), within the territories
in which the Company is actively engaged in the conduct of business during the
term of employment hereunder including, without limitation, the territories in
which customers are then being solicited, his benefit payments shall be
suspended, and he shall be required to return the amount of any previous
benefits paid to him under this Plan plus any interest thereon, as liquidated
damages, or if no such payments have been made, his benefit under the Plan shall
be forfeited.
<PAGE> 12
(b) The word "Competition" for purposes of this Section 14 or
any other provision of this Plan shall mean:
(i) Engaging in or carrying on, directly or
indirectly, either for himself or as a member of a partnership or as a
stockholder, investor, lender, officer or director of a corporation
(other than the Company), or as an employee or agent of, or consultant
or advisor to, any person, partnership, corporation, joint venture or
enterprise (other than the Company), or in any capacity on behalf of
any trust or other organization or entity, any business in competition
with (as defined below) any business then carried on by the Company as
long as any like business is carried on by the Company or by any
person, corporation, partnership, trust or other organization or entity
deriving title to the good will of such business, directly or
indirectly, from the Company; provided, however, that nothing herein
contained shall prevent the Participant from purchasing securities of
any publicly owned company, the securities of which are listed on a
national securities exchange or registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, (the "1934 Act") but the total
holding of such security so
<PAGE> 13
listed or registered shall be limited to 1% of the amount of any such
security outstanding. The Participant may make investments, without
restriction on amount, in noncompetitive private businesses. For the
purposes of this Section 14(b)(i) the term "any business in competition
with" shall mean any business engaged principally or in part in the
business of the Company as described in its Registration Statement on
Form S-1 (Registration No. 333- 3790) relating to the registration of
shares of the common stock of the Company (the "Registration
Statement") and in any other filing made after the Effective Date by
the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, or the 1934 Act ("Subsequent
Filings"); or
(ii) soliciting, raiding, enticing, inducing or
attempting to persuade any person that presently is or is at any time
during the term of the Participant's employment as an Employee (or, in
the case of termination, is at the time of termination or within the
24-month period thereafter) an employee of the Company to become
employed by any person, firm, partnership, corporation or other
enterprise or entity, and the Participant shall not
<PAGE> 14
approach any such employee for such purpose or authorize the taking of
such actions by any other person, firm, partnership, corporation or
other enterprise or entity in taking such action; or
(iii) divulging, furnishing or making accessible
to any person, corporation, partnership, trust or other organization or
entity, any information, trade secrets, technical data or know-how
relating to the business, business practices, methods, attorney-client
communications, pending or contemplated acquisitions or other
transactions, products, processes, equipment or any confidential or
secret aspect of the business of the Company without the prior written
consent of the Company, unless such information shall have become
public knowledge or shall have become known generally to competitors of
the Company through sources other than the Participant.
15. Amendment and Termination. The Company may amend, terminate or
suspend this Plan at any time or from time to time by a resolution by the Board
of Directors; provided, however, that no amendment or termination of the Plan
shall reduce the Accrued Benefit to which any Participant or Surviving Spouse is
entitled under this Plan by reason of the Participant's prior
<PAGE> 15
Years of Service or the Participant's death, or other termination of employment.
16. Administration. This Plan shall be administered by the Board of
Directors. The Board of Directors shall be charged with the operation and
administration of the Plan. The Board of Directors shall have discretionary
authority to interpret and construe this Plan and to determine all questions
arising under this Plan, and to adopt and amend from time to time such by-laws
and rules and regulations necessary for the administration of this Plan which
are not inconsistent with the terms and provisions of this Plan.
17. Binding Effect. This Plan shall inure to the benefit of and be
binding upon the Company, its successors and assigns, including without
limitation any corporation which may acquire all its assets or into which the
Company may be consolidated or merged, and any Participant, his heirs,
executors, administrators and legal representatives, provided that the
obligations of the Participant hereunder may not be delegated.
18. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of California governing contracts to be
made and performed therein without giving effect to principles of conflicts of
law, except to the
<PAGE> 16
extent such laws have been superseded by Federal law.
19. Gender and Number. The masculine pronoun whenever used
herein shall include the feminine pronoun and the singular number shall include
the plural number and vice versa unless the context of the Plan requires
otherwise.
<PAGE> 17
IN WITNESS WHEREOF, Central Financial Acceptance Corporation
has executed this Plan on this 24th of June 1996.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
By___________________________________
Gary M. Cypres
President and Chief Executive Officer
ATTEST:
________________________________
Secretary
<PAGE> 1
EXHIBIT 10.13
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
EXECUTIVE DEFERRED SALARY AND BONUS PLAN
Effective June 24, 1996
<PAGE> 2
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
EXECUTIVE DEFERRED SALARY AND BONUS PLAN
1. PURPOSE
The purpose of the Plan is to attract competent officers and key
executives by offering flexible compensation opportunities; to
motivate these executives to promote the growth and profitability of
the Company; and to associate the interests of these executives with
those of the Company.
2. DEFINITIONS
"Account" shall mean the record maintained by the Company reflecting
Executive's Deferred Amounts and the interest credited thereon as
provided for in this Plan.
"Account Balance" shall mean at any time the total of the amounts
credited to the Executive's Account and any accrued but not credited
interest in accordance with the provisions of the Plan.
"Board of Directors" shall mean the Board of Directors of Central
Finance Acceptance Corporation.
"Bonus" shall mean, at any time, the gross amount of the bonus payable
to the Executive under the Company's Executive Incentive Bonus Program
(or any other similar bonus program hereafter established by the
Company), before giving effect to any deferral agreement hereunder.
"Committee" shall mean the Committee appointed by the Board of
Directors.
"Company" shall mean Central Financial Acceptance Corporation.
"Deferred Amount" shall mean the amount by which the Salary and/or
Bonus is reduced from time to time as agreed upon by the Executive and
the Company and deferred in accordance with the terms of the Plan.
The Deferred Amount may be a dollar amount or a percentage of Salary
and/or Bonus.
-2-
<PAGE> 3
"Employee" shall mean any person (including an officer) actively
employed by the Company on a full-time, salaried basis.
"Employed" or "Employment" shall mean performing services as an
employee on a full time basis for the Company.
"Executive" shall mean an Employee who is an officer or key executive
of the Company Employed in a high-ranking executive or managerial
capacity.
"Participant" shall mean an Executive selected by the Committee and
whose participation in the Plan for a calendar year has been approved.
"Plan" shall mean this Executive Deferred Salary and Bonus Plan, as
from time to time amended and in effect.
"Salary" shall mean, at any time, the gross amount of base
compensation being paid to the Executive for Employment, before giving
effect to any deferral agreement hereunder.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
and discretionary authority to interpret the Plan, to establish rules
and regulations relating to the Plan, to determine the criteria for
eligibility to participate in the Plan, to select Participants in the
Plan, and to make all other determinations and take all other actions
necessary or appropriate for the proper administration of the Plan.
The Committee's interpretation of the Plan, and all actions taken
within the scope of its authority, shall be final and binding on the
Company, its stockholders, Participants, Employees, former Employees
and beneficiaries.
4. ELIGIBILITY AND PARTICIPATION
Participation in the Plan for a calendar year (and for the period
beginning on the effective date of the Plan and ending December 31,
1996) shall be limited to those key Executives whom the Committee
shall select, on the basis of
-3-
<PAGE> 4
such Executives' impact on the long-term success of the Company, and
who might benefit from the deferral of amounts otherwise constituting
current compensation.
5. DEFERRAL OF SALARY AND/OR BONUS
A Participant may, subject to the terms and conditions of this Plan,
elect to defer payment of a maximum of 35% of Salary, and/or a maximum
of 100% of Bonus, annually under this Plan by completing the form
prescribed by the Committee. The form shall constitute an agreement
between the Company and the Employee as to the amount of Salary and/or
Bonus to be deferred pursuant to the Plan. The Committee may further
limit deferral by individual Participants, for any reason it deems
advisable.
(a) Election.
An election to defer Salary shall be made on or before the
last regular working day of the Company of the calendar year
preceding the calendar year for which the Salary and/or Bonus
agreement is to be made and shall be effective upon delivery
(or in the event the form is mailed by certified mail, return
receipt requested, on the date of mailing) of the deferral
form to the Company. Notwithstanding the preceding sentence,
in the calendar year in which this Plan is initially adopted
and in the case of an individual who becomes an Executive
during a calendar year, a Participant's election to defer
Salary that would otherwise be payable after the date of the
election, and/or all or a portion of the Bonus payable with
respect to the period after the date of the election, may be
made up to 30 days after the effective date of the Plan or the
individual becomes an Executive and eligible to participate
herein, whichever is applicable. The election made to reduce
Salary and/or Bonus by a Participant must remain in effect for
an entire calendar year (or, in the case of the calendar year
in which this Plan is adopted or the calendar year in which an
individual becomes an Executive, the remaining portion of such
calendar year to which the
-4-
<PAGE> 5
deferral election relates) and may not be changed by any
action taken by the Participant thereafter.
(b) Payment of Deferred Amount.
The Deferred Amount, plus interest credited thereon pursuant
to Subsection (c) hereof, upon the Participant's termination
of Employment for any reason will be paid to the Participant
(or, in the event of the Participant's death, the person or
estate determined under Section 6 hereof) in a lump sum within
30 days after such termination.
(c) Accounts and Interest Credited on Deferred Amount.
A separate Account shall be established and maintained for
each Participant, which Account shall reflect the Deferred
Amount and all interest credited thereon from time to time.
Each Participant's Account Balance shall be credited quarterly
with interest as of the end of each calendar quarter, with the
first such credit being made as of September 30, 1996. In the
event a Participant's Account Balance is paid other than at
the end of any calendar quarter, he shall be credited with
interest thereon from the end of the immediately preceding
calendar quarter to the date of payment. No interest shall be
credited to a Participant's Account after the payment of such
Participant's Account Balance. Interest to be credited for
any period shall be at a rate equal to the average prime rate
which Wells Fargo Bank N.A. charged from time to time during
such period at its principal office on 90-day unsecured
commercial loans to its most credit worthy commercial
borrowers. Interest credits shall be computed on the basis of
a 360-day year of twelve 30-day months.
(d) Acceleration of Payment of Deferred Amount.
Payment of the Deferred Amount plus interest may occur prior
to the Participant's termination of Employment under the
following circumstances:
-5-
<PAGE> 6
(1) At any time prior to complete payment of the
Participant's Account Balance, the Company may pay to
the Participant an amount not greater than that
portion of the Deferred Amount that the Committee
determines, in its sole discretion, is necessary to
meet an Unforeseeable Emergency. For purposes of
this paragraph, an Unforeseeable Emergency shall mean
an unanticipated emergency that is caused by an event
beyond the control of the Participant and that would
result in severe financial hardship to the
Participant if early withdrawal of the Participant's
Account Balance were not permitted. The Participant
shall apply in writing to the Committee for any
payment under this paragraph and shall furnish to the
Committee such information as the Committee deems
necessary and appropriate to make its determination.
(2) In no event may payment of the Deferred Amount, and
interest thereon, or any portion thereof, be
accelerated in any manner other than as provided
above.
6. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the
event of the Participant's death prior to full payment of his Account
Balance hereunder, shall receive payment of the Account Balance due
under the Plan. Such designation shall be made by the Participant on
a form prescribed by the Committee. The Participant may, at any time,
change or revoke such designation. A beneficiary designation, or
revocation of a prior beneficiary designation, will be effective only
if it is made in writing on a form provided by the Company, signed by
the Participant and received by the Company. If the Participant does
not designate a beneficiary or the beneficiary dies prior to receiving
any payment of the Account Balance, the Account Balance payable under
the Plan shall be paid to the Participant's estate.
7. AMENDMENT AND TERMINATION
-6-
<PAGE> 7
The Board of Directors may at any time amend or terminate this Plan.
No amendment or termination shall adversely affect a Participant's
rights to or interest in the Account Balance credited prior thereto
without the Participant's consent.
8. MISCELLANEOUS PROVISIONS
(a) This Plan is not a contract for employment of the Employee for
a certain period of time. Neither the establishment of this
Plan, nor any action taken hereunder, shall be construed as
giving any Employee any right to be retained in the Employ of
the Company.
(b) A Participant's rights and interest under the Plan are not
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant or the
Participant's beneficiary.
(c) It is the intention of the parties that the Plan be unfunded
for tax purposes and for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The Company shall not be required to establish any special or
separate fund, or to make any other segregation of assets, to
assure payment of the Account Balance. Participants have the
status of general unsecured creditors of the Company and the
Plan constitutes a mere promise by the Company to make benefit
payments in the future.
(d) To the extent that the Plan is considered to be a plan for
purposes of ERISA, it shall be considered an unfunded plan
maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees, within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of ERISA.
-7-
<PAGE> 8
9. WITHHOLDING AND PAYMENTS
The Company shall have the right to deduct from any amount to be paid
to any Participant or beneficiary any taxes or other amounts required
by law to be withheld.
10. EFFECTIVE DATE
The Plan shall be effective on and after June 24, 1996.
-8-
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
1996 1995 JUNE 30, 1997
------------------------ ------------------------ ------------------------
PRIMARY SUPPLEMENTARY PRIMARY SUPPLEMENTARY PRIMARY SUPPLEMENTARY
------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net income from continuing
operations ........................... $5,970,000 $5,970,000 $3,069,000 $3,069,000 $3,532,000 N/A
Net income (loss) from discontinued
operations ........................... (91,000) (91,000) 50,000 50,000 -- N/A
Interest, net of taxes ................. 543,000 1,114,000 -- N/A
---------- ---------- ---------- ---------- ---------- -----------
Net income ............................. $5,879,000 $6,422,000 $3,119,000 $4,233,000 $3,532,000 N/A
Weighted average common shares
outstanding .......................... 6,213,500 7,277,000 5,150,000 7,277,000 7,277,000 N/A
Earnings per share from continuing
operations ........................... $ 0.96 -- $ 0.60 -- $ 0.49 N/A
Income (loss) per share discontinued
operations ........................... (0.01) -- 0.01 -- -- N/A
---------- --------- ---------- --------- ----------- ----------
Net income per share ................... $ 0.95 -- $ 0.61 -- $ 0.49 N/A
Supplementary net income per share ..... -- $ 0.88 -- $ 0.50 $ -- N/A
</TABLE>
<TABLE>
<CAPTION>
1994 JUNE 30, 1996
------------------------ -------------------------
PRIMARY SUPPLEMENTARY PRIMARY SUPPLEMENTARY
------- ------------- ------- --------------
<S> <C> <C> <C> <C>
Net income from continuing operations ............................ $2,182,000 $2,182,000 $2,334,000 $2,334,000
Net income (loss) from discontinued operations ................... -- -- (22,000) (22,000)
Interest, net of taxes ........................................... -- 926,000 -- 543,000
---------- ---------- ---------- ----------
Net income ....................................................... $2,182,000 $3,108,000 $2,312,000 $2,855,000
Weighted average common shares outstanding ....................... 5,150,000 7,277,000 5,150,000 7,277,000
Earnings per share from continuing operations .................... $ 0.42 -- $ 0.45 --
Income (loss) per share discontinued operations .................. -- -- -- --
---------- ---------- ---------- ----------
Net income per share ............................................. $ 0.42 -- $ 0.45 --
Supplementary net income per share ............................... -- $ 0.43 -- $ 0.40
</TABLE>
<PAGE> 1
EXHIBIT 12.1
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED TWO MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
---------------------------- ------------------ -------------------------------------- ------------------
10/31/92 10/31/93 10/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/95 12/31/96 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Interest
Expense... A 2,636 2,443 2,734 382 655 2,335 3,025 4,489 4,948 2,612 2,980
Total Rent
Expense... 104 312 375 49 77 302 403 503 861 376 1,275
Percent of
Rents
Allocable
to
Interest
(Rents*
30%)...... B 31 94 113 15 23 91 121 151 258 113 383
Income
(Loss)
Before
Income
Taxes..... 1,199 1,369 4,182 310 (197) 1,739 3,675 5,148 9,949 3,893 5,742
Add Portion
of Rents
Allocable
to
Interest.. 31 94 113 15 23 91 121 151 258 113 363
Total
Earnings... C 1,230 1,463 4,295 325 (174) 1,830 3,796 5,299 10,207 4,006 6,125
Total
Earnings
Plus
Interest
Expense... A+C 3,866 3,906 7,029 707 481 4,165 6,821 9,788 15,155 6,618 9,105
Total
Interest
Expense
Plus
Allocable
Rents..... A+B 2,667 2,537 2,847 397 678 2,426 3,146 4,640 5,206 2,725 3,363
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF CENTRAL FINANCIAL ACCEPTANCE CORPORATION
Central Check Cashing, Inc.
Central Installment Credit
Corporation
Central Consumer Finance
Company
Centravel, Inc.
Central Financial
Acceptance/Insurance Agency
Central Premium Finance
Company
BCE Properties, Inc.
Central Consumer Company of
Nevada
CALPLAN Travel Corporation
C.E.A. Acquisition Corporation
BTT Corporation
C.E.A. Travel Corporation
Central Finance Reinsurance, Ltd.
Central Financial Acceptance
Corporation Accident & Health
Reinsurance Limited
Central Income Tax Services, Inc.
<PAGE> 1
EXHIBIT 23.1
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
October 1, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Central Financial
Acceptance Corporation and Subsidiaries on Form S-1 of our report dated
April 12, 1996 (June 25, 1996 as to the effects of the reorganization described
in Note 1), appearing in the Prospectus, which is part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Los Angeles, California
October 2, 1997
<PAGE> 1
EXHIBIT 25.1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 95-4574983
(State of incorporation) (I.R.S. employer identification no.)
5480 East Ferguson Drive
Commerce, California 90022
(Address of principal executive offices) (Zip Code)
Junior Subordinated Deferrable Interest Debentures of
Central Financial Acceptance Corporation
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ JAMES P. LAWLER By:/s/ EMMETT R. HARMON
-------------------------- -------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the
<PAGE> 5
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which
are proper or necessary for the transaction of the business
of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
2
<PAGE> 6
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds,
3
<PAGE> 7
as and when the Board of Directors shall determine, and in
the promotion of its said corporate business of investment
and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
4
<PAGE> 8
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
5
<PAGE> 9
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be
6
<PAGE> 10
issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any
class or series of stock or securities convertible into or
exchangeable for stock, or carrying any right to purchase stock, may
be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not
7
<PAGE> 11
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of
8
<PAGE> 12
shares of stock of the Corporation which are beneficially owned by
each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
9
<PAGE> 13
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
10
<PAGE> 14
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
11
<PAGE> 15
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation
12
<PAGE> 16
or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE> 19
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board
of
2
<PAGE> 20
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who
4
<PAGE> 22
are not officers of the Company and who shall hold office during the pleasure of
the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform
5
<PAGE> 23
such duties as the Board of Directors or the Chairman of the Board may from time
to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
6
<PAGE> 24
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange
7
<PAGE> 25
of capital stock shall go into effect, or a date in connection with obtaining
such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses
under applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 23, 1997 By: /s/ Emmett R. Harmon
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------------------- ----------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................208,942
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 403,700
Available-for-sale securities...............................................................................905,200
Federal funds sold and securities purchased under agreements to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . 3,816,484
LESS: Allowance for loan and lease losses. . . . . 54,535
LESS: Allocated transfer risk reserve. . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,761,949
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases).....................................................95,762
Other real estate owned...................................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................................ 42
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................3,572
Other assets................................................................................................108,295
Total assets..............................................................................................5,640,913
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................3,864,774
Noninterest-bearing . . . . . . . . 875,081
Interest-bearing. . . . . . . . . . 2,989,693
Federal funds purchased and Securities sold under agreements to repurchase................................. 337,784
Demand notes issued to the U.S. Treasury.....................................................................95,000
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................775,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G)..................................................................... 84,197
Total liabilities.........................................................................................5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................376,212
Net unrealized holding gains (losses) on available-for-sale securities................................... (2,328)
Total equity capital........................................................................................441,158
Total liabilities, limited-life preferred stock, and equity capital.......................................5,640,913
</TABLE>
2
<PAGE> 1
EXHIBIT 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)______
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
CFAC CAPITAL I
(Exact name of obligor as specified in its charter)
Delaware 95-4574983
Delaware Applied For
(State of incorporation) (I.R.S. employer identification no.)
5480 East Ferguson Drive
Commerce, California 90022
(Address of principal executive offices) (Zip Code)
___% Cumulative Trust Preferred Securities of CFAC Capital I
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ JAMES P. LAWLER By:/s/ EMMETT R. HARMON
--------------------------- -------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the
<PAGE> 5
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which
are proper or necessary for the transaction of the business
of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
2
<PAGE> 6
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds,
3
<PAGE> 7
as and when the Board of Directors shall determine, and in
the promotion of its said corporate business of investment
and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
4
<PAGE> 8
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
5
<PAGE> 9
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be
6
<PAGE> 10
issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any
class or series of stock or securities convertible into or
exchangeable for stock, or carrying any right to purchase stock, may
be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not
7
<PAGE> 11
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of
8
<PAGE> 12
stock of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
9
<PAGE> 13
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
10
<PAGE> 14
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as
is required by law and any other provisions of the Charter or Act
of Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the
Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
11
<PAGE> 15
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation
12
<PAGE> 16
or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE> 19
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board
of
2
<PAGE> 20
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who
4
<PAGE> 22
are not officers of the Company and who shall hold office during the pleasure of
the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform
5
<PAGE> 23
such duties as the Board of Directors or the Chairman of the Board may from time
to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
6
<PAGE> 24
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange
7
<PAGE> 25
of capital stock shall go into effect, or a date in connection with obtaining
such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 23, 1997 By: /s/ Emmett R. Harmon
------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------------------------ ---------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
-----------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coins.............................................208,942
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 403,700
Available-for-sale securities...............................................................................905,200
Federal funds sold and securities purchased under agreements to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. ...................................3,816,484
LESS: Allowance for loan and lease losses................................... 54,535
LESS: Allocated transfer risk reserve....................................... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,761,949
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases).....................................................95,762
Other real estate owned...................................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................................ 42
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................3,572
Other assets................................................................................................108,295
Total assets..............................................................................................5,640,913
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
Deposits:
<S> <C>
In domestic offices.......................................................................................3,864,774
Noninterest-bearing . . . . . . . . 875,081
Interest-bearing. . . . . . . . . . 2,989,693
Federal funds purchased and Securities sold under agreements to repurchase................................. 337,784
Demand notes issued to the U.S. Treasury.....................................................................95,000
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................775,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G)..................................................................... 84,197
Total liabilities.........................................................................................5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................376,212
Net unrealized holding gains (losses) on available-for-sale securities................................... (2,328)
Total equity capital........................................................................................441,158
Total liabilities, limited-life preferred stock, and equity capital.......................................5,640,913
</TABLE>
2
<PAGE> 1
EXHIBIT 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
[ ] CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 95-4574983
(State of incorporation) (I.R.S. employer identification no.)
5480 East Ferguson Drive
Commerce, California 90022
(Address of principal executive offices) (Zip Code)
Central Financial Acceptance Corporation Guarantee with respect to
___% Cumulative Trust Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 23rd day
of September, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ JAMES P. LAWLER By:/s/ EMMETT R. HARMON
----------------------------- --------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the
<PAGE> 5
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which
are proper or necessary for the transaction of the business
of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
2
<PAGE> 6
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest,
dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds,
3
<PAGE> 7
as and when the Board of Directors shall determine, and in
the promotion of its said corporate business of investment
and to the extent authorized by law, to lease, purchase,
hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
4
<PAGE> 8
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
5
<PAGE> 9
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be
6
<PAGE> 10
issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any
class or series of stock or securities convertible into or
exchangeable for stock, or carrying any right to purchase stock, may
be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not
7
<PAGE> 11
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of
8
<PAGE> 12
stock of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
9
<PAGE> 13
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
10
<PAGE> 14
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
11
<PAGE> 15
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or
any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation
12
<PAGE> 16
or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
<PAGE> 19
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board
of
2
<PAGE> 20
Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who
4
<PAGE> 22
are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform
5
<PAGE> 23
such duties as the Board of Directors or the Chairman of the Board may from time
to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
6
<PAGE> 24
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange
7
<PAGE> 25
of capital stock shall go into effect, or a date in connection with obtaining
such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 23, 1997 By: /s/ Emmett R. Harmon
-------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------------- -------------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................208,942
Interest-bearing balances........................................................................... 0
Held-to-maturity securities............................................................................... 403,700
Available-for-sale securities...............................................................................905,200
Federal funds sold and securities purchased under agreements to resell......................................151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income..................3,816,484
LESS: Allowance for loan and lease losses.................. 54,535
LESS: Allocated transfer risk reserve............................0
Loans and leases, net of unearned income, allowance, and reserve..............................3,761,949
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases).....................................................95,762
Other real estate owned...................................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................................ 42
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets.............................................................................................3,572
Other assets................................................................................................108,295
Total assets..............................................................................................5,640,913
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................3,864,774
Noninterest-bearing............875,081
Interest-bearing.............2,989,693
Federal funds purchased and Securities sold under agreements to repurchase..................................337,784
Demand notes issued to the U.S. Treasury.....................................................................95,000
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................775,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).......................................................................84,197
Total liabilities.........................................................................................5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................376,212
Net unrealized holding gains (losses) on available-for-sale securities......................................(2,328)
Total equity capital........................................................................................441,158
Total liabilities, limited-life preferred stock, and equity capital.......................................5,640,913
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001012483
<NAME> CFAC CAPITAL I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
