<PAGE>
As Filed with the Securities and Exchange Commission on May 26, 1999
Registration No. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Bank of the Ozarks, Inc.
(Exact name of registrant as specified in its charter)
Arkansas 6022 71-0556208
(State of organization) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
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Ozark Capital Trust
(Exact name of registrant as specified in its charter)
Delaware 6022 71-6176636
(State of organization) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
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12615 Chenal Parkway
P. O. Box 8811
Little Rock, Arkansas 72231-8811
(501) 978-2265
(Address and telephone number of registrant's principal executive offices)
---------------
George G. Gleason, II
Chairman of the Board and Chief Executive Officer
Bank of the Ozarks, Inc.
12615 Chenal Parkway
P. O. Box 8811
Little Rock, Arkansas 72231-8811
(501) 978-2265
(Name, address, and telephone number of agent for service)
---------------
Copies of all correspondence to:
Jeffrey J. Gearhart, Esq. H. Watt Gregory, III, Esq.
John P. Fletcher, Esq. Joseph S. Mowery, Esq.
Kutak Rock Giroir, Gregory, Holmes & Hoover, PLC
425 West Capitol Avenue, Suite 1100 111 Center Street, Suite 1900
Little Rock, Arkansas 72201 Little Rock, Arkansas 72201
(501) 975-3000 (501) 372-3000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, please check the following
box and list the Securities Act registration statement number of the 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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
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<TABLE>
<CAPTION>
Proposed Maximum Proposed Minimum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(/1/) Per Share(/2/) Offering Price(/2/) Registration Fee(/2/)
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<S> <C> <C> <C> <C>
Preferred Securities of Ozark Capital
Trust............................... 1,725,000 $10.00 $17,250,000 $4,795.50
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Subordinated Debentures of Bank of the
Ozarks, Inc.(/3/)...................
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Guarantee of Bank of the Ozarks, Inc.
with
respect to Preferred
Securities(/4/).....................
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</TABLE>
(1) Includes 225,000 preferred securities which may be sold by the Trust to
cover over-allotments.
(2) The registration fee is calculated pursuant to Section 6(b), in accordance
with Rule 457(a) of the Securities Act of 1933.
(3) The subordinated debentures will be purchased by the Trust with the
proceeds of the sale of the preferred securities. The subordinated
debentures may later be distributed for no additional consideration to
holders of the preferred securities upon the Trust's dissolution and
distribution of its assets.
(4) No fee is required pursuant to Rule 457(n).
---------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 26, 1999
PROSPECTUS
1,500,000 Preferred Securities
Ozark Capital Trust
% Cumulative Trust Preferred Securities
(liquidation amount $10 per preferred security)
Guaranteed by
[LOGO OF BANK OF THE OZARKS APPEARS HERE]
----------
The Trust:
Ozark Capital Trust is a Delaware business trust which will:
. Sell preferred securities to the public and common securities to Bank of the
Ozarks, Inc.;
. Use the proceeds from these sales to buy an equal principal amount of %
subordinated debentures due , 2029 of Bank of the Ozarks, Inc.; and
. Distribute the cash payments it receives from Bank of the Ozarks, Inc. on the
debentures to the holders of the preferred securities and the common
securities.
The Offering:
. For each preferred security that you own, you will receive cumulative cash
distributions accumulating from , 1999 at an annual rate of % of the
liquidation amount of $10 per preferred security on March 31, June 30,
September 30 and December 31 of each year, beginning , 1999.
. Bank of the Ozarks, Inc. may defer interest payments on the debentures at any
time for up to 20 consecutive quarterly periods, in which case, the Trust
will also defer payment of distributions on the preferred securities to you.
However, deferred distributions will themselves accumulate interest at an
annual rate of %.
. The preferred securities mature on , 2029.
. The Trust may redeem the preferred securities, at a redemption price of $10
per preferred security plus accrued and unpaid distributions, at any time on
or after , 2004 or earlier under certain circumstances.
Bank of the Ozarks, Inc.:
. Bank of the Ozarks, Inc. will effectively fully and unconditionally guarantee
the preferred securities on a subordinated basis based on its obligations
under a guarantee, a trust declaration, an indenture and an expense
agreement.
The Trust has applied to list the preferred securities on The Nasdaq National
Market under the trading symbol "OZRKP."
----------
Investing in the preferred securities involves certain risks which are
described in the "Risk Factors" section beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
None of the securities offered by this prospectus are deposits or accounts of a
bank. They are not insured by the Federal Deposit Insurance Corporation or any
other governmental agency.
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<TABLE>
<CAPTION>
Per Security Total
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<S> <C> <C>
Public offering price............................. $10.00 $15,000,000
Underwriting commissions (paid by Bank of the
Ozarks, Inc.).................................... $ .375 $ 562,500
Proceeds to the Trust............................. $10.00 $15,000,000
</TABLE>
The underwriters may also purchase up to an additional 225,000 preferred
securities at the public offering price within 30 days after the date of this
prospectus to cover any over-allotments.
The Trust expects the preferred securities will be ready for delivery in book-
entry form only through The Depository Trust Company on or about , 1999.
----------
Stephens Inc. Morgan Keegan & Company, Inc.
The date of this prospectus is , 1999
<PAGE>
[INSIDE FRONT COVER -- MAP]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary......................................................... 3
Special Note Regarding Forward-Looking Information......................... 9
Risk Factors............................................................... 10
Use of Proceeds............................................................ 18
Accounting Treatment....................................................... 18
Ratio of Earnings to Fixed Charges......................................... 18
Capitalization............................................................. 19
Selected Consolidated Financial Data....................................... 20
Management's Discussion and Analysis....................................... 21
Supplemental Quarterly Data................................................ 45
Business................................................................... 46
Supervision and Regulation................................................. 56
Management................................................................. 62
Certain Transactions....................................................... 68
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Securities Ownership of Certain Beneficial Owners and Management........... 69
Description of the Preferred Securities.................................... 70
Description of the Subordinated Debentures................................. 80
Book-Entry Issuance........................................................ 89
Description of Guarantee................................................... 91
United States Federal Income Tax Consequences.............................. 95
ERISA Considerations....................................................... 99
Underwriting............................................................... 101
Transfer Agent............................................................. 102
Legal Matters.............................................................. 102
Experts.................................................................... 102
Where You Can Find More Information........................................ 103
Index to Consolidated Financial Statements................................. F-1
</TABLE>
You may rely on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor sale of preferred
securities means that information contained in this prospectus is correct after
the date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy the preferred securities in any circumstances
under which the offer or solicitation is unlawful.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information from this prospectus. The summary is not
complete and does not contain all of the information that you should review.
You should read the entire prospectus carefully before investing in the
preferred securities.
The term "Trust" refers to Ozark Capital Trust, a Delaware business trust
organized to purchase our subordinated debentures and issue the preferred
securities. We use the term "bank subsidiaries" to refer to Bank of the Ozarks,
wca and Bank of the Ozarks, nwa, our state chartered bank subsidiaries. The
terms "we", "our", "us" and "the Company" refer to Bank of the Ozarks, Inc.
and, in some cases, will include the Trust and the bank subsidiaries.
Bank of the Ozarks, Inc.
We are a bank holding company that conducts banking operations through 20
offices in 15 communities throughout northern, western and central Arkansas. We
provide a wide range of retail and commercial banking services including
checking, savings, money market, time deposit, and individual retirement
accounts, as well as real estate, consumer, commercial, industrial and
agricultural loans. We also provide mortgage lending, cash management, trust
services, safety deposit boxes, real estate appraisals, credit related life and
disability insurance, ATMs, telephone banking and debit cards.
In 1994 we initiated our expansion strategy, via de novo branching, into
target Arkansas markets. Since embarking on this strategy we have opened 15 new
offices, with 10 being opened since January 1997. In 1998 we added a new
element to our growth strategy by significantly expanding into two of Arkansas'
largest metropolitan markets--Little Rock and Fort Smith. Since 1994 we have
experienced significant growth in operations and maintained profitability:
. Total assets increased to $666.9 million at March 31, 1999 from $165.0
million at December 31, 1994, representing a compounded annual growth
rate of 38.9%.
. Net income increased to $1,526,000 for the three months ended March 31,
1999, up from $1,374,000 for the same quarter in 1998. For the year
ended December 31, 1998 net income was $5,629,000.
. For the three months ended March 31, 1999 return on average assets
equaled 0.97% and return on average stockholders' equity equaled 15.14%.
For the year ended December 31, 1998 return on average assets and return
on average stockholders' equity were 1.16% and 14.83%, respectively.
. Our leverage capital ratio was 5.95% at March 31, 1999 and 6.21% at
December 31, 1998. After inclusion in Tier 1 capital of the eligible net
proceeds of $13.8 million from this offering, our pro forma leverage
capital ratio at March 31, 1999 would have been 7.96%.
Our goal is to maximize long-term stockholder value through strong year-to-
year growth in assets, loans, deposits and earnings per share in a manner
consistent with safe, sound and prudent banking practices. To achieve this
goal, our strategy is to:
. Expand loans and deposits primarily through market share growth at
existing locations and de novo branching in northern, western and
central Arkansas;
. Provide customers with the breadth of financial products and services of
a regional bank;
. Employ, empower and motivate personnel to provide personalized customer
service, consistent with the best traditions of community banking, while
increasing profits; and
. Maintain asset quality and control overhead expense.
Our corporate offices are located at 12615 Chenal Parkway, P. O. Box 8811,
Little Rock, Arkansas 72231-8811, and our telephone number is (501) 978-2265.
Our internet web site is www.bankozarks.com. The information in our web site is
not incorporated into this prospectus.
3
<PAGE>
Ozark Capital Trust
Ozark Capital Trust is a Delaware business trust and will exist solely to
issue and sell its preferred securities to the public and engage in other
activities that are necessary or incidental to the offering described below.
The Trust's corporate offices are located at c/o FMB Trust Company, National
Association, 25 South Charles Street, Baltimore, Maryland 21203, and its
telephone number is (410) 244-3987.
The Offering
Preferred securities Ozark Capital Trust.
issuer......................
Securities offered.......... The Trust is offering for sale 1,500,000(/1/)
preferred securities at an offering price of
$10 each(/2/). The preferred securities
represent an indirect interest in our
subordinated debentures which will be purchased
by the Trust with the proceeds of this
offering.
The Trust will sell its preferred securities to
the public and its common securities to us.
Together, the preferred securities and the
common securities are referred to as "trust
securities."
Use of proceeds............. The Trust will use the net proceeds from the
sale of trust securities to buy our %
subordinated debentures which will have the
same payment terms as the preferred securities.
We plan to use the net proceeds of
approximately $14.1 million(/3/) from the
issuance of the subordinated debentures:
. to repay indebtedness under our revolving
line of credit (approximately $13.1
million); and
. for general corporate purposes including
capital investments in our bank subsidiaries
to fund growth. See "Use of Proceeds" and
"Capitalization."
Quarterly distributions are
payable to you on the
preferred securities........ The distributions payable on each preferred
security will:
. accumulate at a fixed rate of % per year;
. accrue from the date of issuance of the
preferred securities; and
. be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of
each year that the preferred securities are
outstanding, beginning on , 1999.
We may defer distributions
to you on the preferred
securities.................. The Trust may defer distributions on the
preferred securities if we defer paying
interest to the Trust on the subordinated
debentures. We generally have the right to
defer interest payments on the subordinated
debentures for up to 20 consecutive quarters.
During any deferral period, you will accumulate
distributions at the annual rate of %, plus
you will earn additional interest at the annual
rate of %, compounded quarterly, on the
deferred distributions.
- --------
(1) An additional 225,000 preferred securities may be sold by the Trust upon
exercise of the over-allotment option granted to the underwriters.
(2) Plus accumulated distributions from , 1999 if settlement occurs after
that date.
(3) Underwriting commissions for this offering will be $562,500 and expenses
are estimated to be approximately $315,000, all of which will be paid by
Bank of the Ozarks, Inc.
4
<PAGE>
During any deferral period, we will not be
permitted (with certain exceptions) to pay a
dividend or make any other payment or
distribution on our common stock or redeem,
purchase or make a liquidation payment on our
common stock. We currently have no intention of
exercising our right to defer payments of
interest by extending the interest payment
period on the subordinated debentures.
If we defer distributions, you must still
include the related income in your taxable
gross income for United States federal income
tax purposes for as long as the subordinated
debentures remain outstanding. For further
information on deferrals and their tax
consequences, see "Risk Factors--Preferred
Securities Risk Factors" and "United States
Federal Income Tax Consequences."
You will be required to
sell your preferred
securities when the
subordinated debentures
mature...................... The subordinated debentures will mature on
, 2029. You will be required to sell your
preferred securities to the Trust upon the
stated maturity date of the subordinated
debentures.
If the subordinated
debentures are prepaid,
your preferred securities
will be redeemed............
Subject to prior approval of the Federal
Reserve, if then required, we may prepay the
subordinated debentures prior to maturity:
. in whole or in part at any time on or after
, 2004; or
. in whole, but not in part, if certain
changes in tax or investment company laws or
in federal bank regulatory capital
requirements occur or may occur.
Upon any prepayment of the subordinated
debentures, your preferred securities will be
redeemed at the liquidation amount of $10 each
plus any accrued and unpaid distributions to
the date of redemption. For further information
on redemptions, see "Description of the
Preferred Securities--Redemption" and
"Description of the Subordinated Debentures--
Redemption."
At our option, we may
require you to exchange
your preferred securities
for our subordinated
debentures..................
We have the right at any time to dissolve or
liquidate the Trust and distribute the
subordinated debentures to you in exchange for
your preferred securities. If that happens, you
will receive subordinated debentures in
exchange for the same principal amount of your
holdings of preferred securities. However, we
must pay the creditors of the Trust and receive
prior approval of the Federal Reserve, if then
required, before we dissolve or liquidate the
Trust. If the subordinated debentures are
distributed, we will use our best efforts to
list them on The Nasdaq National Market in
place of the preferred securities. For further
information concerning distribution of the
subordinated debentures, see "Description of
the Preferred Securities--Distribution of
Subordinated Debentures."
5
<PAGE>
We guarantee your preferred
securities on a
subordinated basis.......... We fully and unconditionally guarantee the
payment of all distributions the Trust is
obligated to make, but only to the extent the
Trust has sufficient funds to satisfy those
payments.
If we do not make a payment on the subordinated
debentures, the Trust will not have sufficient
funds to make payments on the preferred
securities. The guarantee does not require us
to make any payments on our subordinated
debentures nor does it require us to make up
any shortfall in the Trust's funds needed to
make a payment on the preferred securities to
you. The guarantee only covers payments to the
extent the Trust holds any funds.
We believe that, taken together, our
obligations under the Indenture, the Guarantee
Agreement, the Trust Agreement and the Expense
Agreement (each defined on page 70) provide in
the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated
basis, of all of the obligations of the Trust
under the preferred securities.
For further information concerning our
guarantee of the preferred securities, see
"Risk Factors--Preferred Securities Risk
Factors" and "Description of Guarantee."
Your preferred securities
rank lower in payment
compared to our other
obligations.................
Our obligations under the guarantee, the
subordinated debentures and the related
governing documents are unsecured and have a
payment priority below all of our current and
future Senior and Subordinated Debt (as defined
on page 84). In addition, because we are a
holding company that relies on dividends from
our bank subsidiaries for virtually all of our
income, all existing and future borrowings and
other liabilities of our bank subsidiaries will
effectively rank higher than all of our
obligations relating to the preferred
securities and the subordinated debentures. See
"Risk Factors--Preferred Securities Risk
Factors."
The terms of the preferred securities and the
subordinated debentures do not limit the amount
of other debt, preferred securities or other
subordinated debentures that we or the Trust
may issue in the future or on the amount of
future liabilities of the bank subsidiaries.
Future issuances of securities similar to the
preferred securities and the subordinated
debentures will rank equally with our
obligations under the subordinated debentures
and our guarantee of the preferred securities
described in this prospectus.
Limited voting rights....... As a holder of preferred securities, you will
have very limited voting rights. See "Risk
Factors--Preferred Securities Risk Factors" and
"Description of the Preferred Securities--
Voting Rights; Amendment of the Trust
Agreement."
6
<PAGE>
Book-entry issuance......... You will not receive a certificate for your
preferred securities. Instead, the preferred
securities will be represented by a global
security that will be deposited with The
Depository Trust Company or its custodian and
registered in the name of The Depository Trust
Company or its nominee.
Trustees.................... The Trust will have five trustees. Three of the
trustees are officers of Bank of the Ozarks,
Inc. and will act as "administrative trustees"
for the Trust. FMB Trust Company, National
Association, a subsidiary of First Maryland
Bancorp, will act as "property trustee" for the
Trust, "indenture trustee" for the subordinated
debentures and "guarantee trustee" for the
guarantee. Its offices are located at 25 South
Charles Street, Baltimore, Maryland 21203
(referred to in this prospectus as the
"Corporate Trust Office"). First Omni Bank,
National Association, will act as Delaware
trustee for the Trust.
The Nasdaq National The Trust has applied to list the preferred
Market...................... securities on The Nasdaq National Market under
the trading symbol "OZRKP." See "Risk Factors--
Preferred Securities Risk Factors" and
"Underwriting."
7
<PAGE>
BANK OF THE OZARKS, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
----------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement data:
Net interest income.... $ 7,994 $ 8,312 $ 11,805 $ 14,489 $ 18,364 $ 4,157 $ 5,309
Provision for loan
losses................ 339 360 1,486 1,139 2,026 225 611
Non-interest income.... 2,713(/1/) 1,168 1,865 2,925 5,031 1,094 1,269
Non-interest expense... 5,735 5,996 7,151 9,228 13,119 2,924 3,768
Income before income
taxes................. 4,509(/1/) 3,015 5,033 7,047 8,250 2,102 2,199
Net income............. 2,954(/1/) 2,170 3,027 4,531 5,629 1,374 1,526
Per common share data:
Earnings--diluted...... $ 0.99(/1/) $ 0.75 $ 1.05 $ 1.38 $ 1.47 $ 0.36 $ 0.40
Book value............. 5.07 5.66 6.44 9.44 10.68 9.73 11.01
Weighted avg. shares
outstanding
(thousands)........... 2,975 2,894 2,880 3,281 3,819 3,821 3,796
Balance sheet data at
period end:
Total assets........... $165,030 $212,476 $270,600 $352,093 $612,431 $422,655 $666,921
Total loans............ 112,806 153,198 214,462 275,463 387,526 299,505 400,851
Allowance for loan
losses................ 1,649 1,909 3,019 3,737 4,689 3,822 4,850
Total investment
securities............ 40,521 37,137 39,608 42,459 176,618 70,252 215,049
Total deposits......... 148,453 182,463 231,648 295,555 529,040 352,312 581,704
Notes payable.......... -- 3,920 5,396 5,072 12,448 5,072 13,183
Total stockholders'
equity................ 15,076 16,294 18,547 35,666 40,355 36,793 41,630
Loan to deposit ratio.. 75.99% 83.96% 92.58% 93.20% 73.25% 85.01% 68.91%
Performance ratios:
Return on average
assets................ 1.77%(/1/) 1.17% 1.26% 1.44% 1.16% 1.46%(/4/) 0.97%(/4/)
Return on average
stockholders' equity.. 20.67(/1/) 14.09 17.66 17.21 14.83 15.41(/4/) 15.14(/4/)
Net interest margin.... 5.24 4.95 5.36 4.98 4.19 4.83(/4/) 3.77(/4/)
Efficiency ratio(/2/).. 60.19(/3/) 61.83 51.60 52.55 54.98 54.93 55.65
Assets quality ratios:
Net charge-offs to
average loans......... 0.09% 0.08% 0.21% 0.17% 0.33% 0.20%(/4/) 0.46%(/4/)
Nonperforming loans to
total loans........... 0.57 0.85 1.08 0.25 0.70 0.54 1.04
Nonperforming assets to
total assets.......... 0.50 0.63 0.88 0.24 0.50 0.40 0.75
Allowance for loan
losses as a percentage
of:
Total loans............ 1.46% 1.25% 1.41% 1.36% 1.21% 1.28% 1.21%
Nonperforming loans.... 258.46 146.28 130.69 534.62 171.82 234.19 116.71
Regulatory capital
ratios at period end:
Leverage capital
ratio................. 9.10% 7.49% 6.42% 9.86% 6.21% 9.08% 5.95%
Tier 1 risk-based
capital............... 12.71 9.80 8.45 13.01 9.05 11.65 8.89
Total risk-based
capital............... 13.96 11.05 9.70 14.27 10.21 12.90 10.03
Earnings to fixed
charges ratios:
Including interest on
deposits.............. 2.00x 1.42x 1.50x 1.52x 1.38x 1.52x 1.34x
Excluding interest on
deposits.............. 34.09 45.00 5.65 5.99 3.89 5.68 3.98
</TABLE>
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(1) Includes the effect of a gain of $1.4 million ($1.0 million after tax, or
$0.34 per common share) from the May 1994 sale of a bank subsidiary.
(2) Calculated by dividing non-interest expense by the sum of fully taxable
equivalent net interest income and non-interest income.
(3) Excludes the effect of the gain referenced in footnote (1) of this table.
(4) Annualized. Results for the three months ended March 31, 1999 may not be
indicative of full year results.
8
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains certain forward-looking statements and information
that are based on management's beliefs, assumptions and expectations of our
future economic performance, taking into account information currently
available. When used in this prospectus, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions identify
forward-looking statements. Such statements reflect our current views of
future events and are subject to certain risks, uncertainties and assumptions
that may cause actual results or outcomes to vary materially from management's
expectations.
Some of the important factors that could cause our actual results of
operation or financial condition to differ materially from expectations, which
in turn could have an adverse impact on our ability to pay distributions on
the subordinated debentures and preferred securities are: (1) potential delays
or other problems in implementing our growth and expansion strategy; (2) the
ability to continue to attract new deposits and loans; (3) interest rate
fluctuations; (4) competitive factors and pricing pressures; (5) general
economic conditions; (6) Year 2000 problems; and (7) changes in legal and
regulatory requirements as well as other factors described in this prospectus.
Should one or more of the foregoing risks materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially
from those described in the forward-looking statements. These and other
material risk factors relating to our operations and the preferred securities
are more fully described under the caption "Risk Factors."
9
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following risk factors before investing in the
preferred securities.
PREFERRED SECURITIES RISK FACTORS
The Holders of Our Senior and Subordinated Debt Will Be Paid Before You Are
Paid Under the Guarantee or Subordinated Debentures
Our obligations under the guarantee and subordinated debentures are
unsecured and rank junior in right of payment to all of our Senior and
Subordinated Debt and equal to any securities we may later have that are
similar to the preferred securities and subordinated debentures. The guarantee
and subordinated debentures also will be effectively junior to all obligations
of our bank subsidiaries.
The preferred securities, the subordinated debentures and the guarantee do
not limit our ability to incur additional indebtedness, including indebtedness
that ranks senior to the subordinated debentures and the guarantee. As of
March 31, 1999 we had approximately $13.1 million of Senior and Subordinated
Debt outstanding (substantially all of which was outstanding under our $22
million revolving line of credit and will be repaid with the proceeds of this
offering). Only our common stock currently ranks junior in right of payment to
the subordinated debentures and our obligations under the guarantee. See "Use
of Proceeds," "Description of Guarantee--Status of Guarantee" and "Description
of the Subordinated Debentures--Subordination."
If We Are Unable to Make Payments on the Subordinated Debentures, the Trust
Will Not Be Able to Pay Distributions on the Preferred Securities and the
Guarantee Will Not Apply
The Trust's ability to pay distributions on the preferred securities depends
upon our making timely payments on the subordinated debentures. In turn, our
ability to make payments on the subordinated debentures depends primarily upon
our receipt of cash dividends from our bank subsidiaries. Dividend payments
from the bank subsidiaries are subject to a number of operational, regulatory
and other risks which we describe in more detail under the caption "Bank of
the Ozarks, Inc. Risk Factors."
If we default on our obligations under the subordinated debentures, you will
not be able to rely on the guarantee for payment because the guarantee only
applies if we make a payment of principal or interest on the subordinated
debentures. Instead, you or the property trustee will have to sue us to
enforce the rights of the holder of the subordinated debentures. For more
information on our obligations under the preferred securities guarantee and
the subordinated debentures, see "Description of Guarantee--Status of
Guarantee" and "Description of the Subordinated Debentures--Subordination.
Distributions on the Preferred Securities May be Deferred; You May Have to
Include Interest in Your Taxable Income Before You Receive Cash
It is possible that you will not receive cash distributions on the preferred
securities for up to 20 consecutive quarters (in each case, an "Extension
Period"). We have the right, at one or more times, to defer interest payments
on the subordinated debentures for an Extension Period, but not beyond the
maturity date of the subordinated debentures. We must make payments of all
deferred interest upon the earlier of the end of the Extension Period or the
maturity date. This deferral right exists only if no event of default under
the subordinated debentures has occurred and is continuing. If we exercise
this right, the Trust will also defer distributions on the preferred
securities during an Extension Period. However, you would still accumulate
distributions at an annual rate of % of the liquidation amount of $10 per
preferred security, plus you will earn interest at the annual rate of %,
compounded quarterly, on any unpaid distributions. When we pay all the
accumulated amounts due to you during an Extension Period, the Extension
Period will terminate. However, we have the right to begin
10
<PAGE>
another Extension Period under the same terms outlined above. There is no
limit on the number of times we can elect to begin an Extension Period. During
an Extension Period, the preferred securities may trade at a price that does
not fully reflect the value of accrued but unpaid distributions. See
"Description of the Preferred Securities."
You will also not receive the cash distributions related to any accrued and
unpaid interest from the Trust if you sell the preferred securities before the
end of an Extension Period. However, you will be required to include accrued
interest income as original issue discount for United States federal income
tax purposes in respect of your pro rata share of the subordinated debentures
held by the Trust. While we will take the position that original issue
discount will not arise before the first Extension Period, it is possible that
all interest on the subordinated debentures would be required to be accounted
for as original issue discount. In these circumstances, the receipt of
interest would not separately be reported as taxable income. See "United
States Federal Income Tax Consequences" for more information regarding the tax
consequences of the preferred securities.
We have no current intention of exercising our right to defer interest
payments on the subordinated debentures. However, if we exercise our right in
the future, the market price of the preferred securities is likely to be
adversely affected.
If We Redeem the Subordinated Debentures it Will Cause a Redemption of the
Preferred Securities and You May Not be Able to Reinvest the Proceeds at the
Same or Higher Rate of Return
You are subject to prepayment risk of your preferred securities. If your
preferred securities are redeemed, you may not be able to reinvest the money
you receive in the redemption at a rate that is equal to or higher than the
rate of return you receive on the preferred securities. Although the
subordinated debentures have a stated maturity date of , 2029, they may
be redeemed by us prior to maturity (which, in turn, would cause an early
redemption of the preferred securities) in the following circumstances:
. in whole or in part at any time on or after , 2004 at our option;
. in whole, but not in part, within 90 days following a change in the
federal tax laws or a change in the interpretation of the tax laws by
the courts or the Internal Revenue Service, which would result in a risk
that (1) the Trust may be subject to federal income tax with respect to
income received or accrued on the subordinated debentures, (2) the
interest payable on the subordinated debentures will not be deductible
by us for federal income tax purposes, or (3) the Trust is or will be
subject to more than a minimal amount of other taxes or governmental
charges;
. in whole, but not in part, within 90 days following a change in
investment company laws or regulations if there is a risk that the Trust
is or will be considered to be an investment company that is required to
be registered under the Investment Company Act of 1940; or
. in whole, but not in part, within 90 days following a change in banking
laws or regulations if there is a risk that we will not be able to treat
all or a substantial portion of the preferred securities as "Tier 1
capital" for purposes of federal banking guidelines.
Our exercise of these redemption rights is subject to our receipt of prior
approval of the Federal Reserve, if then required. For tax or regulatory
events that may trigger redemption of the subordinated debentures and
prepayment of the preferred securities, see "Description of the Preferred
Securities--Redemption." Additionally, for a discussion of certain tax
consequences that could be caused by a redemption, see "Federal Income Tax
Consequences--Receipt of Subordinated Debentures or Cash Upon Termination or
Redemption."
11
<PAGE>
An Active Trading Market for the Preferred Securities May Not Develop and a
Distribution of Subordinated Debentures to Holders of Preferred Securities May
Have an Adverse Effect on the Market Price of Your Investment
The preferred securities constitute a new issue of securities with no
established trading market. Although an application for listing of the
preferred securities on The Nasdaq National Market has been filed, there can
be no assurance that the listing will be approved. Further, even if approved,
a listing does not guarantee that a trading market for the preferred
securities will develop. If a trading market does develop, there is no
assurance of the depth of that market or that holders of preferred securities
will be able to sell their preferred securities easily.
Your investment in the preferred securities may decrease in value if the
subordinated debentures are distributed to you in exchange for your preferred
securities. We cannot predict the liquidity or market prices for the
subordinated debentures that may be distributed. Accordingly, the subordinated
debentures that you receive upon a distribution, or the preferred securities
you hold pending such a distribution, may trade at a discount to your purchase
for the preferred securities.
Because you may receive subordinated debentures, you must also make an
investment decision with regard to those securities. You should carefully
review all the information regarding the subordinated debentures contained in
this prospectus.
Under "United States Federal Income Tax Consequences" we discuss applicable
United States federal income tax consequences of a distribution of the
subordinated debentures.
In an Event of a Default, You May be Required to Rely on the Property Trustee
of the Trust to Enforce Your Rights
You may not be able to directly enforce rights against us if an event of
default occurs with respect to the subordinated debentures. For a list of
events of default, see "Description of the Preferred Securities--Events of
Default; Notice" and "Description of the Subordinated Debentures--Debenture
Events of Default."
If an event of default under the subordinated debentures occurs and is
continuing, this event will also be an event of default under the preferred
securities. In that case, you generally would first have to rely on the
property trustee's enforcement of its rights as holder of the subordinated
debentures against us. If the property trustee fails to exercise its rights
under the subordinated debentures, you will then be able to exercise any other
remedies available under the subordinated debentures.
However, if the default arises because we fail to pay interest or principal
(except during an Extension Period) on the subordinated debentures, you may
proceed directly against us without first relying on the property trustee.
Limited Covenants Relating to the Preferred Securities and the Subordinated
Debentures Will Not Necessarily Protect You
The governing documents impose only limited obligations on us with respect
to the preferred securities and the subordinated debentures. As a result, the
governing documents will not necessarily protect you in the event of an
adverse change in our financial condition or results of operations. The
governing documents do not limit the ability of us or our bank subsidiaries to
incur additional debt. You should not consider the covenants contained in the
governing documents to be a significant factor in evaluating whether we will
be able to comply with our obligations under the subordinated debentures or
the guarantee.
12
<PAGE>
You Will Have Limited Voting Rights
As a holder of preferred securities, you will have very limited voting
rights relating only to the modification of the preferred securities, the
dissolution or winding up of the Trust and the removal of the property trustee
upon a limited number of events. You will not have any voting rights regarding
Bank of the Ozarks Inc.'s business or any matters regarding the administrative
trustees. See "Description of the Preferred Securities--Voting Rights;
Amendment of the Trust Agreement" for more information on your limited voting
rights.
Trading Characteristics of the Preferred Securities May Create Adverse Tax
Consequences for You
The preferred securities may trade at a price that does not reflect the
value of accrued but unpaid interest on the underlying subordinated
debentures. If you use the accrual method of accounting for tax purposes (or
if you use the cash method and the preferred securities are deemed to have
been issued with original issue discount) and you dispose of your preferred
securities between record dates for any distribution payments, you will have
to include as ordinary income for United States federal income tax purposes an
amount equal to the accrued but unpaid interest on your proportionate share of
the interest on the subordinated debentures through the date of your
disposition.
You will recognize a capital loss on the amount that the selling price is
less than your adjusted tax basis. Generally, capital losses may be used by a
corporate taxpayer only to offset capital gains and may be used by individual
taxpayers only to offset capital gains plus $3,000 of other income.
See "United States Federal Income Tax Consequences--Potential Extension of
Interest Payment Period and Original Issue Discount" and "--Sale of Preferred
Securities" for more information on possible adverse tax consequences to you.
13
<PAGE>
BANK OF THE OZARKS, INC. RISK FACTORS
Each of these factors may have a material adverse effect on our operations,
financial results or financial conditions in future periods which in turn
could adversely affect our ability to make payments on the subordinated
debentures and the Trust's ability to effect distributions on the preferred
securities.
We Could Sustain Losses If Asset Quality Declines
Our earnings are significantly affected by our ability to properly
originate, underwrite and service loans. We could sustain losses if we
incorrectly assess the creditworthiness of our borrowers or fail to detect or
respond to a deterioration in asset quality in a timely manner. Problems with
asset quality could cause our interest income and net interest margin to
decrease and our provisions for loan losses to increase, which could
materially adversely affect our results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Nonperforming Assets" and "Business--Asset Quality."
Changes in Interest Rates Could Adversely Affect Our Results of Operations and
Financial Condition
Our earnings depend substantially on "rate differentials," which are the
differences between the rates we earn on loans, securities and other earning
assets, and the interest rates we pay on deposits and other borrowings. These
rates are highly sensitive to many factors which are beyond our control,
including general economic conditions and the policies of various governmental
and regulatory authorities. Frequently the maturities of assets and
liabilities are not balanced, and an increase or decrease in interest rates
could have a material adverse effect on our net interest margin, results of
operations and financial condition. For instance, our liabilities are
currently scheduled to reprice more quickly than our assets. As a result, an
increase in interest rates may have a material adverse effect on our results
of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Interest Rate Sensitivity."
Liquidity Needs Could Adversely Affect Our Results of Operations and Financial
Condition
Bank Subsidiaries. Our primary sources of funds are customer deposits and
loan repayments. We have experienced significant growth in our loan portfolio
which has resulted in a high loan to deposit ratio in recent years. Although
our loan to deposit ratio was 68.91% at March 31, 1999, this ratio could
increase to higher levels if loan growth outpaces deposit growth. While
scheduled loan repayments are a relatively stable source of funds, loans
generally are not readily convertible to cash. Additionally, deposit levels
may be affected by a number of factors, including rates paid by competitors,
general interest rate levels, returns available to customers on alternative
investments and general economic conditions. Accordingly, we may be required
from time to time to rely on secondary sources of liquidity to meet withdrawal
demands or otherwise fund operations. Such sources include borrowings under
our revolving line of credit, Federal Home Loan Bank ("FHLB") advances and
federal funds lines of credit from correspondent banks. While we believe that
these sources are currently adequate, there can be no assurance they will be
sufficient to meet future liquidity demands. We may be required to slow or
discontinue loan growth, capital expenditures or other investments or
liquidate assets should such sources not be adequate. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
Holding Company. We rely on the dividends from our bank subsidiaries as our
principal source of funds for our operations including the repayment of our
debt. Federal and state banking regulations restrict the ability of the bank
subsidiaries to pay dividends. Although we expect the level of our bank
subsidiaries' dividends to be adequate to meet our current and anticipated
cash needs, the continued ability to pay dividends at adequate levels is
determined primarily by the net profits, after taxes, of such bank
subsidiaries. Accordingly, because there can be no assurance as to the future
profitability of the bank subsidiaries, dividends we receive may not be
sufficient to meet our future cash requirements. Also, there can be no
assurance that additional federal or state regulations will not further
restrict the bank subsidiaries' ability to pay dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Supervision and Regulation--Bank
Subsidiaries."
14
<PAGE>
Year 2000 Liquidity Needs. We may experience additional liquidity needs in
connection with increased deposit withdrawals due to customer concerns over
the Year 2000 issue. While we have developed a contingency funding plan to
prepare for this potential liquidity need, there can be no assurance that such
steps will be adequate. Consequently, significant depositor withdrawals
immediately before or after January 1, 2000 could have a material adverse
effect on our results of operations or financial condition. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations--
Liquidity and Capital Resources."
We May Not Succeed in Implementing Our Growth Strategy
Our current growth strategy primarily involves growth at existing offices
and through new, or de novo, branches. This strategy involves certain special
risks as follows:
Management of Growth. Our past and expected growth involves a variety of
risks including:
. maintaining loan quality in the context of significant loan growth;
. maintaining adequate management personnel and systems to oversee such
growth;
. maintaining adequate internal audit, loan review and compliance
functions; and
. implementing additional policies, procedures and operating systems
required to support such growth.
Operating Results. There is no assurance that our new offices will achieve
deposit levels, loan balances or other operating results necessary to avoid
losses or produce profitability. Our historical results may not be indicative
of future results or results that may be achieved from a larger number of
locations. Should any new location be unprofitable or marginally profitable,
or should any existing location experience a decline in profitability or incur
losses, the adverse effect on our results of operations and financial
condition could be more significant than would be the case for a larger
company.
Development of Offices. We may encounter delays or other problems in opening
offices. Additionally, we may be unable to accomplish future expansion plans
due to lack of available satisfactory sites, difficulties in acquiring such
sites, increased expenses or loss of potential sites due to complexities
associated with zoning and permitting processes, higher than anticipated
acquisition costs or other factors. We may also consider strategic acquisition
opportunities should they be presented. If we make any acquisitions, there can
be no assurance we will be able to successfully integrate the operations of
any acquired entity.
Regulatory and Economic Factors. Our growth and expansion plans may be
adversely affected by a number of regulatory and economic developments or
other events. Failure to obtain required regulatory approvals, changes in laws
and regulations or other regulatory developments and changes in prevailing
economic conditions or other unanticipated events may prevent or adversely
affect our continued growth and expansion. Such factors may cause us to alter
our growth and expansion plans or slow or halt the growth and expansion
process, which may prevent us from entering certain target markets or allow
competitors to gain or retain market share in our existing or expected
markets.
Failure to successfully address the above issues could have a material
adverse effect on our results of operations and financial condition. See
"Business--Growth Strategy."
15
<PAGE>
The Banking Industry Is Highly Competitive
The banking industry in our market area is highly competitive. We compete
with many different financial and financial service institutions, including:
. other commercial and savings banks and savings and loan associations;
. credit unions;
. finance companies;
. mortgage companies;
. brokerage and investment banking firms; and
. asset-based non-bank lenders.
A substantial number of the commercial banks in our market area are branches
or subsidiaries of much larger organizations affiliated with statewide,
regional or national banking companies, and as a result may have greater
resources and lower cost of funds. Additionally, we may face increased
competition from de novo community banks, including those with senior
management who were previously with other local banks or those controlled by
investor groups with strong local business and community ties.
Various legislative acts in recent years, including the interstate banking
and branching laws, have led to increased competition among financial
institutions. There can be no assurance that we will compete effectively in
the future. Further, there can be no assurance that the United States Congress
or the Arkansas General Assembly will not enact legislation that may further
increase competitive pressures on us. See "Business--Competition" and
"Supervision and Regulation."
Changes in Economic Conditions Could Adversely Affect Our Results of Operation
and Financial Condition
Our profitability depends on the profitability of our bank subsidiaries,
whose operating results and asset quality may be significantly affected by
national and local economic conditions. We make loans primarily to borrowers
who are located in northern, western and central Arkansas and secure these
loans in substantial part with real estate collateral located in the area. We
are subject to adverse changes in general economic conditions in the United
States such as inflation, recession and high levels of unemployment, consumer
credit and bankruptcies. We are also subject to unfavorable changes in
economic conditions affecting our markets which may have a material adverse
effect on our results of operations and financial condition. Such changes
could result from numerous factors beyond our control, including a reduction
in real estate values, business closings or layoffs, inclement weather,
natural disasters and adverse trends or events affecting various industry
groups such as agriculture, real estate and real estate development and
construction.
We Could be Adversely Affected by the Year 2000 Problem
The Year 2000 issue relates to the ability of our computer systems and other
systems with imbedded microchips to properly handle Year 2000 date sensitive
data and the potential risk to us because of relationships with third parties
who do not adequately address the Year 2000 issue. Such third parties include
software and hardware vendors, loan customers, correspondent banks, federal,
state and local governmental agencies, utility companies and others. Failure
in any of these areas could result in a system failure or miscalculations
causing disruptions of our operations, including a temporary inability to
process transactions or engage in normal business activities.
We have a Year 2000 Project Committee that has been evaluating and assessing
our exposure to this issue. We have substantially completed the testing of our
internal mission critical systems and have not yet identified any problems
with our systems that would have a material impact on operations. However,
there can be no
16
<PAGE>
assurance that our internal systems will be free of material errors. In
addition, we can give no assurance that our vendors, borrowers or other third
parties who could affect our operations will be Year 2000 compliant. If either
our computer systems or the systems of these third parties fail to function
properly because of the Year 2000 problem, our results of operations may
materially suffer. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."
We Rely on the Services of Key Personnel
We depend on the services of George Gleason, our Chairman of the Board and
Chief Executive Officer. Mr. Gleason is our largest individual stockholder,
and although we have entered into an employment agreement with him, the loss
of the services of Mr. Gleason could have a material adverse effect on our
results of operations and financial condition. We are also dependent on
certain other key officers who have important customer relationships or are
instrumental to our operations. The loss of these individuals could have a
material adverse effect on our results of operations and financial condition.
In addition, we may not be able to attract and retain key personnel with the
skills and expertise necessary to achieve and manage our planned growth. See
"Business--Growth Strategy" and "Management."
We Could be Adversely Affected by Government Regulation
We are subject to extensive government regulation and supervision under
various state and federal laws, rules and regulations, including rules and
regulations of the Federal Reserve, the Federal Deposit Insurance Corporation
("FDIC") and the Arkansas State Bank Department. These laws and regulations
are designed primarily to protect depositors, borrowers, and the Bank
Insurance Fund of the FDIC and to further certain social policies;
consequently, they may impose limitations on us that may not be in our best
interests or the interests of holders of the preferred securities. We are
subject to changes in federal and state laws, regulations, governmental
policies and accounting principles. The effects of any such potential changes
cannot be predicted, but they could have a material adverse effect on our
results of operations and financial condition. See "Supervision and
Regulation."
Arkansas Usury Laws Could Adversely Affect Our Operating Results
Under the Arkansas Constitution, "consumer loans and credit sales" and other
"general loans" are subject to an interest rate limitation equal to 5% over
the Federal Reserve Discount Rate in effect on the date of the loan. "Consumer
loans and credit sales" are subject to an additional interest rate limitation
of 17% per annum. During 1998 and the first quarter of 1999 the maximum
interest rates we could charge on these categories of loans ranged from 10.0%
at January 1, 1998 to 9.5% at March 31, 1999. The Arkansas Constitution
provides significant penalties, including the forfeiture of interest and
principal depending on the type of loans, for usurious loans. These usury
provisions could adversely affect our net interest margin and loan volume.
Thus, if the Federal Reserve Discount Rate failed to move in tandem with
market rates or if a high interest rate environment reduced or eliminated our
net interest margin, Arkansas usury laws could have a material adverse effect
on our results of operations and financial condition. See "Supervision and
Regulation--State Regulations."
17
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of preferred securities by the Trust will be
invested in the subordinated debentures and are expected to be approximately
$14.1 million ($16.3 million if the underwriters' over-allotment option is
exercised in full), after deducting underwriting commissions and offering
expenses payable by the Company.
We intend to use approximately $13.1 million of the net proceeds from the
subordinated debentures to repay outstanding borrowings under the Company's
revolving line of credit, which provides for maximum outstanding amounts of up
to $22 million and has a maturity date of March 31, 2003. Interest accrues on
outstanding borrowings under the revolving line of credit at a variable rate
equal to the prime rate minus 1.25%, but not to exceed 7.75%. For a more
detailed description of the Company's line of credit, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
We intend to use the balance of the net proceeds for general corporate
purposes, including capital investments in and advances to the bank
subsidiaries to finance the continued implementation of our growth strategy.
See "Business--Growth Strategy." The precise amounts and timing of expenditure
of such net proceeds will depend on the funding requirements of the Company
and the availability of other capital resources. Pending application of the
net proceeds as described above, the Company intends to invest such proceeds
in short term and intermediate term interest bearing securities or in deposits
in its bank subsidiaries.
ACCOUNTING TREATMENT
For financial reporting purposes, the Company will treat the Trust as its
subsidiary. Accordingly, the Company will include the accounts of the Trust in
its Consolidated Financial Statements. The preferred securities will be
presented as a separate category in the consolidated balance sheet of the
Company under the caption "Guaranteed preferred beneficial interest in the
Company's subordinated debentures" and appropriate disclosures about the
preferred securities, the guarantee and the subordinated debentures will be
included in the notes to the Consolidated Financial Statements. The Company
will record distributions on the preferred securities as a reduction in net
earnings available to common stockholders in its consolidated statements of
income.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods indicated. For purposes of computing the
ratios of earnings to fixed charges, earnings represent income from continuing
operations before income taxes, extraordinary items and cumulative effect of
changes in accounting principle plus fixed charges. Fixed charges represent
total interest expense, including and excluding interest on deposits, as
applicable, as well as the interest component of rental expense.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
------------------------------ --------------
1994 1995 1996 1997 1998 1998 1999
----- ----- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to fixed charges:
Including interest on
deposits..................... 2.00x 1.42x 1.50x 1.52x 1.38x 1.52x 1.34x
Excluding interest on
deposits..................... 34.09 45.00 5.65 5.99 3.89 5.68 3.98
</TABLE>
18
<PAGE>
CAPITALIZATION
The following table shows the consolidated capitalization of the Company at
March 31, 1999 and as adjusted to give effect to the receipt and application
of the estimated net proceeds from the offering (assuming no exercise of the
underwriters' over-allotment option). See "Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 1999
-------------------------
As Adjusted
Actual for the Offering
------- ----------------
(Dollars in thousands)
<S> <C> <C>
Notes payable........................................ $13,183 $ 108
Guaranteed preferred beneficial interest in Company's
subordinated debentures............................. -- 15,000
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding....... -- --
Common Stock, $0.01 par value, 10,000,000 shares
authorized, 3,779,555 shares issued and
outstanding........................................ 38 38
Additional paid-in capital.......................... 14,314 14,314
Retained earnings................................... 27,070 27,070
Accumulated other comprehensive income.............. 208 208
------- -------
Total stockholders' equity......................... 41,630 41,630
------- -------
Total capitalization.............................. $54,813 $56,738
======= =======
Ratio of equity to assets............................ 6.24% 6.22%
Regulatory capital ratios:
Leverage capital ratio.............................. 5.95% 7.96%
Tier 1 risk-based capital........................... 8.89 11.92
Total risk-based capital............................ 10.03 13.33
</TABLE>
A substantial portion of the net proceeds of the preferred securities is
expected to qualify as Tier 1 capital with respect to the Company under the
risk-based guidelines established by the Federal Reserve. These guidelines
currently provide that the Tier 1 capital related to the preferred securities
cannot constitute more than 25% of the total core capital elements of the
Company. Amounts in excess of this 25% limitation are expected to constitute
Tier 2 capital of the Company. As of March 31, 1999 this 25% limitation would
limit the amount of net proceeds of the preferred securities eligible for
inclusion in Tier 1 capital to $13.8 million.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data concerning the
Company and is qualified in its entirety by the Company's Consolidated
Financial Statements, including the related notes thereto, and by
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial data included in this prospectus. The
consolidated statement of operations data for the years ended December 31,
1996, 1997 and 1998 and the consolidated balance sheet data at December 31,
1997 and 1998 are derived from audited Consolidated Financial Statements
included elsewhere in this prospectus. The consolidated statement of
operations data for the years ended December 31, 1994 and 1995 and the
consolidated balance sheet data at December 31, 1994, 1995 and 1996 are
derived from audited Consolidated Financial Statements not included in this
prospectus. The income statement, balance sheet and per common share data as
of and for the periods ending March 31, 1998 and March 31, 1999, were derived
from the unaudited Consolidated Financial Statements of the Company included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
----------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income statement data:
Interest income........ $ 12,645 $ 15,703 $ 21,836 $ 27,468 $ 38,882 $ 7,993 $ 11,730
Interest expense....... 4,651 7,391 10,031 12,979 20,518 3,836 6,421
Net interest income.... 7,994 8,312 11,805 14,489 18,364 4,157 5,309
Provision for loan
losses................ 339 360 1,486 1,139 2,026 225 611
Non-interest income.... 2,713(/1/) 1,168 1,865 2,925 5,031 1,094 1,269
Non-interest expense... 5,735 5,996 7,151 9,228 13,119 2,924 3,768
Income before income
taxes................. 4,509(/1/) 3,015 5,033 7,047 8,250 2,102 2,199
Net income............. 2,954(/1/) 2,170 3,027 4,531 5,629 1,374 1,526
Per common share data:
Earnings--diluted...... $ 0.99(/1/) $ 0.75 $ 1.05 $ 1.38 $ 1.47 $ 0.36 $ 0.40
Book value............. 5.07 5.66 6.44 9.44 10.68 9.73 11.01
Dividends.............. 0.30 0.30 0.30 0.20 0.23 0.05 0.10
Weighted avg. shares
outstanding
(thousands)........... 2,975 2,894 2,880 3,281 3,819 3,821 3,796
Balance sheet data at
period end:
Total assets........... $165,030 $212,476 $270,600 $352,093 $612,431 $422,655 $666,921
Total loans............ 112,806 153,198 214,462 275,463 387,526 299,505 400,851
Allowance for loan
losses................ 1,649 1,909 3,019 3,737 4,689 3,822 4,850
Total investment
securities............ 40,521 37,137 39,608 42,459 176,618 70,252 215,049
Total deposits......... 148,453 182,463 231,648 295,555 529,040 352,312 581,704
FHLB advances and
Federal funds
purchased............. -- 7,947 12,517 14,017 26,823 25,993 25,425
Notes payable.......... -- 3,920 5,396 5,072 12,448 5,072 13,183
Total stockholders'
equity................ 15,076 16,294 18,547 35,666 40,355 36,793 41,630
Loan to deposit ratio.. 75.99% 83.96% 92.58% 93.20% 73.25% 85.01% 68.91%
Average balance sheet
data:
Total average assets... $167,333 $185,160 $240,208 $314,489 $486,729 $382,406 $640,792
Total average
stockholders' equity.. 14,287 15,392 17,144 26,328 37,951 36,171 40,867
Average equity to
average assets........ 8.54% 8.31% 7.14% 8.37% 7.80% 9.46% 6.38%
Performance ratios:
Return on average
assets................ 1.77%(/1/) 1.17% 1.26% 1.44% 1.16% 1.46%(/5/) 0.97%(/5/)
Return on average
stockholders' equity.. 20.67%(/1/) 14.09 17.66 17.21 14.83 15.41(/5/) 15.14(/5/)
Net interest margin.... 5.24 4.95 5.36 4.98 4.19 4.83(/5/) 3.77(/5/)
Efficiency ratio(/2/).. 60.19(/3/) 61.83 51.60 52.55 54.98 54.93 55.65
Dividend payout
ratio(/4/)............ 30.30 40.00 28.57 14.49 15.65 13.89 25.00
Assets quality ratios:
Net charge-offs to
average loans......... 0.09% 0.08% 0.21% 0.17% 0.33% 0.20%(/5/) 0.46%(/5/)
Provision for loan
losses to average
loans................. 0.31 0.28 0.82 0.47 0.62 0.31 0.62
Nonperforming loans to
total loans........... 0.57 0.85 1.08 0.25 0.70 0.54 1.04
Nonperforming assets to
total assets.......... 0.50 0.63 0.88 0.24 0.50 0.40 0.75
Allowance for loan
losses as a percentage
of:
Total loans............ 1.46% 1.25% 1.41% 1.36% 1.21% 1.28% 1.21%
Nonperforming loans.... 258.46 146.28 130.69 534.62 171.82 234.19 116.71
Regulatory capital
ratios at period end:
Leverage capital
ratio................. 9.10% 7.49% 6.42% 9.86% 6.21% 9.08% 5.95%
Tier 1 risk-based
capital............... 12.71 9.80 8.45 13.01 9.05 11.65 8.89
Total risk-based
capital............... 13.96 11.05 9.70 14.27 10.21 12.90 10.03
Earnings to fixed
charges ratios:
Including interest on
deposits.............. 2.00x 1.42x 1.50x 1.52x 1.38x 1.52x 1.34x
Excluding interest on
deposits.............. 34.09 45.00 5.65 5.99 3.89 5.68 3.98
</TABLE>
- --------
(1) Includes the effect of a gain of $1.4 million ($1.0 million after tax, or
$0.34 per common share) from the May 1994 sale of a bank subsidiary.
(2) Calculated by dividing non-interest expense by the sum of fully taxable
equivalent net interest income and non-interest income.
(3) Excludes the effect of the gain referenced in footnote (1) of this table.
(4) Calculated by dividing dividends per share by diluted earnings per share.
(5) Annualized. Results for the three months ended March 31, 1999 may not be
indicative of full year results.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and related Notes appearing
elsewhere in this prospectus.
General
Net income was $1,526,000 for the first quarter of 1999, an increase of
11.1% over net income of $1,374,000 for the same quarter in 1998. Diluted
earnings per share rose 11.1% to $0.40 for the quarter ended March 31, 1999,
compared to $0.36 for the same quarter in 1998.
Total assets increased from $612.4 million at December 31, 1998 to $666.9
million at March 31, 1999. Loans were $400.9 million at March 31, 1999,
compared to $387.5 million at December 31, 1998. Deposits were $581.7 million
at March 31, 1999, compared to $529.0 million at December 31, 1998.
Stockholders' equity increased from $40.4 million at December 31, 1998 to
$41.6 million at March 31, 1999, increasing book value per share from $10.68
to $11.01.
For the year ended December 31, 1998 net income was $5,629,000, a 24.2%
increase over net income of $4,531,000 in 1997. Net income in 1996 was
$3,027,000. Diluted earnings per share, which were impacted by the issuance of
899,755 additional shares of common stock in the third quarter of 1997, rose
6.5% to $1.47 per share in 1998 compared to $1.38 per share in 1997. Diluted
earnings per share in 1996 were $1.05 per share.
As shown below total assets, loans and deposits increased 73.9%, 40.7% and
79.0%, respectively, from December 31, 1997 to December 31, 1998 and 30.1%,
28.4% and 27.6%, respectively, from December 31, 1996 to December 31, 1997.
Stockholders' equity increased 13.1% from December 31, 1997 to December 31,
1998 and 92.3% from December 31, 1996 to December 31, 1997. The change from
1996 to 1997 reflects the impact of the Company's initial public offering.
During these same periods, book value per share increased 13.1% and 46.6%,
respectively.
<TABLE>
<CAPTION>
December 31, % Change
-------------------------- ----------
1997 1998
March 31, from from
1996 1997 1998 1999 1996 1997
-------- -------- -------- --------- ---- ----
(Dollars in thousands, except per share
amounts)
<S> <C> <C> <C> <C> <C> <C>
Assets......................... $270,600 $352,093 $612,431 $666,921 30.1% 73.9%
Loans.......................... 214,462 275,463 387,526 400,851 28.4 40.7
Deposits....................... 231,648 295,555 529,040 581,704 27.6 79.0
Stockholders' equity........... 18,547 35,666 40,355 41,630 92.3 13.1
Book value per share........... 6.44 9.44 10.68 11.01 46.6 13.1
</TABLE>
Two measures of performance by banking institutions are return on average
assets and return on average equity. Annualized results presented below for
interim periods may not be indicative of those for the full year or future
periods.
Return on average assets ("ROA") measures net earnings in relation to
average total assets and indicates a company's ability to employ its resources
profitably. For the three months ended March 31, 1999, the Company's
annualized ROA was 0.97%, compared with 1.46% for the same period in 1998. For
the year ended December 31, 1998, the Company's ROA was 1.16% compared with
1.44% and 1.26%, respectively, for the years ended December 31, 1997 and 1996.
Return on average equity ("ROE") is determined by dividing annual net
earnings by average shareholders' equity and indicates how effectively a
company can generate net income on the capital invested by its shareholders.
For the three months ended March 31, 1999 the Company's annualized ROE was
15.14%
21
<PAGE>
compared with 15.41% for the same period in 1998. For the year ended December
31, 1998, the Company's ROE was 14.83% compared with 17.21% and 17.66%,
respectively, for the years ended December 31, 1997 and 1996.
Analysis of Results of Operations
The Company's results of operations depend primarily on net interest income,
which is the difference between the interest income from earning assets, such
as loans and investments, and the interest expense incurred on interest
bearing liabilities, such as deposits and other borrowings. The Company also
generates non-interest income, including service charges on deposit accounts,
mortgage lending income, other charges and fees, trust income, and gains on
sales of assets. The Company's non-interest expenses primarily consist of
employee compensation and benefits, occupancy, equipment, and other operating
expenses. The Company's results of operations are also significantly affected
by its provision for loan losses. The following discussion summarizes the
Company's operations for the past three years and for the three months ended
March 31, 1999.
Net Interest Income
Net interest income is analyzed in the discussion and tables below on a
fully taxable equivalent ("FTE") basis. The adjustment to convert certain
income to an FTE basis consists of dividing tax-exempt income by one minus the
federal income tax rate (34%).
Three months ended March 31, 1999 compared to three months ended March 31,
1998
Net interest income (FTE) increased 30.1% to $5.5 million for the three
months ended March 31, 1999, from $4.2 million for the three months ended
March 31, 1998. This increase primarily resulted from a 66.5% increase in
average earning assets to $591.5 million for the 1999 period from $355.3
million for the 1998 period. The increase in average earning assets for the
1999 period resulted from continued growth in the Company's loan portfolio as
well as substantial growth in the Company's investment securities portfolio.
The Company's net interest margin declined from 4.83% in the first quarter
ended March 31, 1998, to 3.77% for the same quarter of 1999. The Company's net
interest margin declined throughout the year of 1998 as a result of
competitive factors, including promotional CD rates at new offices and intense
pricing competition for loans, and a reduction in the Company's loan to
deposit ratio. While the net interest margin declined throughout 1998, the net
interest margin for the first quarter of 1999 remained unchanged from the
fourth quarter of 1998.
1998 compared to 1997
Net interest income (FTE) increased 28.7% to $18.8 million in 1998 from
$14.6 million in 1997. This increase primarily resulted from a 53.1% increase
in average earning assets to $449.4 million in 1998 from $293.6 million in
1997. The increase in average earning assets resulted from continued growth in
the Company's loan portfolio and a significant increase in the investment
securities portfolio. The Company's net interest margin declined from 4.98%
for 1997 to 4.19% for 1998. While the Company experienced strong competition
for loans which reduced the Company's average loan yields, deposit costs did
not decline proportionately due to competition and promotional time deposit
rates offered by the Company at its eight new offices opened in the past 18
months. The Company capitalized on favorable competitive opportunities
resulting from industry consolidation to capture deposit market share causing
its loan to deposit ratio to decline from 93.2% at the beginning of 1998 to
73.3% at December 31, 1998. Deposit growth not used to fund loans, along with
certain borrowings, was used to increase the investment securities portfolio.
The increase in the investment securities portfolio in amount and as a
percentage of total assets has increased the Company's net interest income but
has reduced net interest margin as the yield on securities was less than the
yield on loans.
22
<PAGE>
1997 compared to 1996
Net interest income (FTE) increased 22.0% to $14.6 million in 1997 from
$12.0 million in 1996. This increase primarily resulted from a 31.1% increase
in average earning assets to $293.6 million in 1997 from $223.9 million in
1996. The increase in average earning assets resulted from expansion of the
Company's loan portfolio due to continued growth of existing branches and
opening of new branches. The decrease in the net interest margin resulted
primarily from a 44 basis point decrease in the yield on average earning
assets. A substantial portion of this decrease was attributable to lower
average balances on a relatively high yielding portfolio of loans acquired
prior to 1996 from the Resolution Trust Corporation.
Analysis of Net Interest Income
(FTE = Fully Taxable Equivalent)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------- -------------------
1996 1997 1998 1998 1999
------- ------- ------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest income............... $21,836 $27,468 $38,882 $ 7,993 $ 11,730
FTE adjustment................ 187 144 466 72 193
------- ------- ------- -------- ---------
Interest income--FTE.......... 22,023 27,612 39,348 8,065 11,923
Interest expense.............. 10,031 12,979 20,518 3,836 6,421
------- ------- ------- -------- ---------
Net interest income--FTE...... $11,992 $14,633 $18,830 $ 4,229 $ 5,502
======= ======= ======= ======== =========
Yield on interest earning
assets--FTE.................. 9.84% 9.40% 8.76% 9.21% 8.17%
Cost of interest bearing
liabilities.................. 5.02 5.02 5.06 5.03 4.77
Net interest spread--FTE...... 4.82 4.38 3.70 4.18 3.40
Net interest margin--FTE...... 5.36 4.98 4.19 4.83 3.77
</TABLE>
23
<PAGE>
The following table sets forth certain information relating to the Company's
net interest income for the years ended December 31, 1996, 1997 and 1998 and
for the three months ended March 31, 1998 and 1999. The yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown except where otherwise noted.
Average balances are derived from daily balances for assets and liabilities.
The average balance of loans receivable includes loans on which the Company
has discontinued accruing interest. The yields and costs include amortization
of certain deferred fees and costs, capitalization of interest on construction
projects and late fees. These are considered adjustments to yields or rates.
Average Consolidated Balance Sheets and Net Interest Analysis
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1996 1997 1998
----------------------- ----------------------- -----------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance
-------- ------- ------ -------- ------- ------ -------- ------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest bearing
deposits......... $ 3,077 $ 169 5.49% $ 3,883 $ 213 5.49% $ 3,730 $ 205 5.50% $ 8,490
Federal funds
sold............. 2,720 145 5.33 2,021 108 5.34 1,659 89 5.36 3,967
Investment
securities:
Taxable.......... 32,526 2,069 6.36 39,413 2,684 6.81 99,840 6,654 6.66 46,501
Tax-exempt--FTE.. 5,215 551 10.57 3,520 353 10.03 15,790 1,160 7.35 9,677
Loans--FTE (net
of unearned
income).......... 180,334 19,089 10.59 244,757 24,254 9.91 328,394 31,240 9.51 286,647
-------- ------- -------- ------- -------- ------- --------
Total earning
assets--FTE..... 223,872 22,023 9.84 293,594 27,612 9.40 449,413 39,348 8.76 355,282
Non-earning
assets............ 16,336 20,895 37,316 27,124
-------- -------- -------- --------
Total assets.... $240,208 $314,489 $486,729 $382,406
======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
Deposits:
Savings and
interest bearing
transaction...... $ 48,989 $ 1,311 2.68% $ 61,184 $ 1,786 2.92% $ 74,354 $ 2,054 2.76% $ 64,828
Time deposits
$100,000 or
more............. 34,689 1,975 5.69 48,919 2,753 5.63 87,751 4,899 5.58 64,513
Other time
deposits......... 102,076 5,719 5.60 129,969 7,287 5.61 198,268 11,165 5.63 152,776
-------- ------- -------- ------- -------- ------- --------
Total interest-
bearing
deposits........ 185,754 9,005 4.85 240,072 11,826 4.93 360,373 18,118 5.03 282,117
FHLB advances and
federal funds.... 9,564 558 5.83 12,347 599 4.85(/1/) 36,402 1,759 4.83(/1/) 22,072
Repurchase
agreements....... -- -- -- -- -- -- 108 4 3.70 --
Notes
payable(/2/)..... 4,315 468 10.85 6,125 554 9.04 8,811 637 7.23 5,072
-------- ------- -------- ------- -------- ------- --------
Total interest
bearing
liabilities..... 199,633 10,031 5.02 258,544 12,979 5.02 405,694 20,518 5.06 309,261
Non-interest
liabilities:
Non-interest
bearing
deposits......... 20,129 26,981 40,583 34,844
Other non-
interest
liabilities...... 3,302 2,636 2,501 2,130
-------- -------- -------- --------
Total
liabilities..... 223,064 288,161 448,778 346,235
Stockholders'
equity............ 17,144 26,328 37,951 36,171
-------- -------- -------- --------
Total
liabilities and
stockholders'
equity.......... $240,208 $314,489 $486,729 382,406
======== ======== ======== ========
Interest rate
spread--FTE....... 4.82% 4.38% 3.70%
------- ------- -------
Net interest
income--FTE....... $11,992 $14,633 $18,830
======= ======= =======
Net interest
margin--FTE....... 5.36% 4.98% 4.19%
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1998 1999
-------------- -----------------------
Income/ Yield/ Average Income/ Yield
Expense Rate Balance Expense Rate
------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest bearing
deposits......... $ 114 5.45% $ 347 $ 5 5.45%
Federal funds
sold............. 54 5.62 208 3 4.88
Investment
securities:
Taxable.......... 776 6.77 166,560 2,758 6.72
Tax-exempt--FTE.. 194 8.13 30,914 525 6.89
Loans--FTE (net
of unearned
income).......... 6,927 9.80 393,493 8,632 8.90
------- -------- -------
Total earning
assets--FTE..... 8,065 9.21 591,522 11,923 8.17
Non-earning
assets............ 49,270
--------
Total assets.... $640,792
========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
Deposits:
Savings and
interest bearing
transaction...... $ 453 2.83% $ 98,861 $ 649 2.66%
Time deposits
$100,000 or
more............. 900 5.66 159,165 1,997 5.09
Other time
deposits......... 2,135 5.67 236,156 3,071 5.27
------- -------- -------
Total interest-
bearing
deposits........ 3,488 5.02 494,182 5,717 4.69
FHLB advances and
federal funds.... 240 4.41 37,903 486 5.20
Repurchase
agreements....... -- -- 1,379 13 3.95
Notes
payable(/2/)..... 108 8.64 12,821 205 6.47
------- -------- -------
Total interest
bearing
liabilities..... 3,836 5.03 546,285 6,421 4.77
Non-interest
liabilities:
Non-interest
bearing
deposits......... 50,799
Other non-
interest
liabilities...... 2,841
--------
Total
liabilities..... 599,925
Stockholders'
equity............ 40,867
--------
Total
liabilities and
stockholders'
equity.......... $640,792
========
Interest rate
spread--FTE....... 4.18% 3.40%
------- -------
Net interest
income--FTE....... $4,229 $5,502
======= =======
Net interest
margin--FTE....... 4.83% 3.77%
</TABLE>
- ----
(1) This rate is impacted by the capitalization of interest on construction
projects in the amount of $145,000 and $275,000 for the years ended
December 31, 1997 and 1998, respectively, and $60,000 and $14,000 for the
periods ended March 31, 1998 and 1999, respectively. In the absence of
this capitalization, these percentages would have been 6.03% and 5.59% for
the years ended December 31, 1997 and 1998, respectively.
(2) The interest expense on notes payable includes interest accrued for the
years ended December 31, 1996 and 1997 for a tax dispute related to the
years 1992-1995. Such interest accruals were $93,000 and $25,000 and were
recorded during the years ended December 31, 1996 and 1997, respectively.
24
<PAGE>
The following table reflects how changes in the volume of interest earning
assets and interest bearing liabilities and changes in interest rates have
affected the Company's interest income and interest expense during the periods
indicated. Information is provided in each category with respect to changes
attributable to (1) changes in volume (changes in volume multiplied by prior
rate); (2) changes in rate (changes in rate multiplied by prior volume); and
(3) changes in rate/volume (change in rate multiplied by change in volume).
The changes attributable to the combined impact of volume and rate have all
been allocated to the changes due to volume.
Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
March 31, 1999 over
1997 over 1996 1998 over 1997 March 31, 1998
----------------------- ------------------------- ----------------------
Yield/ Yield/ Yield/
Volume Rate Total Volume Rate Total Volume Rate Total
------ ------- ------ ------- ------- ------- ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Interest income--FTE:
Interest bearing
deposits.............. $ 44 $ -- $ 44 $ (8) $ -- $ (8) $ (109) $ -- $ (109)
Federal funds sold..... (37) -- (37) (19) -- (19) (45) (7) (52)
Investment securities:
Taxable............... 469 146 615 4,027 (57) 3,970 1,988 (6) 1,982
Tax-exempt--FTE....... (170) (28) (198) 901 (94) 807 361 (30) 331
Loans--FTE, net of
unearned income....... 6,384 (1,219) 5,165 7,956 (970) 6,986 2,345 (639) 1,706
------ ------- ------ ------- ------- ------- ------ ------ ------
Total interest
income--FTE.......... 6,690 (1,101) 5,589 12,857 (1,121) 11,736 4,539 (681) 3,858
------ ------- ------ ------- ------- ------- ------ ------ ------
Interest expense:
Savings and interest
bearing transaction... 356 119 475 364 (96) 268 223 (27) 196
Time deposits of
$100,000 or more...... 801 (23) 778 2,168 (22) 2,146 1,188 (91) 1,097
Other time deposits.... 1,564 4 1,568 3,846 32 3,878 1,084 (148) 936
Federal funds,
repurchase agreements
and FHLB advances..... 135 (94) 41 1,167 (3) 1,164 216 43 259
Notes payable.......... 164 (78) 86 194 (111) 83 124 (27) 97
------ ------- ------ ------- ------- ------- ------ ------ ------
Total interest
expense.............. 3,020 (72) 2,948 7,739 (200) 7,539 2,835 (250) 2,585
------ ------- ------ ------- ------- ------- ------ ------ ------
Increase (decrease) in
net interest income--
FTE.................... $3,670 $(1,029) $2,641 $ 5,118 $ (921) $ 4,197 $1,704 $ (431) $1,273
====== ======= ====== ======= ======= ======= ====== ====== ======
</TABLE>
Non-Interest Income
The Company's non-interest income consists of five main sources: (1) service
charges on deposit accounts, (2) mortgage lending income, (3) other charges
and fees including appraisal fees and commissions from the sale of credit
related insurance products, (4) trust income, and (5) gains on sales of
assets.
Non-interest income for the first quarter of 1999 was $1.3 million compared
with $1.l million for the first quarter of 1998, a 16.0% increase. During the
first quarter the Company benefited from record levels of service charges on
deposit accounts and trust income. The increase in service charges resulted
from continued growth in the number of checking, savings and money market
accounts as well as the impact of an increase in service charge rates
effective January 1, 1999. The Company's growth in trust income resulted from
an increase in the volume of trust business due to expansion and relocation of
the Company's trust department to Little Rock in late 1998. Mortgage lending
income for the first quarter of 1999 increased from the level for the first
quarter of 1998, but declined from the record levels for the last two quarters
of 1998.
Non-interest income for the year ended December 31, 1998 increased 72.0% to
$5.0 million compared with $2.9 million in 1997. Non-interest income was $1.9
million in 1996. The Company's growth in non-interest income is primarily due
to increases in mortgage lending income and service charges on the higher
level of deposit accounts. In 1996 the Company began to originate residential
mortgage loans for resale in the secondary market. The related growth in
mortgage lending income over the past two years has been the largest single
contributor to the Company's improvement in non-interest income.
25
<PAGE>
The table below shows non-interest income for the years ended December 31,
1996, 1997 and 1998 and for the three months ended March 31, 1998 and 1999.
Non-Interest Income
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
------------------------ -------------
1996 1997 1998 1998 1999
------- ------- ------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts... $ 806 $ 957 $ 1,372 $ 281 $ 502
Mortgage lending income............... 68 566 2,136 395 449
Other charges and fees................ 469 570 656 162 154
Trust income.......................... 214 274 335 78 128
Gain on sale of loans................. 274 57 -- -- --
Gain on sale of foreclosed real
estate............................... 14 261 98 84 (10)
Gain on sale of other assets.......... -- 76 15 4 3
Gain (loss) on sale of securities..... (77) 14 255 51 25
Printed check sales................... 90 127 118 32 8
Other................................. 7 23 46 7 10
------- ------- ------- ------ ------
Total non-interest income........... $ 1,865 $ 2,925 $ 5,031 $1,094 $1,269
======= ======= ======= ====== ======
</TABLE>
Non-Interest Expense
Non-interest expense consists of salaries and employee benefits, occupancy,
equipment and other operating expenses. Non-interest expense for first quarter
of 1999 was $3.8 million compared with $2.9 million for the same period in
1998, a 28.9% increase. This increase resulted primarily from continued growth
and expansion in connection with the opening of five new offices in 1998 and
one new office in the first quarter of 1999.
Non-interest expense for the year ended December 31, 1998 increased 42.2% to
$13.1 million compared with $9.2 million in 1997. Non-interest expense was
$7.2 million in 1996. These increases resulted primarily from continued growth
and expansion in 1998, including commencement in February of branch operations
in Little Rock, the June opening of two additional Little Rock offices
including the new corporate headquarters, the September opening of a banking
center in Fort Smith and the December opening of the Company's fourth Little
Rock office. Full-time equivalent employees increased to 266 at December 31,
1998 from 182 at December 31, 1997 as the Company added commercial and
consumer lenders, customer service staff, trust department personnel and
others to staff these new offices.
During the fourth quarter of 1998 the Company incurred after tax charges
totaling approximately $67,000, or approximately $0.02 per diluted share,
related to combining the operations of certain corporate subsidiaries and
certain expenses related to a proposed acquisition which was not consummated.
The efficiency ratio (non-interest expenses divided by the sum of net
interest income on a tax equivalent basis and non-interest income) was 55.65%
for the first quarter of 1999 compared to 54.93% for the first quarter of
1998. The efficiency ratio was 54.98% for the year ended December 31, 1998
compared to 52.55% in 1997 and 51.60% in 1996.
26
<PAGE>
The table below shows non-interest expense for the years ended December 31,
1996, 1997 and 1998 and for the three months ended March 31, 1998 and 1999.
Non-Interest Expense
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------ ---------------
1996 1997 1998 1998 1999
------- ------- -------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits....... $ 4,263 $ 5,330 $ 7,197 $ 1,677 $ 2,000
Net occupancy expense................ 457 584 877 187 297
Equipment expense.................... 541 721 1,084 239 339
Other real estate and foreclosure
expense............................. 49 40 130 16 63
Other operating expense:
Professional services.............. 60 102 211 45 100
Postage............................ 140 178 243 68 71
Telephone.......................... 125 221 314 67 101
Data lines......................... 25 41 139 18 86
Operating supplies................. 215 405 454 121 112
Advertising and public relations... 123 332 566 96 176
Directors' fees.................... 96 116 114 28 30
Software expense................... 69 119 190 38 64
Check printing charges............. 102 137 147 37 --
ATM expense........................ 36 53 118 24 36
FDIC and state assessments......... 47 112 166 32 47
Business development, meals and
travel............................ 58 84 149 27 36
Amortization of intangibles........ 75 75 173 22 67
Other.............................. 670 578 847 182 143
------- ------- -------- ------- -------
Total non-interest expense....... $ 7,151 $ 9,228 $ 13,119 $ 2,924 $ 3,768
======= ======= ======== ======= =======
</TABLE>
The Company has initiated a series of organizational enhancements intended
to eliminate redundant expenses, improve efficiency, enhance customer service
and facilitate the introduction of new products and services in the future.
During the first quarter of 1999 the Company consolidated its federal savings
bank subsidiary into its lead bank. During the second quarter the Company
plans to consolidate its two remaining commercial bank subsidiaries.
Regulatory approval of this consolidation has been obtained and completion of
the consolidation process is expected in June 1999.
Income Taxes
The provision for income taxes was $673,000 for the first quarter of 1999,
compared to $728,000 for the same period in 1998. The effective income tax
rates were 30.6% and 34.6%, respectively, for these periods.
The provision for income taxes was $2.6 million for the year ended December
31, 1998 compared to
$2.5 million in 1997 and $2.0 million in 1996. The effective income tax rates
were 31.8%, 35.7% and 39.9%, respectively, for 1998, 1997 and 1996.
The decrease in the effective tax rate in 1998 and the first quarter of 1999
resulted primarily from the Company's increased investments in tax-exempt
securities, including securities exempt from both federal and Arkansas income
taxes as well as certain federal agency securities exempt solely from Arkansas
income taxes. In 1996 the Company was assessed $326,000 of additional state
income taxes for the years 1992 through 1995 with respect to a dispute
involving the taxation of intercompany dividends. The Company fully expensed
this assessment in 1996 which significantly increased its effective income tax
rate. The tax rate for 1996 would have been 35.6% without this additional tax
expense.
27
<PAGE>
Analysis of Financial Condition
Loan Portfolio
At March 31, 1999, the Company's loan portfolio was $400.9 million, an
increase from $387.5 million at December 31, 1998. As of March 31, 1999, the
Company's loan portfolio consisted of approximately 64.6% real estate loans,
16.2% consumer loans, 13.7% commercial and industrial loans and 5.0%
agricultural loans (non-real estate).
At December 31, 1998 the Company's loan portfolio was $387.5 million, an
increase of 40.7% from $275.5 million at December 31, 1997. As of December 31,
1998 the Company's loan portfolio consisted of approximately 63.8% real estate
loans, 17.1% consumer loans, 13.5% commercial and industrial loans and 5.2%
agricultural loans (non-real estate).
The following table reflects the amount and type of loans outstanding.
Loan Portfolio
<TABLE>
<CAPTION>
December 31,
-------------------------------------------- March 31,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
Single family
residential.......... $ 41,494 $ 55,609 $ 78,124 $ 96,943 $121,539 $119,404
Non-farm/non-
residential.......... 22,978 36,603 35,258 41,710 76,563 86,560
Agricultural.......... 8,373 9,274 11,583 13,443 19,463 20,784
Construction/land
development.......... 4,668 3,471 8,808 16,257 23,305 26,778
Multifamily
residential.......... 3,806 4,388 3,743 3,897 6,207 5,465
-------- -------- -------- -------- -------- --------
Total real estate... 81,319 109,345 137,516 172,250 247,077 258,991
Consumer................ 17,583 25,372 39,868 53,233 66,407 64,976
Commercial and
industrial............. 6,191 11,077 28,154 37,470 52,192 55,163
Agricultural (non-real
estate)................ 6,889 6,963 8,363 10,824 20,068 20,027
Other................... 824 441 561 1,686 1,782 1,694
-------- -------- -------- -------- -------- --------
Total loans......... $112,806 $153,198 $214,462 $275,463 $387,526 $400,851
======== ======== ======== ======== ======== ========
</TABLE>
The following table reflects remaining maturities at March 31, 1999 by type
and by fixed or floating interest rates.
Loan Maturities
<TABLE>
<CAPTION>
Over 1 Year
1 Year Through Over
or Less 5 Years 5 Years Total
-------- ----------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate............................. $ 75,262 $147,634 $36,095 $258,991
Consumer................................ 15,700 47,537 1,739 64,976
Commercial, industrial and
agricultural........................... 33,301 38,953 2,936 75,190
Other................................... 47 105 1,542 1,694
-------- -------- ------- --------
$124,310 $234,229 $42,312 $400,851
======== ======== ======= ========
Fixed rate.............................. $116,825 $225,920 $23,342 $366,087
Floating rate........................... 7,485 8,309 18,970 34,764
-------- -------- ------- --------
$124,310 $234,229 $42,312 $400,851
======== ======== ======= ========
</TABLE>
28
<PAGE>
Nonperforming Assets
Nonperforming assets consist of (1) nonaccrual loans, (2) accruing loans 90
days or more past due, (3) restructured loans providing for a reduction or
deferral of interest or principal because of a deterioration in the financial
position of the borrower and (4) real estate or other assets acquired in
partial or full satisfaction of loan obligations or upon foreclosure.
The Company generally places a loan on nonaccrual status when payment of
principal or interest is contractually past due 90 days, or earlier when doubt
exists as to the ultimate collection of principal and interest. The Company
continues to accrue interest on certain loans contractually past due 90 days
if such loans are both well secured and in the process of collection. When a
loan is placed on nonaccrual status, interest previously accrued but
uncollected is generally reversed and charged against interest income. If a
loan is determined to be uncollectible, the portion of the loan principal
determined to be uncollectible will be charged against the allowance for loan
losses. Interest income on nonaccrual loans is recognized on a cash basis when
and if actually collected.
Nonperforming assets as a percent of total assets were 0.75% as of March 31,
1999, compared to 0.70% as of December 31, 1998 and 0.40% as of March 31,
1998. Nonperforming loans as a percent of total loans were 1.04% as of March
31, 1999 compared to 0.70% as of December 31, 1998, and 0.54% as of March 31,
1998. The Company's ratios of nonperforming loans and nonperforming assets as
of March 31, 1999 were impacted by the placing on nonaccrual status of $1.6
million of real estate loans to a single borrower. These loans were charged
down by $103,000 to the current appraised value of the collateral.
The Company's nonperforming loans increased in 1998 from an unusually low
1997 level. The year-end 1998 nonperforming loan percentage of 0.70% is
consistent with the Company's historical performance. In 1998 loan charge-offs
increased in amount and as a percentage of average loans when compared to
prior years. Charge-offs for commercial and industrial loans increased to
$423,000 in 1998 from zero in 1997. Over half of this amount was attributable
to a single borrower, whose loans were fully liquidated in 1998. Charge-offs
for consumer loans increased 45.8% to $633,000 in 1998 from $434,000 in 1997.
This increase was attributable primarily to the Company's growth in its
consumer loan portfolio as well as a somewhat higher incidence of defaults
within that loan category.
While management expects nonperforming loans and net charge-offs to continue
to exhibit volatility, it does not presently foresee any adverse trends in
asset quality which would materially affect the Company's results of
operations or financial condition.
Foreclosed assets held for sale and repossessions are generally written down
to appraised value at the time of transfer from the loan portfolio. The
Company reviews the value of such assets from time to time throughout the
holding period and makes adjustments to the then market value, if lower, until
disposition. Under Arkansas banking law, other real estate owned must be
written off over a five year period unless the Arkansas State Bank Department
approves the write-off over an extended period.
29
<PAGE>
The following table presents information concerning nonperforming assets
including nonaccrual and restructured loans and foreclosed assets held for
sale.
Nonperforming Assets
<TABLE>
<CAPTION>
December 31,
------------------------------------ March 31,
1994 1995 1996 1997 1998 1999
----- ------ ------ ----- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans.............. $ 571 $1,181 $2,057 $ 664 $2,708 $4,126
Accruing loans 90 days or more
past due..................... 67 124 253 35 21 30
Restructured loans............ -- -- -- -- -- --
----- ------ ------ ----- ------ ------
Total nonperforming
loans.................... 638 1,305 2,310 699 2,729 4,156
Foreclosed assets held for
sale and repossessions....... 189 29 78 136 314 855
----- ------ ------ ----- ------ ------
Total nonperforming
assets................... $ 827 $1,334 $2,388 $ 835 $3,043 $5,011
===== ====== ====== ===== ====== ======
Nonperforming loans to total
loans........................ 0.57% 0.85% 1.08% 0.25% 0.70% 1.04%
Nonperforming assets to total
assets....................... 0.50 0.63 0.88 0.24 0.50 0.75
</TABLE>
30
<PAGE>
An analysis of the allowance for loan losses for the periods indicated is
shown in the table below.
Allowance for Loan Losses
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------- March 31,
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of
period................. $1,716 $1,649 $1,909 $3,019 $3,737 $4,689
Loans charged off:
Real estate:
Single family
residential......... 58 14 73 35 75 237(/1/)
Non-farm/non-
residential......... 34 51 -- -- 18 --
Agricultural......... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total real estate... 92 65 73 35 93 237
Consumer............... 31 44 216 434 633 180
Commercial and
industrial............ 3 47 128 -- 423 79
Agricultural (non-real
estate)............... -- -- -- -- -- 4
------ ------ ------ ------ ------ ------
Total loans charged
off................ 126 156 417 469 1,149 500
------ ------ ------ ------ ------ ------
Recoveries of loans
previously charged off:
Real estate:
Single family
residential......... 7 33 2 5 9 --
Non-farm/non-
residential......... -- -- -- -- -- --
Agricultural......... -- -- -- 2 -- --
------ ------ ------ ------ ------ ------
Total real estate... 7 33 2 7 9 --
Consumer............... 12 23 35 39 55 49
Commercial and
industrial............ -- -- 4 2 11 1
Agricultural (non-real
estate)............... 2 -- -- -- -- --
------ ------ ------ ------ ------ ------
Total recoveries.... 21 56 41 48 75 50
------ ------ ------ ------ ------ ------
Net loans charged off... 105 100 376 421 1,074 450
Provision charged to
operating expense...... 339 360 1,486 1,139 2,026 611
Sale of subsidiary...... (301) -- -- -- -- --
------ ------ ------ ------ ------ ------
Balance, end of period.. $1,649 $1,909 $3,019 $3,737 $4,689 $4,850
====== ====== ====== ====== ====== ======
Net charge-offs to
average loans
outstanding during the
periods indicated...... 0.09% 0.08% 0.21% 0.17% 0.33% 0.46%(/2/)
Allowance for loan
losses to total loans.. 1.46 1.25 1.41 1.36 1.21 1.21
Allowance for loan
losses to nonperforming
loans.................. 258.46 146.28 130.69 534.62 171.82 116.70
</TABLE>
- --------
(1)Includes $103,000 related to construction and land development loans to a
single borrower which were charged down to the appraised value of the
collateral.
(2)Annualized. Results for the three months ended March 31, 1999 may not be
indicative of full year results.
The Company continuously monitors its underwriting procedures in an attempt
to maintain loan quality. During 1998 the Company implemented changes in its
lending process, including changes in personnel, to more effectively address
credit risks associated with the Company's loan portfolio growth. These
changes are intended to improve loan quality and allow the Company to continue
to maintain a satisfactory charge-off level.
The allowance for loan losses is the amount determined by management to be
adequate to provide for losses on loans that may become uncollectible. The
level of the allowance for loan losses and the need for additions are based on
management's judgment as well as the evaluation of the loan portfolio
utilizing objective and subjective criteria. The objective criteria utilized
by the Company to assess the adequacy of its allowance for loan losses and
required additions to such reserve are (1) an internal grading system, (2) a
peer group analysis and (3) a historical analysis.
31
<PAGE>
The Company's internal grading system assigns each loan (other than consumer
installment loans) to one of seven risk categories, with each category being
assigned a specific reserve allocation percentage as follows:
<TABLE>
<CAPTION>
Loan Grade Reserve Allocation
Risk Category Percentage
------------- --------------------
<S> <C>
1Excellent 0.10%
2Good 0.50
3Moderate 1.00
4Fair 2.00
5Watch 7.00
6(a) Substandard 15.00
6(b) Impaired--SFAS 114 Impaired Amount
or 15%,
whichever is greater
7Doubtful 50.00
</TABLE>
The loan grade for each individual loan is determined by the loan officer at
the time it is made and changed from time to time to reflect an ongoing
assessment of loan risk. Loan grades are reviewed on specific loans from time
to time by senior management and as part of the Company's internal loan review
process.
Required reserves are calculated for consumer installment loans based upon
past due status as follows:
<TABLE>
<CAPTION>
Reserve
Past Due Status Allocation Percentage
--------------- ---------------------
<S> <C>
Current 0.225%
Overdue 30 to 89 days 7.500
Overdue 90 days or more 37.500
</TABLE>
Reserve allocations are also calculated using the internal grading system
for all outstanding letters of credit, outstanding loan commitments and
unfunded loan balances. The sum of all reserve amounts determined by the
internal grading system is utilized by management as the primary indicator of
the appropriate reserve level.
In addition to the internal grading system, the Company compares the
allowance for loan losses (as a percentage of total loans) maintained by each
of its subsidiary banks to the peer group average percentage as shown on the
most recently available FDIC Uniform Bank Performance Reports for such banks.
The Company also compares the allowance for loan losses for each subsidiary
bank to such bank's historical cumulative net charge-offs for the five
preceding calendar years.
The Company subjectively assesses the adequacy of the allowance for loan
losses by considering the nature and volume of the portfolio, overall
portfolio quality, review of specific problem loans, national, regional and
local business and economic conditions that may affect the borrowers' ability
to pay or the value of collateral securing the loans, and other relevant
factors. Although the Company does not determine the overall allowance based
upon the amount of loans in a particular type or category, risk elements
attributable to particular loan types or categories are considered in
assigning loan grades to individual loans. These risk elements include the
following: (1) in the case of single family residential real estate loans, the
borrower's ability to repay including credit history, debt to income ratio and
employment and income stability, the loan to value ratio, and the age,
condition and marketability of collateral; (2) for non-farm/non-residential
loans and multifamily residential loans, the debt service coverage ratio
(income from the property in excess of operating expenses compared to loan
payment requirements), operating results of the owner in the case of owner-
occupied properties, the loan to value ratio, the age and condition of the
collateral and the volatility of income, property value and future operating
results typical of properties of that type; (3) for agricultural real estate
loans, the loan to value ratio; (4) for construction and land development
loans, the perceived feasibility of the project including the ability to sell
developed lots or improvements constructed for resale or ability to lease
property constructed for lease, the quality and nature of contracts for
presale or preleasing if any, experience and ability of the developer and loan
32
<PAGE>
to value ratios; (5) for commercial and industrial loans, the operating
results of the commercial, industrial or professional enterprise, the
borrower's business, professional and financial ability and expertise, the
specific risks and volatility of income and operating results typical for
businesses in that category and the value, nature and marketability of
collateral; and (6) for non-real estate agricultural loans, the operating
results, experience and ability of the borrower, historical and expected
market conditions and the value, nature and marketability of collateral. In
addition, for each category the Company considers secondary sources of income
and the financial strength of the borrower and any guarantors.
Management reviews the allowance on a quarterly basis to determine whether
the amount of regular monthly provision should be increased or decreased or
whether additional provision should be made to the allowance. Because the
allowance is primarily determined based upon management's assessment and
grading of individual loans, no reserve is made for specific categories of
loans. The total allowance amount is available to absorb losses across the
Company's entire portfolio.
The following table sets forth the sum of the amounts of the allowance for
loan losses attributable to individual loans within each loan category,
unfunded items and unallocated reserves as of December 31, 1997 and 1998.
Information prior to the Company's initial public offering in 1997 is not
available. The amounts shown are not necessarily indicative of the actual
future losses that may occur within particular loan categories.
Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998 March 31, 1999
-------------------------- -------------------------- --------------------------
Percent of Loans Percent of Loans Percent of Loans
Allowance in Category to Allowance in Category to Allowance in Category to
Amount Total Loans Amount Total Loans Amount Total Loans
--------- ---------------- --------- ---------------- --------- ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
Single family
residential........... $1,116 35.2% $1,618 31.4% $1,553 29.8%
Non-farm/non-
residential........... 423 15.2 794 19.7 899 21.6
Agriculture............ 152 4.9 242 5.0 258 5.2
Construction/land
development........... 163 5.9 291 6.0 323 6.7
Multifamily............ 41 1.4 63 1.6 62 1.4
Consumer................ 372 19.3 534 17.1 474 16.2
Commercial and
industrial............. 412 13.6 640 13.5 636 13.8
Agriculture (non-real
estate)................ 114 3.9 270 5.2 301 5.0
Other................... 15 0.6 15 0.5 9 0.4
Unfunded items (letters
of credit, outstanding
loan commitments and
unadvanced loan
balances).............. 233 N/A 206 N/A 195 N/A
Unallocated reserve..... 696 N/A 16 N/A 140 N/A
------ ----- ------ ----- ------ -----
$3,737 100.0% $4,689 100.0% $4,850 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
The Company maintains an internally classified loan list that, along with
the list of nonaccrual or nonperforming loans, helps management assess the
overall quality of the loan portfolio and the adequacy of the allowance. Loans
classified as "substandard" are loans with clear and defined weaknesses such
as highly leveraged positions, unfavorable financial ratios, uncertain
repayment sources or poor financial condition which may jeopardize
recoverability of the loan. Loans classified as "doubtful" are those loans
that have characteristics similar to substandard loans, but also have an
increased risk that a loss may occur or at least a portion of the loan may
require a charge-off if liquidated. Although loans classified as substandard
do not duplicate loans
33
<PAGE>
classified as doubtful, both substandard and doubtful loans may include some
loans that are past due at least 90 days, are on nonaccrual status or have
been restructured. Loans classified as "loss" are loans that are in the
process of being charged off. At December 31, 1998 "substandard" loans not
designated as nonaccrual or 90 days past due totaled $2.5 million. No loans
were designated as "doubtful" or "loss" at December 31, 1998.
Administration of the bank subsidiaries' lending function is the
responsibility of the Chief Executive Officer, Vice Chairman and certain
senior lenders. Such officers perform their lending duties subject to the
oversight and policy direction of the Board of Directors and various loan
committees. Loan authorities are granted to the Chief Executive Officer and
Vice Chairman as determined appropriate by the Board of Directors. Loan
authorities of other lending officers are assigned by the Chief Executive
Officer and Vice Chairman.
Loans and aggregate loan relationships exceeding $3 million up to the
lending limit of the banks can be authorized only by the Board of Directors.
Loans and aggregate loan relationships exceeding $1 million up to $3 million
can be authorized by one of the loan committees. At monthly meetings, a
designated loan review committee reviews reports of new loans, loan
commitments over $100,000, loan loss activity, past due and problem loans,
asset quality and other matters as appropriate. The Board of Directors also
reviews on a monthly basis reports of loan originations, past due loans,
internally classified and watch list loans and activity in the Company's
allowance for loan losses.
The Company's compliance and loan review officers are responsible for
serving the bank subsidiaries of the Company in the loan review and compliance
areas. Periodic reviews are scheduled for the purpose of evaluating asset
quality and effectiveness of loan administration. The compliance and loan
review officers prepare loan review reports which identify deficiencies,
establish recommendations for improvement, and outline management's proposed
action plan for curing the deficiencies. This report is provided to the audit
committee, which consists of three non-employee members of the Boards of
Directors.
The Company's allowance for loan losses exceeds its cumulative historical
net charge-off experience for the last five years. However, the allowance is
considered reasonable given the significant growth in the loan portfolio in
1998, key allowance and nonperforming loan ratios and comparisons to industry
averages.
The Company's allowance for loan losses increased to $4.9 million at March
31, 1999, or 1.21% of total loans, compared to $4.7 million at December 31,
1998. The allowance for loan losses was 1.21% of loans at December 31, 1998
compared to 1.36% at December 31, 1997. While management believes the current
allowance is adequate based on the procedures outlined above, changing
economic and other conditions may require future adjustments to the allowance
for loan losses.
Provision for Loan Losses. The amounts of provision to the allowance for
loan losses are based on management's judgment and evaluation of the loan
portfolio utilizing the criteria discussed above. The provision for loan
losses was $611,000 for the three months ended March 31, 1999, compared to
$225,000 for the same three months in 1998. The provision for the year ended
1998 was $2.0 million compared to $1.1 million in 1997 and $1.5 million in
1996.
34
<PAGE>
Investments and Securities
The Company's securities portfolio is the second largest component of
earning assets and provides a significant source of revenue for the Company.
The following table presents the amortized cost and the fair value of
investment securities for each of the dates indicated.
Investment Securities
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------- March 31,
1996 1997 1998 1999
-------------------- -------------------- -------------------- --------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value(/1/) Cost Value(/1/) Cost Value(/1/) Cost Value(/1/)
--------- ---------- --------- ---------- --------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities of U.S.
Government agencies.... $23,881 $23,896 $24,562 $24,596 $156,351 $156,331 $167,290 $165,151
Mortgage-backed
securities............. 10,119 10,256 9,340 9,571 2,107 2,117 257 254
Obligations of states
and political
subdivisions........... 4,094 4,119 6,801 6,819 14,742 14,884 43,836 44,167
Other securities........ 1,353 1,353 1,510 1,510 3,286 3,347 3,329 3,390
------- ------- ------- ------- -------- -------- -------- --------
Total................ $39,447 $39,624 $42,213 $42,496 $176,486 $176,679 $214,712 $212,962
======= ======= ======= ======= ======== ======== ======== ========
</TABLE>
- --------
(1) The fair value of the Company's investments is based on quoted market
prices where available. If quoted market prices are not available, fair
values are based on market prices of comparable securities.
The following table reflects the amortized cost, by contractual maturity, of
the Company's investment securities at March 31, 1999 and weighted average
yields (for tax-exempt obligations on a fully taxable equivalent basis
assuming a 34% tax rate) of such securities. Expected maturities may differ
from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Maturity Distribution of Investment Securities
<TABLE>
<CAPTION>
Over Over
1 Year 1 Year 5 Years Over
or Thru 5 Thru 10 10
Less Years Years Years Total Fair Value
------ ------ -------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities of U.S.
Government agencies.... $-- $ -- $144,264 $23,026 $167,290(/1/) $165,151
Mortgage-backed
securities............. -- -- 85 172 257(/2/) 254
Obligations of states
and political
subdivisions........... 922 7,503 10,552 24,859 43,836(/3/) 44,167
Other securities........ -- -- -- 3,329 3,329 3,390
---- ------ -------- ------- -------- --------
Total................. $922 $7,503 $154,901 $51,386 $214,712 $212,962
==== ====== ======== ======= ======== ========
Percentage of total..... 0.43% 3.49% 72.14% 23.93% 100.00%
Weighted average yield
(FTE)(/4/)............. 5.97 5.87 6.52 6.47 6.48
</TABLE>
- --------
(1) At March 31, 1999 all federal agency securities held by the Company have
certain rights which allow the issuer to call or prepay the obligation
without prepayment penalties.
(2)At March 31, 1999 approximately $167,000 of these securities earned
interest at floating rates repricing monthly or semi-annually.
(3)At March 31, 1999 approximately $1.3 million of these securities earned
interest at floating rates repricing semi-annually.
(4)The weighted average yields (FTE) are based on book value.
35
<PAGE>
Deposits
The Company's bank subsidiaries' lending and investing activities are funded
primarily by deposits, approximately 72.3% of which were time deposits and
27.7% of which were demand and savings deposits at March 31, 1999. Interest
bearing deposits other than time deposits consist of transaction, savings and
money market accounts. These deposits comprise 18.0% of total deposits at
March 31, 1999. Non-interest bearing demand deposits at March 31, 1999
constituted approximately 9.7% of total deposits. The Company had no brokered
deposits at March 31, 1999.
Average Deposit Balances and Rates
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------- Three Months Ended
1996 1997 1998 March 31, 1999
---------------- ---------------- ---------------- ---------------------
Average Average Average Average
Average Rate Average Rate Average Rate Average Rate
Amount Paid Amount Paid Amount Paid Amount Paid
-------- ------- -------- ------- -------- ------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts............... $ 20,129 -- $ 26,981 -- $ 40,583 -- $ 50,799 --
Interest bearing
accounts:
Transaction (NOW)...... 22,209 2.20% 25,469 2.19% 32,419 2.25% 47,350 2.22%
Savings................ 8,238 2.14 8,734 2.13 12,002 2.11 14,079 1.96
Money market........... 18,542 3.49 26,981 3.86 29,933 3.58 37,432 3.48
Time deposits less than
$100,000.............. 102,076 5.60 129,969 5.61 198,268 5.63 236,156 5.27
Time deposits $100,000
or more............... 34,689 5.69 48,919 5.63 87,751 5.58 159,165 5.09
-------- -------- -------- -----------
Total deposits......... $205,883 $267,053 $400,956 $ 544,981
======== ======== ======== ===========
</TABLE>
The following table sets forth by time remaining to maturity, time deposits
in amounts of $100,000 or more at March 31, 1999.
Maturity distribution of time deposits of $100,000 and over
<TABLE>
<CAPTION>
Maturity March 31, 1999
-------- ----------------------
(Dollars in thousands)
<S> <C>
3 months or less...................................... $102,653
3 to 6 months......................................... 40,876
6 to 12 months........................................ 34,074
Over 12 months........................................ 11,113
</TABLE>
Interest Rate Sensitivity
The Company's interest rate risk management is the responsibility of the
Asset/Liability Management Committee, which reports to the Board of Directors.
This committee establishes policies that monitor and coordinate the Company's
sources, uses and pricing of funds. The committee is also involved with
management in the Company's planning and budgeting process.
The Company regularly reviews its exposure to changes in interest rates.
Among the factors considered are changes in the mix of earning assets and
interest bearing liabilities, interest rate spreads and repricing periods.
Typically, the committee reviews on at least a quarterly basis the bank
subsidiaries' relative ratio of rate sensitive assets to rate sensitive
liabilities and the related cumulative gap for different time periods.
Additionally, the committee and management review other alternative interest
rate risk measures and models in assessing the Company's interest rate
sensitivity.
36
<PAGE>
Using a simple static GAP analysis as shown in the following table, at March
31, 1999 the cumulative ratios of rate sensitive assets to rate sensitive
liabilities at six months and one year were 54.1% and 53.8%, respectively. A
financial institution is considered to be liability sensitive, or as having a
negative GAP, when the amount of its interest bearing liabilities maturing or
repricing within a given time period exceeds the amount of its interest
earning assets also maturing or repricing within that time period. Conversely,
an institution is considered to be asset sensitive, or as having a positive
GAP, when the amount of its interest bearing liabilities maturing and
repricing is less than the amount of its interest earning assets also maturing
or repricing during the same period. Generally, in a falling interest rate
environment, a negative GAP should result in an increase in net interest
income, and in a rising interest rate environment this negative GAP should
adversely affect net interest income. The converse would be true for a
positive GAP. Due to inherent limitations in any static GAP analysis and since
conditions change on a daily basis, these conclusions may not reflect future
results.
Rate Sensitive Assets and Liabilities
<TABLE>
<CAPTION>
March 31, 1999
----------------------------------------------------------------
Rate Rate Cumulative Cumulative
Sensitive Sensitive Period Cumulative Gap to RSA to
Assets Liabilities Gap Gap Total RSA RSL
--------- ----------- -------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Floating rate........... $ 37,941 $ 56,016 $(18,075) $(18,075) (2.92)% 67.73%
Fixed rate repricing
in:....................
1 month................ 52,283 81,370 (29,087) (47,162) (7.63) 65.67
2 month................ 21,686 43,832 (22,146) (69,308) (11.21) 61.75
3 month................ 20,196 43,344 (23,149) (92,457) (14.95) 58.83
4 month................ 16,168 32,675 (16,507) (108,964) (17.62) 57.64
5 month................ 14,415 33,544 (19,129) (128,093) (20.72) 55.95
6 month................ 14,526 36,650 (22,124) (150,217) (24.30) 54.12
6 months--1 year....... 66,870 126,706 (59,836) (210,053) (33.97) 53.75
1--2 years............. 75,372 53,942 21,431 (188,622) (30.51) 62.88
2--3 years............. 48,262 14,714 33,548 (155,074) (25.08) 70.34
3--4 years............. 31,273 23,665 7,608 (147,466) (23.85) 73.01
4--5 years............. 9,200 2,727 6,473 (140,993) (22.80) 74.33
Over 5 years........... 210,073 16,971 193,102 52,109 8.43 109.20
-------- -------- --------
Total.................. $618,265 $566,156 $ 52,109
======== ======== ========
</TABLE>
The data used in the table above is based on contractual repricing dates
rather than maturities. This simple GAP analysis gives no consideration to a
number of factors which can have a material impact on the Company's interest
rate risk position. Such factors include call features on certain assets and
liabilities, prepayments, interest rate floors and caps on various assets and
liabilities, the current interest rates on assets and liabilities to be
repriced in each period, and the relative changes in interest rates on
different types of assets and liabilities.
The Company also utilizes an earnings change ratio analysis, which it
believes is a more accurate analysis of interest rate sensitivity because it
measures not only the volume of assets and liabilities being repriced but also
the expected relative change in interest rates on the different types of
assets and liabilities. This analysis applies coefficients to the various
types of assets and liabilities in order to estimate the relative rates of
change expected. As of March 31, 1999 this model reflected a one-year ratio of
rate sensitive assets to rate sensitive liabilities of 67.1%. The earnings
change ratio analysis is subject to a number of limitations, including the
other limitations discussed above.
The following table provides contractual balances of the Company's financial
instruments at the expected maturity as well as the fair value of those
financial instruments as of December 31, 1998. Fixed and variable rate
categories are based upon expected amortization or contractual maturity dates.
The Company considers assets and liabilities that do not have a stated
maturity date, as in cash equivalents and certain deposits, to be long term in
nature and reports them in the "Thereafter" column. The Company does not
consider these financial
37
<PAGE>
instruments materially sensitive to interest rate fluctuations and management
expects these balances to remain fairly constant over various economic
conditions. The weighted average interest rates for the various assets and
liabilities presented are actual as of December 31, 1998.
The fair value of cash, interest bearing deposits at other banks, and
interest receivable approximates their book values due to their short
maturities. The fair value of available for sale securities is based on
reports provided the Company by third parties. Federal Home Loan Bank stock is
valued at stated redemption value. The fair value of loans and time deposits
is estimated by discounted cash flows through the estimated maturity using
estimated market discount rates that reflect current rates offered by the
Company. The fair value of FHLB borrowings is estimated by discounting the
cash flows through maturity based on current rates offered by the FHLB for
borrowings with similar maturities. The fair value of the note payable
approximates the carrying value due to the note payable's interest rate
approximating market rates. The components of the Company's financial
instruments did not materially change from December 31, 1998 to March 31,
1999.
38
<PAGE>
Expected Maturity Dates of Financial Instruments
<TABLE>
<CAPTION>
December 31, Dec. 31, Dec. 31, Dec. 31,
-------------------------------------------- 1998 1998 1997
1999 2000 2001 2002 2003 Thereafter Total Fair Value Total
-------- ------- ------- ------- ------- ---------- -------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Assets:
Cash and due from
banks................. $ -- $ -- $ -- $ -- $ -- $ 14,168 $ 14,168 $ 14,168 $ 9,021
Interest bearing
deposits.............. 856 -- -- -- -- -- 856 856 6,607
Weighted avg. interest
rate.................. 4.70% -- -- -- -- -- 4.70% 5.98%
Federal funds sold..... -- -- -- -- -- -- -- 2,885
Weighted avg. interest
rate.................. -- -- -- -- -- -- -- 5.50%
Securities--available
for sale:
US Govt. agencies...... -- -- 1,001 -- -- -- 1,001 1,001 12,619
Weighted avg. interest
rate.................. -- -- 6.04% -- -- -- 6.04% 6.52%
Mortgage-backed
securities:
Fixed rate............. -- -- -- -- -- 156 156 156 133
Weighted avg. interest
rate.................. -- -- -- -- -- 6.37% 6.37% 5.51%
Variable rate.......... -- -- -- -- -- 1,961 1,961 1,961 9,206
Weighted avg. interest
rate.................. -- -- -- -- -- 6.50% 6.50% 6.44%
State and political
subdivision
obligations:
Fixed rate............. 20 118 151 187 195 10,594 11,265 11,265 1,583
Weighted avg. interest
rate.................. 5.45% 5.61% 5.75% 5.72% 5.79% 6.98% 6.90% 5.33%
Equity securities...... -- -- -- -- -- 136 136 136 75
Dividend yields........ -- -- -- -- -- -- -- --
FHLB stock............. -- -- -- -- -- 3,110 3,110 3,110 1,435
Dividend yield......... -- -- -- -- -- 5.50% 5.50% 6.00%
Securities--held to
maturity:
US Govt. agencies...... -- -- -- -- 1,000 154,351 155,351 155,330 11,943
Weighted avg. interest
rate.................. -- -- -- -- 6.21% 6.56% 6.56% 6.67%
State and political
subdivision
obligations:
Fixed rate............. 72 82 94 80 86 2,045 2,459 2,541 3,091
Weighted avg. interest
rate.................. 7.58% 8.03% 8.18% 7.67% 7.70% 7.54% 7.59% 4.74%
Variable rate.......... 70 76 83 91 100 658 1,078 1,078 2,031
Weighted avg. interest
rate.................. 10.95% 10.95% 10.95% 10.95% 10.95% 10.95% 10.95% 10.95%
Other securities....... -- -- -- -- -- 101 101 101 --
Weighted avg. interest
rate.................. -- -- -- -- -- 6.53% 6.53%
Loans held for sale--
fixed rate............ 6,493 -- -- -- -- -- 6,493 6,493 2,935
Weighted avg. interest
rate.................. 7.09% -- -- -- -- -- 7.09% 7.14%
Loans held for sale--
var. rate............. 192 -- -- -- -- -- 192 192 --
Weighted avg. interest
rate.................. 4.50% -- -- -- -- -- 4.50% --
Loans:
Loans--fixed........... 117,383 52,757 67,907 32,400 60,123 17,038 347,608 347,508 235,984
Weighted avg. interest
rate.................. 9.56% 9.75% 9.63% 9.59% 9.29% 8.95% 9.53% 9.46%
Loans--variable........ 7,148 1,658 178 3,414 532 20,303 33,233 33,216 36,544
Weighted avg. interest
rate.................. 8.99% 9.76% 9.15% 8.26% 8.19% 8.71% 8.97% 9.23%
Interest receivable.... -- -- -- -- -- 5,517 5,517 5,517 3,013
Financial Liabilities:
Deposits:
Demand deposits........ -- -- -- -- -- $ 50,138 $ 50,138 $ 50,138 $ 31,091
NOW accounts........... -- -- -- -- -- 46,914 46,914 46,914 27,527
Weighted avg. interest
rate.................. -- -- -- -- -- 1.59% 1.59% 2.00%
Money market accounts.. -- -- -- -- -- 35,238 35,238 35,238 28,132
Weighted avg. interest
rate.................. -- -- -- -- -- 4.30% 4.30% 3.71%
Regular savings........ -- -- -- -- -- 13,319 13,319 13,319 9,083
Weighted avg. interest
rate.................. -- -- -- -- -- 2.00% 2.00% 2.15%
Time deposits:
Fixed rate............. 357,806 13,396 5,868 1,884 997 993 380,944 382,111 197,364
Weighted avg. interest
rate.................. 5.38% 5.40% 5.54% 5.85% 5.57% 5.96% 5.39% 5.68%
Variable rate.......... 1,412 1,075 -- -- -- -- 2,487 2,487 2,358
Weighted avg. interest
rate.................. 4.60% 4.60% -- -- -- -- 4.60% 5.20%
Repurchase agreements.. 1,408 -- -- -- -- -- 1,408 1,408 --
Weighted avg. interest
rate.................. 3.93% -- -- -- -- -- 3.93% --
FHLB advances--long
term.................. 5,268 2,144 4,198 198 198 10,987 22,993 23,600 14,017
Weighted avg. interest
rate.................. 6.46% 5.77% 5.95% 6.30% 6.30% 5.02% 5.13% 6.06%
Federal funds
purchased............. 3,830 -- -- -- -- -- 3,830 3,830 --
Weighted avg. interest
rate.................. 4.79% -- -- -- -- -- 4.79% --
Notes payable.......... 24 24 -- -- 12,400 -- 12,448 12,448 5,072
Weighted avg. interest
rate.................. 6.00% 6.00% -- -- 6.50% -- 6.50% 8.79%
Interest payable....... -- -- -- -- -- 1,828 1,828 1,828 1,409
</TABLE>
39
<PAGE>
Impact of Inflation and Changing Prices
The Consolidated Financial Statements and related Notes presented elsewhere
in this prospectus have been prepared in accordance with generally accepted
accounting principles. This requires the measurement of financial position and
operating results in terms of historical dollars without considering the
changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of the Company's
operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Company are monetary in nature. As a result, interest rates
have a greater impact on the Company's performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.
Liquidity and Capital Resources
Line of Credit. The Company maintains a revolving line of credit for up to
$22 million with a correspondent bank. Interest accrues on all outstanding
borrowings due under the line of credit at a variable rate equal to the
average prime lending rate reported from time to time by the Wall Street
Journal minus 1.25%, provided, however, the rate is not to exceed 7.75%.
Interest is payable quarterly. The line of credit is effective through March
31, 2003 subject to an annual compliance review by the lender. No standby or
unused commitment fees are payable under the line of credit.
All borrowings under the line of credit are secured by a pledge of 100% of
the Company's stock in Bank of the Ozarks, wca and Bank of the Ozarks, nwa. As
of March 31, 1999 $13.1 million was outstanding under the line of credit.
The line of credit requires the Company's bank subsidiaries, Bank of the
Ozarks, wca and Bank of the Ozarks, nwa, to maintain (1) a return on average
assets for each calendar year equal to at least 1.0%, (2) a ratio of capital,
as defined in the line of credit, to assets at levels acceptable to bank
regulatory authorities but at least 7.0% at each calendar year end and (3) net
charges to the reserve for loan losses at less than 1.0% of net loans during
any calendar year. In addition, the line of credit requires that the parent
company's aggregate indebtedness not exceed 60.0% of its tangible net worth
through March 31, 1999 reducing 5% a year thereafter and that borrowings under
the line of credit not exceed 50.0% of the tangible book value of all stock
pledged to secure such borrowings. At March 31, 1999 the Company was in
compliance with these requirements.
Growth and Expansion. In February 1998 the Company acquired Heartland
Community Bank, FSB in Little Rock, from its parent company--Heartland
Community Bank, Camden--for $3.1 million in cash. The Company received the
federal savings bank charter, approximately $9.4 million in customer deposits
and the related banking facility. No loans were acquired as a part of the
transaction. Following closing the Company commenced operations in Little Rock
under the Bank of the Ozarks name. This federal savings bank was merged into
the Company's lead bank subsidiary on January 7, 1999.
In June 1998 the Company opened its Little Rock corporate headquarters and
banking center on Chenal Parkway and a third Little Rock branch on Rodney
Parham Road.
In August 1998 the Company completed the purchase of the Marshall, Arkansas
branch of Superior Federal Bank, F.S.B. The acquisition included the branch
bank building, related assets and deposit accounts totaling approximately $16
million. The Company paid a purchase premium and incurred other acquisition
costs totaling approximately $1.5 million.
In September 1998 the Company opened its new Fort Smith facility and in
December 1998 opened a fourth Little Rock branch at 7500 Cantrell Road.
During the first quarter of 1999 the Company opened its first branch in
North Little Rock. A third Harrison branch is under construction and is
expected to open during the second quarter of 1999. The Company has obtained
regulatory approval to construct a branch in Clinton, Arkansas and expects to
begin construction on
40
<PAGE>
that site in the second quarter of 1999. The Company is negotiating to lease a
site in North Little Rock on which to construct a second branch in that city.
In 1998 the Company spent approximately $13.9 million on acquiring,
constructing and furnishing its corporate banking headquarters in Little Rock,
the new Fort Smith facility and three other branch offices. Although the
Company is currently working to open additional branches in 1999, capital
expenditures are expected to be substantially less than 1998.
Bank Liquidity. Liquidity represents an institution's ability to provide
funds to satisfy demands from depositors and borrowers by either converting
assets into cash or accessing new or existing sources of incremental funds.
Generally, the Company's bank subsidiaries rely on customer deposits and loan
repayments as their primary sources of funds. The Company has used these
funds, together with FHLB and other borrowings, to make loans, acquire
investment securities and other assets and to fund continuing operations.
Deposit levels may be affected by a number of factors, including rates paid
by competitors, general interest rate levels, returns available to customers
on alternative investments and general economic conditions. Accordingly, the
Company may be required from time to time to rely on secondary sources of
liquidity to meet withdrawal demands or otherwise fund operations and
investments. Such sources include FHLB advances, federal funds lines of credit
from correspondent banks and borrowings by the Company under its revolving
credit facility described above.
At March 31, 1999 the Company's bank subsidiaries had an aggregate of $58.6
million of unused blanket FHLB borrowing availability. Additionally at March
31, 1999 the bank subsidiaries had available substantial federal funds lines
of credit.
Management anticipates that the Company's bank subsidiaries will continue to
rely primarily on customer deposits and loan repayments to provide liquidity.
However, where necessary, the above described borrowings (including borrowings
under the Company's line of credit) will be used to augment the Company's
primary funding sources.
Year 2000 Liquidity Needs. The Company may experience additional liquidity
needs in connection with increased deposit withdrawals due to customer
concerns over the Year 2000 issue. The Board of Directors has adopted a
Contingency Funding Plan to guide management in handling unusual liquidity
needs. In preparing for possible increased Year 2000 liquidity demands,
management is taking several actions including: (1) modification of the
pricing and terms of certain time deposit products to encourage depositors to
accept maturities after year end, (2) developing plans to place collateral
with various sources of secondary liquidity to facilitate short-term borrowing
and (3) developing plans to have additional cash available at the branches and
ATMs of the bank subsidiaries during the latter part of the year. Although
management believes these and other actions will prepare the Company for this
potential liquidity need, there can be no assurance these steps will be
adequate.
Dividend Policy. In 1998 the Company paid dividends of $0.23 per share. In
1997 and 1996 the Company paid dividends of $0.20 and $0.30 per share,
respectively. The Company increased its dividend for the second quarter of
1998 to $0.06 from $0.05. The Company increased the dividend effective for the
first quarter of 1999 to $0.10 per share. The determination of future
dividends on the Company's common stock will depend on conditions existing at
that time. The Company's goal is to continue the current $0.10 quarterly
dividend amount with consideration to future increases depending on the
Company's earnings, capital and liquidity needs.
Capital Compliance. Bank regulatory authorities in the United States impose
certain capital standards on all bank holding companies and banks. These
capital standards require compliance with certain minimum "risk-based capital
ratios" and a minimum "leverage ratio". The risk-based capital ratios consist
of (1) Tier 1 capital (i.e. common stockholders' equity excluding goodwill,
certain intangibles and appreciation on investment securities, but including
certain other qualifying items) to total risk-weighted assets and (2) total
capital (Tier 1
41
<PAGE>
capital plus Tier 2 capital which is the qualifying portion of the allowance
for loan losses) to risk-weighted assets. The leverage ratio is measured as
Tier 1 capital to adjusted quarterly average assets.
The Company's risk-based and leverage capital ratios exceeded these minimum
requirements at December 31, 1997, December 31, 1998 and March 31, 1999 and
are presented below, followed by the capital ratios of each of the bank
subsidiaries at March 31, 1999.
Consolidated Regulatory Capital Ratios
<TABLE>
<CAPTION>
December 31,
----------------------- March 31,
1997 1998 1999
-------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Tier 1 capital:
Stockholders' equity............ $ 35,666 $ 40,355 $ 41,630
Less net unrealized gains on
available for sale securities.. (152) (81) (208)
Less goodwill and certain
intangibles.................... (1,337) (3,623) (3,478)
-------- -------- --------
Total tier 1 capital.......... $ 34,177 $ 36,651 $ 37,944
-------- -------- --------
Tier 2 capital:
Qualifying allowance for loan
losses......................... 3,288 4,689 4,850
-------- -------- --------
Total risk-based capital...... $ 37,465 $ 41,340 $ 42,794
-------- -------- --------
Risk-weighted assets.............. $262,592 $404,879 $426,644
======== ======== ========
Ratios at end of period:
Leverage........................ 9.86% 6.21% 5.95%
Tier 1 risk-based capital....... 13.01 9.05 8.89
Total risk-based capital........ 14.27 10.21 10.03
Minimum ratio guidelines:
Leverage........................ 3.00%(/1/) 3.00%(/1/) 3.00%(/1/)
Tier 1 risk-based capital....... 4.00 4.00 4.00
Total risk-based capital........ 8.00 8.00 8.00
</TABLE>
Regulatory Capital Ratios of Bank Subsidiaries
<TABLE>
<CAPTION>
March 31, 1999
-----------------------
Bank of the Bank of the
Ozarks, wca Ozarks, nwa
----------- -----------
<S> <C> <C>
Stockholders' equity--Tier 1............................ $39,036 $11,579
Leverage ratio.......................................... 8.17% 7.25%
Risk-based capital ratios:
Tier 1................................................ 12.22% 11.06%
Total capital......................................... 13.38 12.16
</TABLE>
- --------
(1) Regulatory authorities require institutions to operate at varying levels
(ranging from 100-200 basis points) above a minimum leverage ratio of 3%
depending upon capitalization classification.
42
<PAGE>
Year 2000
The Year 2000 issue relates to the ability of the Company's computer and
other systems with imbedded microchips to properly handle Year 2000 date
sensitive data and the potential risk to the Company because of relationships
with third parties (e.g. software and hardware vendors, loan customers,
correspondent banks, utility companies and others) who do not adequately
address the Year 2000 issue. Failure in any of these areas could result in a
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions
or engage in normal business activities. In late 1997 the Company established
a Year 2000 Project Committee to evaluate and assess the Company's exposure to
this issue. This committee has implemented an approach to the Year 2000 issue
consisting of four phases. These phases include awareness, assessment,
renovation and testing.
The awareness phase consists of defining the Year 2000 problem, developing
the resources necessary to perform compliance work, establishing a Year 2000
program committee and program coordinator and developing an overall strategy
that encompasses in-house systems, service bureaus, vendors, auditors,
customers and suppliers (including correspondents). This phase has been
completed.
The assessment phase consists of evaluating the size and complexity of the
problem and detailing the magnitude of the effort necessary to address the
Year 2000 issue. The objective of this phase is to identify all hardware,
software, networks, automated teller machines, other various processing
platforms and customer and vendor interdependencies affected by the Year 2000
date change. The assessment phase goes beyond the Company's information
systems and includes environmental systems that are dependent on embedded
microchips, such as security systems, elevators, sprinkler systems, alarms and
vaults. The assessment phase is substantially completed, but is considered an
ongoing process for the Company.
The renovation phase includes the remediation of any systems identified in
the awareness phase as not Year 2000 compliant. The replacement of a
proof/capture system was expedited due to lack of Year 2000 compliance earlier
in 1998. Also the need for minor upgrades to several proof machines were
identified and have been completed. Environmental systems including vault
doors, security systems, elevators, sprinkler systems and alarms have been
evaluated and assurances from vendors have been received regarding their Year
2000 compliance. The renovation phase is essentially complete with all
identified problem areas having been addressed.
The Company is well into its testing phase with the primary focus being on
the core software that runs basic bank services including the following
applications: checking, savings, time deposits, individual retirement
accounts, loans, safe deposit box and general ledger accounting. Complete
testing of mission critical systems was substantially completed as of December
31, 1998. Further testing with mission critical vendors and other significant
third party vendors will continue and is expected to be completed by June 30,
1999. The Company has not identified any problems thus far with any of its
systems that would have a material adverse impact upon its operations.
The Company incurred expenses throughout 1996, 1997 and 1998 and in the
first quarter of 1999 related to this project and will continue to incur
expenses over the next 9 months. The Company currently estimates that the cost
to remediate both its Year 2000 hardware and software issues to be less than
$130,000 with approximately 85% of the costs having already been expended
through March 31, 1999. A significant portion of total Year 2000 project
expenses is represented by existing staff that have been redeployed to this
project. The Company does not believe that the redeployment of existing staff
will have a material adverse effect on its business, results of operations or
financial position nor have any projects under consideration by the Company
been deferred because of Year 2000. Incremental expenses related to the Year
2000 project are not expected to materially impact operating results in any
one period.
43
<PAGE>
The impact of Year 2000 issues on the Company will depend not only on
corrective actions that the Company takes, but also on the way in which Year
2000 issues are addressed by governmental agencies, businesses and other third
parties that provide services or data to, or receive services or data from,
the Company, or whose financial condition or operational capability is
important to the Company. To reduce this exposure, the Company has an ongoing
process of identifying and contacting mission critical third party vendors and
other significant third party vendors to determine their Year 2000 plans and
target dates. Notwithstanding the Company's efforts, there can be no assurance
that mission critical third party vendors or other significant third party
vendors will adequately address their Year 2000 issues.
The Company has developed contingency plans for implementation in the event
that mission critical third party vendors or other significant third party
vendors fail to adequately address Year 2000 issues. Such plans principally
involve identifying alternate vendors or internal remediation. There can be no
assurance that any such plans will fully mitigate any failures or problems.
Furthermore, there may be certain mission critical third parties, such as
utilities or telecommunication companies, where alternative arrangements or
sources are limited or unavailable. The most reasonably likely worst case
scenario would be that the Company may experience disruption in its operations
if any of these mission critical third parties experienced system failure.
The Company's credit risk associated with borrowers may increase to the
extent borrowers fail to adequately address Year 2000 issues. As a result,
there may be increases in the Company's problem loans and credit losses in
future years. The Company is making ongoing efforts to assess the risks
associated with loan customers, large depositors and significant employers in
the Company's service areas, however, it is not possible to quantify the
potential impact of such risks at this time.
As remediated and tested systems are brought into operation, the Company
will need to take steps to avoid the re-introduction of Year 2000 related
problems into its systems. This is an ongoing process for the Company because
normal operations and other considerations may require that modifications
continue to be made to its systems in 1999. To some extent, therefore, all
four phases of the Company's project will need to continue throughout 1999 and
beyond.
The forward-looking statements contained herein with regard to the timing
and overall cost estimates of the Company's efforts to address the Year 2000
problem are based upon the Company's experience thus far in this effort.
Should the Company encounter unforeseen difficulties either in the continuing
review of its computerized systems, their ultimate remediation, or the
response of parties with which it does business or from which it obtains
services, the actual results could vary significantly from the estimates
contained in these forward-looking statements.
44
<PAGE>
SUPPLEMENTAL QUARTERLY DATA
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1998 1998 1998 1998 1999
----------- ----------- ------------ ------------ ----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Total interest income... $ 7,993 $ 9,000 $ 10,423 $ 11,466 $ 11,730
Total interest expense.. 3,836 4,570 5,782 6,330 6,421
----------- ----------- ------------ ------------ ----------
Net interest income... 4,157 4,430 4,641 5,136 5,309
Provision for loan
losses................. 225 255 742 804 611
Non-interest income..... 1,094 1,152 1,333 1,452 1,269
Non-interest expense.... 2,924 3,329 3,267 3,599 3,768
----------- ----------- ------------ ------------ ----------
Income before income
taxes................ 2,102 1,998 1,965 2,185 2,199
Income taxes............ 728 611 544 738 673
----------- ----------- ------------ ------------ ----------
Net income............ $ 1,374 $ 1,387 $ 1,421 $ 1,447 $ 1,526
=========== =========== ============ ============ ==========
Per share:
Earnings--diluted..... $ 0.36 $ 0.36 $ 0.37 $ 0.38 $ 0.40
Cash dividends........ 0.05 0.06 0.06 0.06 0.10
Bid price per common
share:
Low................... $ 21.94 $ 30.00 $ 20.00 $ 18.50 $ 20.00
High.................. 30.00 34.75 30.75 24.00 23.25
<CAPTION>
Three Months Ended
----------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997
----------- ----------- ------------ ------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Total interest income... $ 6,016 $ 6,635 $ 7,168 $ 7,649
Total interest expense.. 2,900 3,216 3,465 3,398
----------- ----------- ------------ ------------
Net interest income... 3,116 3,419 3,703 4,251
Provision for loan
losses................. 259 265 150 465
Non-interest income..... 742 641 662 880
Non-interest expense.... 2,105 2,219 2,316 2,588
----------- ----------- ------------ ------------
Income before income
taxes................ 1,494 1,576 1,899 2,078
Income taxes............ 537 572 698 709
----------- ----------- ------------ ------------
Net income............ $ 957 $ 1,004 $ 1,201 $ 1,369
=========== =========== ============ ============
Per share:
Earnings--diluted..... $ 0.33 $ 0.35 $ 0.34 $ 0.36
Cash dividends........ 0.10 -- 0.05 0.05
Bid price per common
share:
Low................... -- -- $ 17.38 $ 19.75
High.................. -- -- 20.13 25.25
</TABLE>
See "Supervision and Regulation" and Note 15 to Consolidated Financial
Statements for discussion of dividend restrictions.
45
<PAGE>
BUSINESS
Bank of the Ozarks is an Arkansas business corporation registered under the
Bank Holding Company Act of 1956. The Company owns two state chartered banks,
Bank of the Ozarks, wca and Bank of the Ozarks, nwa, that conduct banking
operations through 20 offices in 15 communities throughout northern, western
and central Arkansas.
The Company provides a wide range of retail and commercial banking services.
Deposit services include checking, savings, money market, time deposit and
individual retirement accounts. Loan services include various types of real
estate, consumer, commercial, industrial and agricultural loans. The Company
also provides mortgage lending, cash management, trust services, safety
deposit boxes, real estate appraisals, credit related life and disability
insurance, ATMs, telephone banking and debit cards.
In 1994 we initiated our expansion strategy, via de novo branching, into
target Arkansas markets. Since embarking on this strategy we have opened 15
new offices, with 10 being opened since January 1997. In 1998 we added a new
element to our growth strategy by significantly expanding into two of
Arkansas' largest metropolitan markets--Little Rock and Fort Smith. Since 1994
we have experienced significant growth in operations and maintained
profitability:
. Total assets increased to $666.9 million at March 31, 1999 from $165.0
million at December 31, 1994, representing a compounded annual growth
rate of 38.9%.
. Net income increased to $1,526,000 for the three months ended March 31,
1999, up from $1,374,000 for the same quarter in 1998. For the year
ended December 31, 1998 net income was $5,629,000.
. For the three months ended March 31, 1999 return on average assets
equaled 0.97% and return on average stockholders' equity equaled 15.14%.
For the year ended December 31, 1998 return on average assets and return
on average stockholders' equity were 1.16% and 14.83%, respectively.
. Our leverage capital ratio was 5.95% at March 31, 1999 and 6.21% at
December 31, 1998. After inclusion in Tier 1 capital of the eligible net
proceeds of $13.8 million from this offering, our pro forma leverage
capital ratio at March 31, 1999 would have been 7.96%.
Business Strategy
The Company's goal is to maximize long-term stockholder value through strong
year-to-year growth in assets, loans, deposits and earnings per share in a
manner consistent with safe, sound and prudent banking practices. To achieve
this goal the Company's business strategy is to:
. Expand loans and deposits primarily through market share growth at
existing locations and de novo branching in northern, western and
central Arkansas;
. Provide customers with the breadth of financial products and services of
a regional bank;
. Employ, empower and motivate personnel to provide personalized customer
service, consistent with the best traditions of community banking, while
increasing profits; and
. Maintain asset quality and control overhead expense.
Growth Strategy. The Company's growth strategy is to (1) build on market
share at existing locations, (2) open new branches in strategic locations, (3)
utilize competitive or superior products and pricing to achieve loan and
deposit growth, (4) aggressively market its products and services and (5)
capitalize on opportunities presented by banking industry consolidation.
In 1994 the Company initiated its expansion strategy, via de novo branching,
into target Arkansas markets. Since embarking on this strategy, the Company
has opened 15 new offices with 10 being opened since January
46
<PAGE>
1997. The Company's de novo branching strategy initially focused on opening
branches in smaller communities throughout its market area. During 1994 the
Company opened its first new office pursuant to this expansion strategy in
Clarksville, Arkansas. In 1995 and 1996 the Company opened additional offices
including new full service offices in Marshall, Van Buren and Harrison,
Arkansas and a second office in Clarksville. In 1997 the Company opened new
full service offices in Mulberry, Alma, Paris and Bellefonte, Arkansas. These
openings contributed to the Company's compounded annual growth rates of 34.7%
in loans, 25.8% in deposits and 28.7% in assets from 1994 through 1997.
In 1998 the Company added a new element to its growth strategy by
significantly expanding into two of Arkansas' largest metropolitan markets--
Little Rock and Fort Smith. Pulaski County (which includes the Little Rock
metropolitan area) is Arkansas' largest banking market with approximately $4.8
billion in total bank and thrift deposits, while Sebastian County (which
includes Fort Smith) is the state's fourth largest market with approximately
$1.6 billion in total bank and thrift deposits. The Company originally entered
the Little Rock market in 1995, when it opened its corporate headquarters and
a small commercial lending office. Encouraged by the results of the commercial
lending office, the Company opened a residential mortgage lending office in
1996. In February 1998 the Company began full service banking operations in
Little Rock with the acquisition of a small savings and loan with $9.4 million
in deposits. In June 1998 the Company opened its second and third Little Rock
deposit offices, including its 40,000 square foot corporate headquarters which
houses a full-service banking center, corporate offices, a mortgage lending
center and full service trust operations. In December 1998 the Company opened
its fourth office in Little Rock. As of March 31, 1999 the Company's total
deposits at these Little Rock offices had grown to $167.5 million.
Additionally, the Company has established itself as one of the leading
mortgage lenders in Pulaski County, originating approximately $98.0 million of
Pulaski County residential mortgages for resale in the secondary market in
1998 and the first quarter of 1999. The Company is continuing to expand its
presence in Pulaski County with the January 1999 opening of an office in North
Little Rock. Subject to completion of site negotiations and receipt of
regulatory approval, a second North Little Rock office is planned for opening
in late 1999 or early 2000.
The Company pursued major expansion in a second metropolitan market in
September 1998 with the opening of a 22,500 square foot building in Fort Smith
which includes a full service banking center. This full service facility
replaced a temporary branch opened less than a year earlier. At March 31, 1999
the Company's deposits at this office had grown to $51.7 million and loans had
grown to $44.8 million. The growth in the Little Rock and Fort Smith markets
contributed significantly to unusually high growth rates for the Company of
40.7% in loans, 79.0% in deposits, and 73.9% in assets during 1998. The 1998
growth rates also reflect the Company's continued addition of customers
throughout its branch network, now numbering 20 offices in nine Arkansas
counties. The Company continued to experience strong growth in the first
quarter of 1999.
As a result of the August 1998 acquisition of a competitor's branch with $16
million in deposits in Searcy County, Arkansas, and based upon market data
published by the FDIC as of June 30, 1998, the Company now has the number one
deposit market share in three of the nine counties in which it maintains
offices. In addition to its leading market share in Franklin, Newton and
Searcy counties, the June 1998 FDIC data also indicates that the Company
increased its market share in 3 other counties between June 1997 and June
1998. The Company will continue to pursue its growth strategy in each of these
markets, with a goal of obtaining a significant market share in every market
it serves.
47
<PAGE>
The following table reflects loans and deposits for the Company's locations
as of December 31, 1996, 1997 and 1998 and March 31, 1999.
<TABLE>
<CAPTION>
Loans Deposits
------------------------------------ -----------------------------------------
Months in Operation December 31, December 31,
as of -------------------------- March 31, -------------------------- March 31,
March 31, 1999(/1/) 1996 1997 1998 1999 1996 1997 1998 1999
------------------- -------- -------- -------- --------- -------- -------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North Little Rock..... 3 $ -- $ -- $ -- $ 1,416 $ -- $ -- $ -- $ 20,694
Little Rock (4
offices)............. 13,9,9,4(/2/) 37,250 52,776 80,606 88,239 -- -- 143,359(/3/) 167,487
Fort Smith............ 17 -- 16,600 40,746 44,755 -- 47 42,932 51,702
Alma.................. 19 -- 2,670 9,108 9,025 -- 5,194 10,973 10,655
Paris................. 20 -- 808 8,841 9,665 -- 5,921 10,235 10,240
Mulberry.............. 24 -- 1,326 2,848 2,744 -- 6,735 8,958 9,647
Harrison/Bellefonte
(2 offices).......... 37,15 14,766 28,357 41,116 43,587 17,012 30,709 37,692 37,700
Van Buren............. 41 16,381 13,903 22,729 23,854 17,830 25,750 22,130 23,229
Marshall.............. 49 10,631 14,614 22,347 22,538 16,279 21,878 41,592(/3/) 40,264
Clarksville (2
offices)............. 53,44 25,868 38,671 57,142 54,161 26,496 31,130 38,750 36,617
Western Grove......... -- (/4/) 25,499 27,867 28,199 28,217 12,644 15,023 20,355 20,397
Ozark/Altus (3
offices)............. -- (/4/) 67,602 61,737 57,076 55,497 110,857 117,255 110,169 110,541
Jasper................ -- (/4/) 16,465 16,134 16,768 17,153 30,530 35,913 41,895 42,531
-------- -------- -------- -------- -------- -------- -------- --------
Total................ $214,462 $275,463 $387,526 $400,851 $231,648 $295,555 $529,040 $581,704
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) Months in operation is from the date the Company opened each full service
banking office in the applicable city.
(2) The Company opened temporary commercial and mortgage lending offices in
Little Rock in 1995 and 1996, respectively, but did not commence deposit
operations in Little Rock until late February 1998.
(3) Deposit growth in 1998 includes deposits obtained through acquisitions in
Little Rock and Marshall of approximately $9.4 million and $16 million,
respectively.
(4) Operations commenced in Western Grove, Altus, Ozark and Jasper in 1976,
1972, 1937 and 1903, respectively.
In addition to growth at existing offices, the Company expects to continue
expansion with additional de novo branches. Specific locations targeted for
future development include a second full service branch in Harrison, which is
currently under construction and is expected to open in the second quarter of
1999, and a full service branch in Clinton, Arkansas expected to open by the
end of 1999. The Company is currently negotiating to acquire a site and plans
to seek regulatory approval for a second North Little Rock location which is
planned for opening in late 1999 or early 2000.
Although the Company will continue to open new offices, capitalizing on the
growth potential of existing offices is becoming an increasingly significant
part of its strategy. The Company has 15 offices that are less than five years
old, including 10 opened since January 1997. By seeking to more fully utilize
the unused capacity at existing offices, the Company's goal is to continue
loan, deposit and revenue growth without proportionate increases in the rate
of growth in capital investments and expenses.
The Company is also taking other steps to reduce expenditures in connection
with the opening of new offices. Management is considering other methods of
expanding its branch network including in-store branches, offices in shopping
centers and other leased facilities, and smaller or less expensive branches.
The Company believes that in many instances it can reduce the cost of new
offices while effectively entering new markets and expanding its presence in
existing markets. Finally, the Company may consider growth by acquisition as
opportunities arise.
Finally, the Company believes it will be able to continue to capitalize on
the opportunities presented by consolidation in the banking industry. Many
financial institutions operating in the Company's market areas have become
branches or subsidiaries of larger statewide, regional or national
organizations. Management believes
48
<PAGE>
that many of these organizations have shifted decision making and certain
services away from local offices while in many cases reducing personnel. Such
actions have created and may continue to create substantial opportunities for
the Company to increase market share and develop valuable customer
relationships. The Company has also been able to employ quality senior loan
officers and other management personnel from these institutions.
Banking Products and Services. The Company has expanded its traditional
banking products and services in recent years. New offerings are designed to
provide customers with a competitive or superior array of products and
services in each of the markets it serves. Management believes that these new
product offerings are especially important as the Company increases its
presence in metropolitan markets. Additionally, the expansion of the Company's
product line is intended to increase non-interest income as a percentage of
total revenues in order to diversify income sources and reduce dependence on
net interest margin.
The Company has significantly expanded its deposit products to include a
number of special time deposit offerings with aggressive rates and atypical
maturities, totally free checking, new ATM locations (with a total of 16 at
March 31, 1999), debit cards and telephone banking services. Additionally, in
1998 the Company introduced various cash management products, including
automated clearing house services, sweep accounts, special information
reporting services, wholesale lock box services, controlled disbursement and
account analysis. The Company also significantly expanded its trust operations
by adding new trust officers and a broader range of corporate trust, personal
trust and employee benefit services. Finally, during 1998 the Company
continued its emphasis on building its mortgage lending operations. The
mortgage lending operation has been the single largest contributor to growth
in non-interest income during the past two years. The Company's expanded
product offerings are designed to give the Company a broader range of products
and services than are typically associated with small community banks.
The Company intends to introduce internet banking services by the end of
1999 allowing customers to use their home computers to, among other things,
access personal account information, effect electronic transfers and bill
payments and download personal account data. The Company plans to continue to
introduce new banking products and services in order to meet changing customer
needs and expectations.
Management Structure and Incentives. The Company believes that an empowered
banking team, motivated to provide high quality, personalized customer service
while increasing profits, is a critical element of its business strategy. The
Company implements this element of its strategy by (1) employing experienced,
customer-oriented personnel, (2) using a decentralized and streamlined
management structure, (3) holding managers separately accountable for branch
or departmental performance and (4) providing incentive compensation designed
to reward positive financial performance.
The Company strives to create the personal and comfortable atmosphere of a
small hometown bank in each of its offices. A decentralized management
structure allows managers to make credit and other decisions efficiently while
providing a higher degree of service and increased flexibility to local
customers. The Company encourages branch and departmental managers and their
staff to pursue quality customer service and active community involvement and
to develop extensive market knowledge, new business and customer
relationships.
Although senior management establishes all major plans, policies and
strategies for the Company as a whole, management also reviews key performance
indicators for each branch and department. The Company maintains
accountability and control of each branch and department through (1) direct
senior management oversight, (2) review of asset quality and regulatory
compliance by internal loan review and compliance officers, (3) review of
operations by an internal audit officer and (4) executive management review of
branch and departmental budget and financial reports.
In 1996 the Company implemented an incentive cash bonus plan which provides
employees the potential for bonuses based upon growth and profitability.
Rewards are conditional upon attaining company-wide performance thresholds.
Assuming the Company achieves the minimum thresholds, rewards are based upon a
combination of branch and departmental performance and individual performance
and responsibility.
49
<PAGE>
Management believes this plan has been successful in focusing individuals on
key performance areas. Additionally, the Company provides equity based
compensation to certain personnel in the form of discretionary stock options
to further align their interests with stockholders.
Asset Quality. The successful implementation of the Company's business
strategy requires an emphasis on maintaining asset quality. The Board of
Directors, including its loan review committee, and senior management
regularly monitor asset quality. In addition, the Company employs loan
personnel based primarily upon their ability to properly underwrite, originate
and service loans. The Company's procedures to maintain favorable asset
quality include:
. regular meetings among loan and collection personnel to continuously
assess the status of problem or nonperforming loans;
. rapid resolution of nonaccrual loans with minimal tolerance for loans
remaining in nonaccrual status for extended periods; and
. prompt and orderly liquidation of other real estate received upon
foreclosure.
For a more detailed description of the Company's procedures and policies for
maintaining asset quality, see "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Nonperforming Assets" and "--
Allowance and Provision for Loan Losses."
In the past year the Company has taken several steps to improve its ability
to monitor asset quality. At the end of 1997 the Company hired James Patridge
as Vice Chairman to oversee its lending function. Mr. Patridge has 25 years of
lending experience and has worked in all facets of loan portfolio management,
including the development and administration of credit policies and
underwriting procedures. Additionally, the Company has effected other changes
in personnel, including the hiring of an experienced manager to oversee the
loan administration functions, and modified its lending policies to more
effectively address credit risks associated with the Company's loan portfolio
growth. Finally, the Board of Directors has formed a loan review committee,
with Mr. Patridge as Chairman, to increase the oversight of the lending
function at the Board of Directors level.
The Company is continuing to take steps to improve its ability to
underwrite, originate and service loans. In the first quarter of 1999 the
Company commenced a comprehensive training program that will require
substantially all employees to attend a series of training courses to be
conducted throughout 1999 and 2000. Many courses in this program relate to
lending and credit functions. Further, the Company has established two loan
administration offices in Ozark and Little Rock to serve western and central
Arkansas, respectively, and intends to establish a third such office in
Harrison to serve northern Arkansas. The Company's centralization of loan
documentation and servicing functions within its three geographic regions is
intended to achieve greater uniformity and improved quality while maintaining
quick response times and strong customer service.
Overhead Objectives. One of the Company's goals is to consistently improve
its operating efficiency and ultimately become a low cost provider of
financial services. Although the Company's efficiency ratio has increased from
51.60% in 1996 to 54.98% in 1998, this increase is primarily the result of the
Company having invested heavily to expand into new markets. During 1998 the
Company increased its investment in fixed assets from $13 million to $27
million as it added a number of new offices, including its corporate
headquarters. In addition, the number of full-time equivalent employees
increased by approximately 45% during 1998 as the Company hired new personnel
to staff these offices.
The Company has made substantial capital investments and incurred
significant expenses in connection with opening 10 new offices since January
1997. The Company believes these investments in physical facilities and people
have significantly expanded its capacity for further growth, and create an
opportunity for further loan, deposit and revenue growth without proportionate
increases in the rate of growth in capital investments and expenses. The
Company's 1999 budget for capital expenditures is approximately 40% of the
1998 amount, and its staffing plans for 1999 call for the addition of
approximately 30% of the number of employees added in 1998.
50
<PAGE>
The Company believes the slower growth rate in capital expenditures and
personnel expenses, coupled with its targeted growth rate for new loans and
deposits, will result in an improved efficiency ratio in 1999 compared to the
1998 level. For the quarter ended March 31, 1999, the Company's efficiency
ratio was 55.65%.
In an effort to achieve further efficiencies, the Company has also begun to
consolidate subsidiaries and streamline certain operations. In the fourth
quarter of 1998 the Company consolidated the operations of a small mortgage
company subsidiary into Bank of the Ozarks, wca, the Company's lead bank
subsidiary. In January 1999 the Company merged its federal savings bank
subsidiary into Bank of the Ozarks, wca. Additionally, the Company plans to
consolidate its two remaining bank subsidiaries into a single entity by the
end of the second quarter of 1999. These actions should improve operating
efficiency and enhance customer service by making it easier to transact
business throughout the Company's expanding branch network, including
facilitating the use of the Company's TeleBank and voice response services and
the introduction of internet and other new banking services in the future.
Lending Activities
The Company's primary source of income is interest earned from its loan
portfolio and, to a lesser extent, earnings on its investment portfolio. In
underwriting loans, primary emphasis is placed on the borrower's financial
condition, including its ability to generate cash flow to support its debt
obligations and other cash expenses. Additionally, substantial consideration
is given to collateral value and marketability as well as the borrower's
character, reputation and other relevant factors. The Company's portfolio
includes most types of real estate loans, consumer loans, commercial and
industrial loans, agricultural loans and other types of loans. The vast
majority of the properties collateralizing the Company's mortgage loans are
located within the trade areas of the Company's main offices and branches.
The Company prices its loans to be competitive while maintaining
profitability. In establishing loan pricing the Company considers (1) the
risks associated with the loan, (2) the borrower's overall relationship with
the Company and (3) yields on other investment alternatives.
The following table summarizes the Company's loan portfolio, by loan
category, amount and percentage of total loans as of December 31, 1996, 1997
and 1998 and March 31, 1999.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------- March 31,
1996 1997 1998 1999
-------------- -------------- -------------- --------------
% of % of % of % of
Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans
-------- ----- -------- ----- -------- ----- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Single family
residential.......... $ 78,124 36.4% $ 96,943 35.2% $121,539 31.4% $119,404 29.8%
Non-farm/non-
residential.......... 35,258 16.4 41,710 15.1 76,563 19.8 86,560 21.6
Agricultural.......... 11,583 5.4 13,443 4.9 19,463 5.0 20,784 5.2
Construction/land
development.......... 8,808 4.1 16,257 5.6 23,305 6.0 26,778 6.6
Multifamily
residential.......... 3,743 1.8 3,897 1.4 6,207 1.6 5,465 1.4
-------- ----- -------- ----- -------- ----- -------- -----
Total real estate... 137,516 64.1 172,250 62.5 247,077 63.8 258,991 64.6
Consumer................ 39,868 18.6 53,233 19.3 66,407 17.1 64,976 16.2
Commercial and
industrial............. 28,154 13.1 37,470 13.6 59,192 13.5 55,163 13.7
Agricultural (non-real
estate)................ 8,363 3.9 10,824 3.9 20,068 5.2 20,027 5.0
Other................... 561 0.3 1,686 0.6 1,782 0.5 1,694 0.5
-------- ----- -------- ----- -------- ----- -------- -----
Total loans......... $214,462 100.0% $275,463 100.0% $387,526 100.0% $400,851 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
51
<PAGE>
Real Estate Loans. The Company's portfolio of real estate loans includes
loans secured by single family residential, non-farm non-residential,
agricultural, construction and land development, and multifamily (five or
more) properties. Single family residential loans include permanent loans
secured by first liens on one to four family residential properties. Such
loans comprise the largest portion of the Company's real estate loans. Non-
farm non-residential loans include those secured by real estate mortgages on
hotels, motels, churches, medical facilities, nursing homes, shopping centers,
office buildings, restaurants, and other business and industrial properties.
Agricultural real estate loans include loans secured by farmland and related
improvements including loans guaranteed by the Farm Service Agency or the
Small Business Administration. Real estate construction and land development
loans include loans with original maturities of sixty months or less to
finance land development or construction of industrial, commercial,
residential or farm buildings or additions or alterations to existing
structures.
The Company offers a variety of real estate loan products that are generally
amortized over five to thirty years, payable in monthly or other periodic
installments of principal and interest, and due and payable in full (unless
renewed) at a balloon maturity generally within one to five years. Certain
loans not subject to Arkansas' usury law, typically first mortgage residential
loans, may be structured as term loans with adjustable interest rates
(adjustable daily, every six months, annually, or at other regular adjustment
intervals usually not to exceed every five years) and without balloon
maturities.
Single family residential loans are underwritten primarily based on the
borrower's ability to repay, including prior credit history, and the value of
the collateral. Other real estate loans are underwritten based on the ability
of the property, in the case of income producing property, or the borrower's
business to generate sufficient cash flow to amortize the debt. Secondary
emphasis is placed upon collateral value and other factors. Loans
collateralized by real estate have generally been originated with loan to
appraised value ratios of not more than 89% for owner-occupied single family
residential, 85% for other single family residential and other improved
property, 80% for construction loans secured by commercial, multifamily and
other non-residential properties, 75% for land development loans, and 65% for
raw land loans.
The Company typically requires mortgage title insurance in the amount of the
loan and hazard insurance on improvements. Documentation requirements vary
depending on loan size, type, complexity and other factors.
Consumer Loans. The Company's portfolio of consumer loans generally includes
loans to individuals for household, family and other personal expenditures
(other than those secured by real estate). Proceeds from such loans are used
to, among other things, fund the purchase of automobiles, household
appliances, furniture, trailers, boats and mobile homes, and for credit
extended pursuant to credit card and other similar plans. Consumer loans made
by the Company are generally collateralized with terms typically ranging up to
72 months, depending upon the nature of the collateral and size of the loan.
Consumer loans are attractive to the Company because they generally have a
short term with interest rates at or near the maximum lawful rate in Arkansas.
Such loans, however, pose additional risks of collectibility and loss when
compared to certain other types of loans. The borrower's ability to repay is
of primary importance in the underwriting of consumer loans.
Commercial and Industrial Loans. The Company's commercial and industrial
loan portfolio consists of loans for commercial, industrial and professional
purposes including loans to fund working capital requirements (such as
inventory, floor plan and receivables financing), purchases of machinery and
equipment and other purposes. The Company offers a variety of commercial and
industrial loan arrangements, including term loans, balloon loans and lines of
credit with the purpose and collateral supporting a particular loan
determining its structure. These loans are offered to businesses and
professionals for short and medium terms on both a collateralized and
uncollateralized basis. As a general practice, the Company obtains as
collateral a lien on furniture, fixtures, equipment, inventory, receivables or
other assets.
52
<PAGE>
Commercial and industrial loans typically are underwritten on the basis of
the borrower's ability to make repayment from the cash flow of its business
and generally are collateralized by business assets. As a result, such loans
involve additional complexities, variables and risks and require more thorough
underwriting and servicing than other types of loans.
Agricultural (Non-Real Estate) Loans. The Company's portfolio of
agricultural (non-real estate) loans includes loans for financing agricultural
production, including loans to businesses or individuals engaged in the
production of timber, poultry, livestock and crops. The Company's agricultural
(non-real estate) loans are generally secured by farm machinery, livestock,
crops, vehicles or other agri-related collateral.
Deposits
The Company offers an array of deposit products consisting of non-interest
bearing checking accounts, low cost deposit products, including interest
bearing transaction (such as checking) and savings accounts, and higher cost
deposit products, including money market accounts and time deposits.
The following tables summarizes the deposit products of the Company by
category, amount and percentage of total deposits at December 31, 1996, 1997
and 1998 and March 31, 1999.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------- March 31,
1996 1997 1998 1999
----------------- ----------------- ----------------- -----------------
% of % of % of % of
Total Total Total Total
Amount Deposits Amount Deposits Amount Deposits Amount Deposits
-------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts............... $ 21,295 9.2% $ 31,091 10.5% $ 50,138 9.5% $ 56,281 9.7%
Interest bearing
accounts:
Transaction (NOW)..... 24,424 10.5 27,527 9.3 46,915 8.9 51,184 8.8
Savings............... 8,180 3.5 9,082 3.1 13,319 2.5 15,438 2.7
Money market.......... 24,325 10.5 28,133 9.5 35,237 6.7 38,273 6.6
Time deposits:
Less than $100,000.... 111,379 48.1 141,741 48.0 239,891 45.3 231,812 39.8
$100,000 or more...... 42,045 18.2 57,981 19.6 143,540 27.1 188,716 32.4
-------- ----- -------- ----- -------- ----- -------- -----
Total deposits...... $231,648 100.0% $295,555 100.0% $529,040 100.0% $581,704 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The Company acts as depository for a number of state and local governments
and government agencies or instrumentalities. Such public fund deposits are
often subject to competitive bid and in many cases must be secured by the
Company's pledge of government agency or other securities. The Company's
deposits come primarily from within the Company's trade area. As of March 31,
1999 the Company had no outstanding "brokered deposits," defined as deposits
which, to the knowledge of management of the Company, have been placed with
the bank subsidiaries by a person who acts as a broker in placing such
deposits on behalf of others.
Other Banking Services
Trust Services. Historically the Company has provided trust services from
its Ozark, Arkansas. As the Company has expanded into larger markets, it has
identified a need to expand the capabilities and services of this department.
In 1998 the Company assembled a team of experienced trust officers to handle
personal trusts, corporate trusts, employee benefit accounts and trust
operations. In the fourth quarter of 1998 this team commenced operations in
the Company's corporate headquarters in Little Rock and the Ozark trust
operations were consolidated into that office. The Company also converted to a
new trust computer system which allows the trust department to more
efficiently service its growing base of trust accounts. As of March 31, 1999
total
53
<PAGE>
trust assets under management were $67.8 million. With the new trust resources
in place, the Company expects to increase trust assets under management and
trust revenues in 1999 and future years.
Cash Management Services. In 1998 the Company introduced cash management
products which are designed to provide a high level of specialized support to
the treasury operations of business customers. Cash management has four basic
functions: deposit handling, funds concentration, funds disbursement and
information reporting. The Company's cash management services include
automated clearing house services (e.g., direct deposit, automatic bill
collection and electronic cash concentration), sweep accounts, current and
prior day transaction reporting, wholesale lockbox services, controlled
disbursement and account analysis. The Company will continue to expand its
product offerings in this area in order to meet the increasingly sophisticated
needs of its expanding commercial customer base.
Mortgage Lending. In 1996 the Company expanded its residential mortgage
product line by offering long-term fixed and variable rate loans to be sold on
a servicing released basis in the secondary market. The Company originates
such loans through its Little Rock, Fort Smith and Harrison offices. During
1998 the Company significantly increased its mortgage lending operations by
hiring additional mortgage lending personnel. This has resulted in the
Company's originations of residential mortgage loans growing from just $4.5
million in 1996 to $138.9 million in 1998.
Competition
The banking industry in the Company's market area is highly competitive. In
addition to competing with other commercial and savings banks and savings and
loan associations, the Company competes with credit unions, finance companies,
mortgage companies, brokerage and investment banking firms, asset-based non-
bank lenders and many other financial service firms. Competition is based upon
interest rates offered on deposit accounts, interest rates charged on loans,
fees and service charges, the quality and scope of the services rendered, the
convenience of banking facilities and, in the case of loans to commercial
borrowers, relative lending limits.
A substantial number of the commercial banks operating in the Company's
market area are branches or subsidiaries of much larger organizations
affiliated with statewide, regional or national banking companies, and as a
result may have greater resources and lower costs of funds than the Company.
Additionally, the Company faces increased competition from de novo community
banks, including those with senior management who were previously with other
local banks or those controlled by investor groups with strong local business
and community ties. Management believes the Company will continue to be
competitive because of its strong commitment to quality customer service,
highly autonomous local branches, active community involvement and competitive
products and pricing.
Employees
At March 31, 1999 the Company employed 281 full-time equivalent employees.
None of the employees were represented by any union or similar group. The
Company has not experienced any labor disputes or strikes arising from any
organized labor groups. The Company believes its employee relations are good.
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Properties
The Company serves its customers by offering a broad range of banking
services throughout northern, western and central Arkansas from the following
locations:
<TABLE>
<CAPTION>
Banking Location (/1/) Year Opened Square Footage
- ------------------------------------------- -------------------- --------------
<S> <C> <C>
Harrison (Downtown)........................ Under construction 14,000
North Little Rock (Indian Hills)(/2/)...... 1999 1,500
Fort Smith................................. 1998 22,500
Little Rock (Cantrell)..................... 1998 2,700
Little Rock (Chenal)....................... 1998 40,000
Little Rock (Rodney Parham)................ 1998 2,500
Little Rock (Chester)(/3/)................. 1998 1,716
Bellefonte................................. 1997 1,444
Alma....................................... 1997 4,200
Paris...................................... 1997 3,100
Mulberry................................... 1997 1,875
Harrison (North)(/4/)...................... 1996 3,300
Clarksville (Rogers)(/4/).................. 1995 3,300
Van Buren.................................. 1995 2,520
Marshall(/4/).............................. 1995 2,520
Clarksville (Main)......................... 1994 2,520
Ozark (Westside)........................... 1993 2,520
Western Grove.............................. 1976 (expanded 1991) 2,610
Altus(/5/)................................. 1972 (rebuilt 1998) 1,500
Ozark (Main)............................... 1971 (expanded 1985) 30,877
Jasper..................................... 1967 (expanded 1984) 4,408
</TABLE>
- --------
(1) Unless otherwise indicated, the Company owns, or will own upon the
completion of construction, its banking locations.
(2) The Company leases the building and land at this location with an initial
term expiring in December 1999, subject to options to renew for five
additional terms of two years each.
(3) This location was acquired by the Company in February 1998. The facility
was constructed in 1994.
(4) The Company owns the buildings and leases the land at these locations. The
initial lease terms expire in 2001 (Harrison), 2007 (Clarksville) and 2024
(Marshall). The Company has renewal options on the Harrison and Marshall
facilities and purchase options on the Harrison and Clarksville
facilities.
(5) Original facility was destroyed by storm in 1997. This facility was
rebuilt and placed in service in 1998.
While management believes its existing banking locations are adequate for
its present operations, the Company intends to establish additional branch
offices in the future in accordance with its growth strategy. See "--Business
Strategy."
Legal Proceedings
The Company is not currently involved in any material legal proceedings.
However, from time to time the Company is involved in routine legal
proceedings arising in the ordinary course of business. Management does not
believe that any such proceedings, either individually or in the aggregate,
will result in material losses to the Company.
55
<PAGE>
SUPERVISION AND REGULATION
In addition to the generally applicable state and federal laws governing
businesses and employers, bank holding companies and banks are extensively
regulated under both federal and state law. With few exceptions, state and
federal banking laws have as their principal objective either the maintenance
of the safety and soundness of the Bank Insurance Fund ("BIF") and Savings
Association Insurance Fund ("SAIF") of the FDIC or the protection of consumers
or classes of consumers, rather than the specific protection of the
stockholders of the Company. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to those particular statutory and regulatory provisions. Any
change in applicable law or regulation may have an adverse effect on the
results of operation and financial condition of the Company and its bank
subsidiaries.
Federal Regulations
The primary federal banking regulatory authority for the Company is the
Board of Governors of the Federal Reserve System, acting pursuant to its
authority to regulate bank holding companies. Because the Company's bank
subsidiaries are insured depository institutions who are not member banks of
the Federal Reserve System, they are subject to regulation and supervision by
the FDIC and are not subject to direct supervision by the Federal Reserve.
Bank Holding Company Act. The Company is subject to supervision by the
Federal Reserve under the provisions of the Bank Holding Company Act of 1956,
as amended (the "BHCA"). The BHCA restricts the types of activities in which
bank holding companies may engage and imposes a range of supervisory
requirements on their activities, including regulatory enforcement actions for
violations of laws and policies. The BHCA limits the activities of the Company
and any companies controlled by it to the activities of banking, managing and
controlling banks, furnishing or performing services for its subsidiaries, and
any other activity that the Federal Reserve determines to be incidental to or
closely related to banking. These restrictions also apply to any company in
which the Company owns 5% or more of the voting securities.
Before a bank holding company engages in any bank-related activities, either
by acquisition or commencement of de novo operations, it must comply with the
Federal Reserve's notification and approval procedures. In reviewing these
notifications, the Federal Reserve considers a number of factors, including
the expected benefits to the public versus the risks of possible adverse
effects. In general, the potential benefits include greater convenience to the
public, increased competition and gains in efficiency, while the potential
risks include undue concentration of resources, decreased or unfair
competition, conflicts of interest and unsound banking practices.
Under the BHCA, a bank holding company must obtain Federal Reserve approval
before engaging in acquisitions of banks or bank holding companies. In
particular, the Federal Reserve must generally approve the following actions
by a bank holding company:
. the acquisition of ownership or control of more than 5% of the voting
securities of any bank or bank holding company;
. the acquisition of all or substantially all of the assets of a bank; and
. the merger or consolidation with another bank holding company
In considering any application for approval of an acquisition or merger, the
Federal Reserve is required to consider various competitive factors, the
financial and managerial resources of the companies and banks concerned, the
convenience and needs of the communities to be served and the applicant's
record of compliance with the Community Reinvestment Act (the "CRA"). The CRA
generally requires financial institutions to take affirmative action to
ascertain and meet the credit needs of its entire community, including low and
moderate income neighborhoods. The Attorney General of the United States may,
within 30 days after approval of an
56
<PAGE>
acquisition by the Federal Reserve, bring an action challenging such
acquisition under the federal antitrust laws, in which case the effectiveness
of such approval is stayed pending a final ruling by the courts.
Interstate Banking. On September 29, 1994, President Clinton signed into law
the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act") which amended the BHCA to permit bank holding companies to
acquire existing banks in any state effective September 29, 1995. The
Interstate Act preempted barriers that restricted entry into states and
created opportunities for expansion into markets that were previously closed.
Interstate banking and branching authority (discussed below) is subject to
certain conditions and restrictions, such as capital adequacy, management and
CRA compliance.
The Interstate Act also contained interstate branching provisions that allow
multistate banking operations to merge into a single bank with interstate
branches. The interstate branching provisions became effective on June 1,
1997, although states were allowed to pass laws to opt in early or to opt out
completely as long as they acted prior to that date. Effective May 31, 1997,
the Arkansas Interstate Banking and Branching Act of 1997 (the "Arkansas
Interstate Act") authorized banks to engage in interstate branching activities
within the borders of the state of Arkansas.
Banks acquired pursuant to this new branching authority may be converted to
branches. Interstate branching allows banks to merge across state lines to
form a single institution. Interstate merger transactions can be used to
consolidate existing multistate operations or to acquire new branches. A bank
can also establish a new branch as its initial entry into a state if the state
has authorized de novo branching. The Arkansas Interstate Act prohibits entry
into the state through de novo branching.
Deposit Insurance. The FDIC insures the deposits of the Company's bank
subsidiaries to the extent provided by law. BIF is the primary insurance fund
for the banks' deposits, but SAIF insures a portion due to certain
acquisitions by the Company of deposits from SAIF-insured institutions. Under
the FDIC's risk-based insurance system, depository institutions are currently
assessed premiums based upon the institution's capital position and other
supervisory factors. BIF and SAIF members currently have the same risk-based
assessment schedule, which is 0 to 27 cents per $100 of eligible deposits.
Insured depository institutions are further assessed premiums for Financing
Corporation Bond debt service ("FICO"). Beginning January 1, 1997, FICO
premiums for BIF and SAIF became 1.22 and 6.1 basis points, respectively, per
$100 of eligible deposits. For the period July 1, 1998 through December 31,
1998, the Company's bank subsidiaries were assessed an annualized premium of
$0.01164 per $100 of BIF-eligible deposits and $0.0582 per $100 of SAIF-
eligible deposits.
Capital Adequacy Requirements. The Federal Reserve monitors the capital
adequacy of bank holding companies such as the Company, and the FDIC monitors
the capital adequacy of its bank subsidiaries. The federal bank regulators use
a combination of risk-based guidelines and leverage ratios to evaluate capital
adequacy.
Under the risk-based capital guidelines, bank regulators assign a risk
weight to each category of assets based generally on the perceived credit risk
of the asset class. The risk weights are then multiplied by the corresponding
asset balances to determine a "risk-weighted" asset base. The minimum ratio of
total risk-based capital to risk-weighted assets is 8.0%. At least half of the
risk-based capital must consist of Tier 1 capital, which is comprised of
common equity, retained earnings and certain types of preferred stock and
excludes goodwill and various intangible assets. The remainder, or Tier 2
capital, may consist of a limited amount of subordinated debt, certain hybrid
capital instruments and other debt securities, preferred stock, and an
allowance for loan losses not to exceed 1.25% of risk-weighted assets. The sum
of Tier 1 capital and Tier 2 capital is "total risk-based capital."
The leverage ratio is a company's Tier 1 capital divided by its adjusted
total assets. The leverage ratio requires a 3.0% Tier 1 capital to adjusted
total assets ratio for institutions with the highest regulatory rating of 1.
All other institutions must maintain a leverage ratio of 4.0% to 5.0%. For a
tabular summary of the Company's
57
<PAGE>
and the bank subsidiaries' risk-weighted capital and leverage ratios, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources."
Bank regulators from time to time consider raising the capital requirements
of banking organizations beyond current levels. However, the Company is unable
to predict whether higher capital requirements will be imposed and, if so, the
amount or timing of such increases. Therefore, the Company cannot predict what
effect such higher requirements may have on it or its bank subsidiaries.
Enforcement Authority. The Federal Reserve has enforcement authority over
bank holding companies and non-banking subsidiaries to forestall activities
that represent unsafe or unsound practices or constitute violations of law. It
may exercise these powers by issuing cease-and-desist orders or through other
actions. The Federal Reserve may also assess civil penalties against companies
or individuals who violate the BHCA or related regulations in amounts up to $1
million for each day's violation. The Federal Reserve can also require a bank
holding company to divest ownership or control of a non-banking subsidiary or
require such subsidiary to terminate its non-banking activities. Certain
violations may also result in criminal penalties.
The FDIC possesses comparable authority under the Federal Deposit Insurance
Act (the "FDI Act"), the Federal Deposit Insurance Corporation Improvement Act
("FDICIA") and other statutes with respect to the bank subsidiaries. In
addition, the FDIC can terminate insurance of accounts, after notice and
hearing, upon a finding that the insured institution is or has engaged in any
unsafe or unsound practice that has not been corrected, is in an unsafe and
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, or order of, or condition imposed by the appropriate
supervisors.
The FDICIA required federal banking agencies to broaden the scope of
regulatory corrective action taken with respect to depository institutions
that do not meet minimum capital and related requirements and to take such
actions promptly in order to minimize losses to the FDIC. In connection with
FDICIA, federal banking agencies established capital measures (including both
a leverage measure and a risk-based capital measure) and specified for each
capital measure the levels at which depository institutions will be considered
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. If an institution becomes
classified as undercapitalized, the appropriate federal banking agency will
require the institution to submit an acceptable capital restoration plan and
can suspend or greatly limit the institution's ability to effect numerous
actions including capital distributions, acquisitions of assets, the
establishment of new branches and the entry into new lines of business. On
November 30, 1998 the FDIC advised the Company that each of its existing bank
subsidiaries had been classified as "well-capitalized" under these guidelines.
Examination. The Federal Reserve may examine the Company and any or all of
its subsidiaries. The FDIC examines and evaluates insured banks every 12
months, and it may assess the institution for its costs of conducting the
examinations. The FDIC has a reciprocal agreement with the Arkansas State Bank
Department whereby each will accept the other's examination reports in certain
cases. As a result, the bank subsidiaries generally undergo FDIC and state
examinations either on a joint basis or in alternating years.
Reporting Obligations. As a bank holding company, the Company must file with
the Federal Reserve an annual report and such additional information as the
Federal Reserve may require pursuant to the BHCA. The bank subsidiaries must
submit to federal and state regulators annual audit reports prepared by
independent auditors, and the Company's audit report can be used to satisfy
this requirement.
Other Regulation. The Company's status as a registered bank holding company
under the BHCA does not exempt it from certain federal and state laws and
regulations applicable to corporations generally, including, without
limitation, certain provisions of the federal securities laws. The Company is
under the jurisdiction of the Securities and Exchange Commission and of state
securities commissions for matters relating to the offer and sale of its
securities.
Interest and certain other charges collected or contracted for by the bank
subsidiaries are subject to state usury laws and certain federal laws
concerning interest rates. The bank subsidiaries' loan operations are also
58
<PAGE>
subject to certain federal laws applicable to credit transactions, such as the
federal Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials
to determine whether a financial institution is fulfilling its obligation to
help meet the housing needs of the community it serves, the Equal Credit
Opportunity Act prohibiting discrimination on the basis of race, creed or
other prohibited factors in extending credit, the Fair Credit Reporting Act of
1978 governing the use and provision of information to credit reporting
agencies, the Fair Debt Collection Act governing the manner in which consumer
debts may be collected by collection agencies, the Fair Housing Act
prohibiting discriminatory practices relative to real estate-related
transactions, including the financing of housing and the rules and regulations
of the various federal agencies charged with the responsibility of
implementing such federal laws. The deposit operations of the bank
subsidiaries also are subject to the Right to Financial Privacy Act, which
imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of financial
records, and the Electronic Funds Transfer Act, which governs automatic
deposits to and withdrawals from deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and other
electronic banking services, the Truth in Savings Act requiring depository
institutions to disclose the terms of deposit accounts to consumers and the
Expedited Funds Availability Act requiring financial institutions to make
deposited funds available according to specified time schedules and to
disclose funds availability policies to consumers.
State Regulations
The Company and its bank subsidiaries are subject to examination and
regulation by the Arkansas State Bank Department. Examinations of the bank
subsidiaries are conducted annually but may be extended to 24 months if an
interim examination is performed by the FDIC. The Arkansas State Bank
Department may also make at any time an examination of the Company as may be
necessary to disclose fully the relations between the holding company and its
bank subsidiaries and the effect of those relations.
The Arkansas Constitution provides, in summary, that "consumer loans and
credit sales" have a maximum percentage limitation of 17% per annum and that
all "general loans" have a maximum limitation of 5% over the Federal Reserve
Discount Rate in effect at the time the loan was made. The Arkansas Supreme
Court has determined that "consumer loans and credit sales" are also "general
loans" and are thus subject to an interest rate limitation equal to the lesser
of 5% over the Federal Reserve Discount Rate or 17% per annum. The Arkansas
Constitution also provides penalties for usurious "general loans" and
"consumer loans and credit sales," including forfeiture of all principal and
interest on consumer loans and credit sales made at a greater rate of interest
than 17% per annum. Additionally, "general loans" made at a usurious rate may
result in forfeiture of uncollected interest and a refund to the borrower of
twice the interest collected. Arkansas usury laws, however, are preempted by
federal law with respect to first residential real estate loans and certain
loans guaranteed by the Small Business Administration.
The Company is also subject to the Arkansas Bank Holding Company Act of 1983
("ABHCA") which places certain restrictions on the acquisition of banks by
bank holding companies. Any acquisition by the Company of more than 10% of any
class of the outstanding capital stock of any bank located in Arkansas, would
require the Arkansas Bank Commissioner's approval. Further, no bank holding
company may acquire any bank if after such acquisition the holding company
would control, directly or indirectly, banks having 25% of the total bank
deposits (excluding deposits from other banks and public funds) in the State
of Arkansas. Under the ABHCA a bank holding company cannot own more than one
bank subsidiary if any of its bank subsidiaries has been chartered for less
than 5 years.
Effective January 1, 1999 Arkansas law allows the Company to engage in
branching activities for its bank subsidiaries on a statewide basis.
Immediately prior to that date, the state's branching laws prevented state and
national banks from opening branches in any county of the state other than
their home county and the counties contiguous to their home county. Because
the state branching laws did not limit the branching activities of federal
59
<PAGE>
savings banks, the Company was able to branch outside of the traditional areas
of its state bank subsidiaries through the federal thrift that it acquired in
February 1998. In response to the change in state branching laws, the Company
merged its thrift charter into its lead state bank subsidiaries in early 1999.
Bank Subsidiaries
The lending and investment authority of the state bank subsidiaries is
derived from Arkansas law. The lending powers of each of these bank
subsidiaries are generally subject to certain restrictions, including the
amount which may be lent to a single borrower.
Regulations of the FDIC and the Arkansas State Bank Department limit the
ability of the bank subsidiaries to pay dividends to the Company without the
prior approval of such agencies. FDIC regulations prevent insured state banks
from paying any dividends from capital and allows the payment of dividends
only from net profits then on hand after deduction for losses and bad debts.
The Arkansas State Bank Department currently limits the amount of dividends
that the bank subsidiaries can pay the Company to 75% of each bank's net
profits after taxes for the current year plus 75% of its retained net profits
after taxes for the immediately preceding year.
Federal law substantially restricts transactions between financial
institutions and their affiliates, particularly their non-financial
institution affiliates. As a result, the bank subsidiaries are sharply limited
in making extensions of credit to the Company or any non-bank subsidiary, in
investing in the stock or other securities of the Company or any non-bank
subsidiary, in buying the assets of, or selling assets to, the Company, and/or
in taking such stock or securities as collateral for loans to any borrower.
Moreover, transactions between the bank subsidiaries and the Company (or any
nonbank subsidiary) must generally be on terms and under circumstances at
least as favorable to the bank subsidiaries as those prevailing in comparable
transactions with independent third parties or, in the absence of comparable
transactions, on terms and under circumstances that in good faith would be
available to nonaffiliated companies.
The FDIC requires all depository institutions, including the bank
subsidiaries, to maintain reserves against their checking and transaction
accounts (primarily checking accounts, NOW and Super NOW checking accounts).
Because reserves must generally be maintained in cash or in non-interest
bearing accounts, the effect of the reserve requirements is to increase the
bank subsidiaries' cost of funds. Arkansas law requires state chartered banks
to maintain such reserves as are required by the applicable federal regulatory
agency.
The bank subsidiaries are subject to Section 23A of the Federal Reserve Act,
which places limits on the amount of loans or extensions of credit to, or
investments in, or certain other transactions with, affiliates, including the
Company. In addition, limits are placed on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. Most of
these loans and certain other transactions must be secured in prescribed
amounts. The bank subsidiaries are also subject to Section 23B of the Federal
Reserve Act, which prohibits an institution from engaging in transactions with
certain affiliates unless the transactions are on terms substantially the
same, or at least as favorable to such institution or its subsidiaries, as
those prevailing at the time for comparable transactions with non-affiliated
companies. The bank subsidiaries are subject to restrictions on extensions of
credit to executive officers, directors, certain principal stockholders, and
their related interests. These extensions of credit (1) must be made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with third parties
and (2) must not involve more than the normal risk of repayment or present
other unfavorable features.
Proposed Legislation For Bank Holding Companies And Banks
Certain proposals affecting the banking industry have been discussed from
time to time. Such proposals include: limitations on investments that an
institution may make with insured funds; regulation of all insured depository
institutions by a single regulator; limitations on the number of accounts
protected by the federal deposit insurance funds; and reduction of the
$100,000 coverage limit on deposits. It is uncertain which, if any, of the
above proposals may become law and what effect they would have on the Company
and its bank subsidiaries.
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<PAGE>
Several legislative proposals for reforming the financial services industry
have been submitted before the United States Congress, including the Financial
Services Act of 1999. Each of these proposals would expand the financial
services industry by, among other things, allowing banks to engage in
securities underwriting, insurance and other activities that are "financial"
in nature. The legislation would also repeal Glass-Steagall prohibitions on
bank holding companies owning firms that engage in securities underwriting,
and it would allow bank holding companies to engage in a broad range of
insurance activities. The Company is unable to predict whether any of this
legislation will be adopted or its potential impact on the Company's
operations.
61
<PAGE>
MANAGEMENT
Directors and Executive Officers
<TABLE>
<CAPTION>
Name Age Position(/1/)
- ---- --- -------------
<S> <C> <C>
George Gleason............ 45 Chairman of the Board and Chief Executive Officer
James Patridge............ 48 Vice Chairman and Director
Mark Ross................. 43 President and Director
Roger Collins............. 50 Director
Jerry Davis............... 59 Director
C. E. Dougan.............. 52 Director
Robert East............... 51 Director
Linda Gleason............. 45 Director
Porter Hillard............ 67 Director
Henry Mariani............. 60 Director
R. L. Qualls.............. 65 Director
Kennith Smith............. 68 Director
Danny Criner.............. 44 President, Bank of the Ozarks, nwa
Paul Moore................ 52 Chief Financial Officer
Margaret Oldner........... 47 Executive Vice President
Aubrey Avants............. 55 Executive Vice President, Bank of the Ozarks, wca
Susan Sisk Grobmyer....... 50 Executive Vice President, Bank of the Ozarks, wca
Darrel Russell............ 45 Executive Vice President, Bank of the Ozarks, wca
Randy Oates............... 55 Senior Vice President
</TABLE>
- --------
(1) Unless otherwise indicated, the individual serves in the same position
with both the Company and each of its bank subsidiaries.
George Gleason, Chairman and Chief Executive Officer. Mr. Gleason has served
the Company or one of its bank subsidiaries as Chairman, Chief Executive
Officer and/or President since 1979. He holds a B.A. in Business and Economics
from Hendrix College and a J.D. from the University of Arkansas.
James Patridge, Vice Chairman since December 1997. From 1985 to 1997 Mr.
Patridge served as Executive Vice President with NationsBank, N.A. (formerly
Boatmen's Arkansas, Inc. and Worthen Banking Corporation). He has served as a
director of the Company and its bank subsidiaries since December 1997. Mr.
Patridge holds a B.S.B.A. from the University of Arkansas, an M.S. in Finance
from Memphis State University and a J.D. from Oklahoma City University.
Mark Ross, President. Mr. Ross has served as President since 1986 and in
various capacities for one of the bank subsidiaries since 1980. He was elected
as a director of the Company in 1992. Mr. Ross holds a B.A. in Business
Administration from Hendrix College.
Roger Collins, Director since July 1997. Mr. Collins is Executive Vice
President, Chief Financial Officer and a director of Harp's Food Stores, Inc.,
a regional grocery chain headquartered in Springdale, Arkansas with 42 stores
located in Arkansas, Oklahoma and Missouri. He holds a B.A. from Rice
University and a M.B.A. from the University of Texas at Austin and is a C.P.A.
Jerry Davis, Director since September 1998. Mr. Davis is Chairman, President
and Chief Executive Officer for Affiliated Foods Southwest, Inc., a wholesale
grocery operation located in Little Rock, Arkansas.
C. E. Dougan, Director since July 1997. Mr. Dougan is co-owner of Mooney-
Dougan, Inc., which is engaged in residential real estate development,
construction and investments. Prior to 1997 he served 12 years as President
and Chief Executive Officer of Mercantile Bank of Crawford County (formerly
Peoples Bank & Trust Company of Van Buren and First National Bank of Crawford
County). Mr. Dougan has also served as a director of one of the bank
subsidiaries since February 1997.
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<PAGE>
Robert East, Director since July 1997. Mr. East is Chairman and President of
Robert East Company, an investment company, Chairman and Chief Executive
Officer of East-Harding, Inc., a general contracting firm, and Partner and
Treasurer of AMO Electrical Company, a distributor of electrical supplies. He
is also a partner or owner of numerous real estate projects and other
investments. Mr. East holds a B.A. in Finance and Administration from the
University of Arkansas.
Linda Gleason, Director since 1987. From 1992 to 1996 Ms. Gleason served as
the Company's Deputy Chief Executive Officer and Assistant Secretary. She has
attended Arkansas State University and the University of Arkansas at Little
Rock.
Porter Hillard, Director since July 1997. Mr. Hillard is a retired owner and
operator of various agricultural businesses since 1957. He has owned, operated
or managed various purebred and commercial cattle operations, a turkey
hatchery, feed mills, turkey grow-out operations and other businesses. Mr.
Hillard has also served as a director of one of the bank subsidiaries since
1967. He holds a B.S. in Agriculture from the University of Arkansas.
Henry Mariani, Director since July 1997. Mr. Mariani is Chairman and Chief
Executive Officer of Nite Lite Company, a manufacturing, wholesale and retail
mail order operation which specializes in hunting equipment and supplies. Mr.
Mariani holds a B.S. in Finance from Penn State University and is a C.P.A.
R. L. Qualls, Director since July 1997. Dr. Qualls is Vice Chairman of
Baldor Electric Company, a marketer, designer and manufacturer of electric
motors based in Fort Smith, Arkansas. From 1993 to 1998 he served as Chief
Executive Officer of Baldor. Dr. Qualls holds a B.A. and M.S. in Economics
from Mississippi State University and completed his doctoral work at Louisiana
State University.
Kennith Smith, Director since July 1997. Mr. Smith is retired and previously
served as the owner and operator of Smith Cattle Farm from 1984 until his
retirement in 1993. Prior to that time he was the co-owner of Mulberry Lumber
Company. Mr. Smith has also served as a director of one of the bank
subsidiaries since 1977.
Danny Criner, President of Bank of the Ozarks, nwa since 1990. Mr. Criner
received a B.S.B.A. in Banking and Finance from the University of Arkansas.
Paul Moore, Chief Financial Officer since 1995. From December 1989 to 1995
Mr. Moore served as secretary, secretary/treasurer or director of eight
privately held companies under common ownership of Frank Lyon Jr. and family.
Such companies engaged in diverse activities ranging from real estate to
agricultural to banking. He is a C.P.A. and received a B.S.B.A. in Banking,
Finance and Accounting from the University of Arkansas.
Margaret Oldner, Executive Vice President since October 1997. From January
1991 to March 1997 Ms. Oldner was Senior Vice President and Chief Financial
Officer for Mercantile Bank of Arkansas (formerly Twin City Bank) in North
Little Rock. She is a C.P.A. and received a B.S. in Business Administration
from California State University at Fullerton.
Aubrey Avants, Executive Vice President, Trust of Bank of the Ozarks, wca
since June 1998. From 1993 to 1998 Mr. Avants served as Senior Vice President,
Trust Manager for First Bank of Arkansas, Jonesboro, Arkansas, and Senior Vice
President, Trust for First Commercial Bank, Memphis, Tennessee. Mr. Avants
received an MBA from the University of Tennessee and his undergraduate degree
in Finance from the University of Arkansas.
Susan Sisk Grobmyer, Executive Vice President of Bank of the Ozarks, wca
since May 1997. Ms. Grobmyer joined Bank of the Ozarks, wca in March 1997 as
Senior Vice President. She previously served as a Senior Vice President of
Commercial Loans for Pulaski Bank from 1995 to 1997 and Twin City Bank (now
Mercantile Bank of Arkansas) from 1978 to 1995. Ms. Grobmyer attended the
University of Arkansas at Monticello.
63
<PAGE>
Darrel Russell, Executive Vice President of Bank of the Ozarks, wca since
May 1997. From 1992 to 1997 Mr. Russell served as Senior Vice President of
Bank of the Ozarks, wca. He received a B.S.B.A. in Banking and Finance from
the University of Arkansas.
Randy Oates, Senior Vice President, Marketing since 1996. From 1992 to 1996
he served as Marketing Director for Commercial National Bank, Shreveport,
Louisiana. He received a B.S.B.A. in Marketing from the University of
Arkansas.
Linda Gleason is the wife of George Gleason. Except for the foregoing, no
family relationships exist among any of the above named persons.
Board of Directors
The Company's Board of Directors is comprised of one class of directors,
elected annually. Each director serves a term of one year or until his or her
successor is duly elected or qualified. The number of directors is currently
set at 12, and the Board of Directors has the power to fix or change the
number of directors by resolution and without any further action of the
stockholders in accordance with the Company's bylaws. The Company's Amended
and Restated Articles of Incorporation contain a provision that allows the
Board of Directors, by resolution and without any further action by the
stockholders, to classify or stagger the board into two or three groups, as
equal in number as possible, with the terms of office of each group of
directors expiring one, two or three years after their election to the Board,
as applicable. All directors serve on the board of directors of the Company
and each bank subsidiary.
Committees of the Board of Directors
During 1998 the Board of Directors met on 12 occasions. Each member of the
Board, other than Mr. Davis who was appointed by the Board on September 15,
1998, was elected by stockholders at the 1998 annual meeting. In 1998 each
Director attended at least 75% or more of the total of meetings of the Board
and committees of the Board during the period in which he or she served. The
Company presently does not have a standing nominating committee, and the Board
of Directors nominates persons for director. The Board will consider
suggestions by stockholders for names of nominees to the Board of Directors
for the 2000 Annual Meeting, provided that such suggestions are made in
writing and delivered to the Secretary of the Company on or before December 1,
1999. The following is a brief description of the functions of the Company's
committees.
Audit Committee. The Audit Committee met 11 times in 1998. The Audit
Committee makes recommendations concerning the engagement of the Company's
independent auditors, reviews the terms of their engagement, reviews the
auditors' report and all related reports and matters, coordinates appropriate
action in response thereto and reviews the adequacy of the Company's internal
controls. The Audit Committee also receives and reviews the monthly reports
and presentations of the loan review and compliance officers and the internal
auditor, provides general oversight and direction for their work, and
coordinates corrective action as appropriate. Roger Collins, as Chairman,
Robert East and Porter Hillard served on the Audit Committee during 1998 and
will continue to serve on such committee in 1999. None of these individuals
was employed during or prior to 1998 as officers or employees of the Company
or its subsidiaries.
Compensation and Personnel Committee. The Compensation and Personnel
Committee met eight times in 1998. The Compensation and Personnel Committee
considers, approves and reviews all salaries and bonuses for officers and
employees, recommends to the Board of Directors the election of officers,
reviews additions and terminations of personnel, oversees administration of
the employee benefit plans and programs, including the Company's stock option
plans, and oversees staff training and educational programs. Henry Mariani, as
Chairman, Porter Hillard, and Kennith Smith served on the Compensation and
Personnel Committee during 1998 and will continue to serve on such committee
in 1999. None of these individuals was employed during or prior to 1998 as
officers or employees of the Company or its subsidiaries.
64
<PAGE>
Trust Committee. The Trust Committee met 11 times in 1998. The operation of
the bank's trust department and the administration of its trust accounts are
overseen by the Trust Committee. R. L. Qualls, as Chairman, Kennith Smith and
Linda Gleason served on the Trust Committee during 1998 and will continue to
serve on such committee in 1999.
Loan Committees. The Loan Committees met 31 times in 1998. Loan Committees
have been established for each of the three geographic divisions of the
Company and consist of both board members and executive officers. Such Loan
Committees have responsibility for reviewing and approving all loans and
aggregate loan relationships in excess of $1,000,000 and for administering all
other aspects of the lending function within each division. The following
persons served on the Company's Loan Committees during 1998 and will continue
to serve on such committees in 1999:
<TABLE>
<CAPTION>
Western Central Northern
------- ------- --------
<S> <C> <C>
C. E. Dougan, Chairman Robert East, Chairman James Patridge, Chairman
George Gleason George Gleason Danny Criner
Porter Hillard Linda Gleason George Gleason
James Patridge Henry Mariani George Landrum
R. L. Qualls James Patridge Louis Melton
Joe Willis
Bill Witty
</TABLE>
Directors Loan Review Committee. On February 17, 1998 the Board established
the Directors Loan Review Committee to increase the Board's oversight of the
Company's lending activities. The Loan Review Committee met nine times in
1998. The Loan Review Committee, among other things, reviews reports of new
loans, loan commitments over $100,000, loan loss activity, past due and
problem loans, asset quality and other matters as appropriate. James Patridge,
as Chairman, C. E. Dougan, Henry Mariani, Jerry Davis and George Gleason
served on this committee during 1998 and will continue to serve on this
committee in 1999.
ALCO and Investment Committee. The ALCO and Investment Committee met eight
times in 1998. Management of the asset/liability (interest rate risk)
position, liquidity and investment portfolio is overseen by the ALCO and
Investment Committee. Paul Moore, as Chairman, Mark Ross, Danny Criner, Randy
Oates and Dan Rolett served on the ALCO and Investment Committee during 1998
and together with George Gleason will serve on this committee in 1999.
Director Compensation
Non-employee directors are paid a monthly retainer fee of $500 and a fee of
$500 for attending each regular and special board meeting. In addition,
nonemployee directors are paid a fee of $100 for attendance at each meeting of
a committee of the Board of Directors. Additionally, under the Company's Non-
Employee Director Stock Option Plan, each non-employee director is
automatically granted, on the date a director's term of office commences, and
each year thereafter on the day following the annual meeting of stockholders
as long as such director's term as a director is continuing for the ensuing
year, an option to acquire 1,000 shares of common stock at an exercise price
equal to the fair market value of the common stock on the date of grant.
Effective April 22, 1998 the Company granted options to its eight non-employee
directors to purchase 1,000 shares each of common stock at an exercise price
of $34.13 per share. An additional non-employee director joined the Board and
was awarded an option for 1,000 shares at an exercise price of $22.31 on
September 15, 1998. All options granted to non-employee directors become
exercisable upon grant. The Company's officers are not compensated for their
service as directors.
Limitations on Director and Officer Liability
Article Tenth of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall, to the full extent permitted by
Section 4-27-850 of the Arkansas Business Corporation Act, indemnify all
persons whom it may indemnify pursuant thereto.
65
<PAGE>
Article Ninth of the Company's Amended and Restated Articles of
Incorporation provides that the Company's directors will not be personally
liable to the Company or any of its stockholders for monetary damages
resulting from breaches of their fiduciary duty as directors except (a) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 4-27-
833 of the Arkansas Business Corporation Act, as the same exists or hereafter
may be amended, (d) for any transactions from which the director derived an
improper personal benefit, or (e) for any act, omission, transaction, or
breach of a director's duty creating any third party liability to any person
or entity other than the Company or stockholder.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
Executive Compensation
The following table shows for the years indicated all cash and certain other
compensation paid or to be paid by the Company to the Chief Executive Officer
and its other executive officers whose aggregate salary and bonus exceeded
$100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ---------------------
Name & Principal Securities Underlying All Other
Position Year Salary Bonus Options(#) Compensation(/1/)
- ---------------- ---- ------------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
George Gleason(/2/)..... 1998 $ 278,958 $ -- 18,500(/3/) $4,870
Chairman and Chief 1997 372,556 45,297 12,200(/3/) 5,899
Executive Officer 1996 405,900 200,000 -- 4,636
James Patridge(/4/)..... 1998 $ 115,000 $ -- 14,500(/3/) $2,479
Vice Chairman
Mark Ross............... 1998 $ 115,000 $ -- 4,500(/3/) $2,309
President 1997 97,847 19,569 4,200(/3/) 3,526
1996 92,782 22,042 -- 4,047
Jean Arehart(/5/)....... 1998 $ 75,000 $ 106,493 -- $1,405
Executive Vice 1997 73,274 55,988 3,600(/3/) 2,177
President--
Bank of the Ozarks, wca 1996 37,917 2,275 -- --
</TABLE>
- --------
(1)Represents employer matching contributions under the Company's 401(k) Plan
for 1998.
(2) Mr. Gleason's salary and bonus is determined pursuant to a written
employment contract. For a description of this agreement, see "--
Employment Agreement with Mr. Gleason."
(3)Represents option grants under the Company's Stock Option Plan for
employees. See "--Option Grants in Last Fiscal Year."
(4)Mr. Patridge commenced employment with the Company on December 31, 1997.
(5)Ms. Arehart retired from the Company in April 1999.
Employment Agreement with Mr. Gleason
Mr. Gleason's salary and bonus is determined pursuant to a written
employment contract which became effective on July 17, 1997, was amended on
September 16, 1997, and amended again on July 21, 1998. The agreement
continues through December 31, 2000. The agreement, as amended, reduced Mr.
Gleason's annual base salary effective July 21, 1998 to $225,000, subject to
an annual cost of living adjustment and an annual bonus not to exceed 1% of
the Company's net income for each fiscal year. This agreement is in addition
to any other compensation that may be received by Mr. Gleason under employee
benefit plans or reimbursement arrangements.
66
<PAGE>
Stock Option Plan
The Company's Board of Directors and stockholders adopted a Stock Option
Plan in 1997. The purpose of the Stock Option Plan is to provide an additional
incentive to executive officers and employees to put forth maximum efforts for
the success of the Company's business and to serve the best interests of the
stockholders. Under the Stock Option Plan, the Compensation and Personnel
Committee or the full Board of Directors of the Company may grant executive
officers and key employees options to purchase shares of common stock at
prices not less than the fair market value of such shares on the date of
grant. Additionally, the Compensation and Personnel Committee or the full
Board of Directors will determine, among other things, the number of shares
subject to option grants and the terms and conditions of such grants,
including the dates upon which such options vest and become exercisable and
provisions relating to termination of such options. This Stock Option Plan
provides for the issuance of up to 285,000 shares of common stock, and options
relating to 181,050 shares of common stock had been granted and remained
outstanding under this plan at December 31, 1998. For information concerning
grants of options under the Director Option Plan, see "--Director
Compensation."
Options Grants in Last Fiscal Year
The following table sets forth information with respect to the named
executive officers concerning options granted in the last fiscal year and
their potential realizable value:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation for
Individual Grants Option Term(/1/)
------------------------------------------------- -----------------
% of Total
Number of Options Granted Exercise or
Securities Underlying to Employees in Base Price Expiration
Name Options Granted Fiscal Year(%) ($/Sh) Date 5% 10%
- ---- --------------------- --------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
George Gleason.......... 10,000 9.6% $27.75 (/2/) $133,035 $320,730
8,500 8.2% 21.88 9/22/03 51,382 113,432
James Patridge.......... 10,000 9.6% $25.13 (/2/) $120,416 $289,422
4,500 4.3% 21.88 9/22/03 27,202 60,097
Mark Ross............... 4,500 4.3% $21.88 9/22/03 $ 27,202 $ 60,097
</TABLE>
- --------
(1) As required by the SEC rules and regulations, potential realizable values
are based on the assumption that the common stock price appreciates at the
annual rates shown compounded annually from the date of the grant until
the end of the option term and is not intended to forecast appreciation in
stock price.
(2) Mr. Gleason's options expire in the amount of 8,500, 3,300, 3,300 and
3,400 shares on each of September 22, 2003 and July 21, 2005, 2006 and
2007, respectively; and Mr. Patridge's options expire in installments of
4,500, 3,300, 3,300 and 3,400 shares on each of September 22, 2003 and
January 20, 2005, 2006 and 2007, respectively.
67
<PAGE>
The following table sets forth information with respect to the named
executives concerning exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End FY-End(/1/)
------------------------- -------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George Gleason.......... -- -- -- 30,700 -- $94,563
James Patridge.......... -- -- -- 14,500 -- 5,063
Mark Ross............... -- -- -- 8,700 -- 34,463
Jean Arehart............ -- -- -- 3,600 -- 25,200
</TABLE>
- --------
(1) The dollar amounts shown represent the product of the number of shares
purchasable upon exercise of the related options times the difference of
the average of the high and low sales prices reported on December 31, 1998
($23.00) and the purchase price per share payable upon such exercise
applicable to each in-the-money option.
401(k) Plan
The Company established the 401(k) Retirement Savings Plan in 1997. This
plan is a qualified retirement plan with a salary deferral feature designed to
qualify under Section 401 of the Internal Revenue Code of 1986. The 401(k)
Plan permits all employees of the Company to defer a portion of their eligible
compensation on a pre-tax basis subject to certain maximum amounts. With the
January 1999 approval by the Board of Directors to merge the ESOP with the
401(k) Plan, the Company's matching contributions will increase in 1999 up to
a maximum of three percent of the participant's salary per year. Additionally,
in order to encourage employees to invest in the common stock the Company has
amended the 401(k) Plan to include a Company common stock fund as one of its
investment alternatives.
CERTAIN TRANSACTIONS
Each of the Company's bank subsidiaries has had, in the ordinary course of
business, banking transactions with certain of its officers and directors and
with certain officers and directors of the Company. All loan transactions with
officers and directors of the Company, its bank subsidiaries, and their
related and affiliated parties, have been in the ordinary course of business,
on substantially the same terms, including interest rates and collateral as
those prevailing for comparable transactions with other loan customers of the
Company, and have not included more than the normal risk of collectibility
associated with the Company's other banking transactions or other unfavorable
features.
The Company has entered into contracts with East-Harding, Inc., of which
Robert East is co-owner, Chairman and Chief Executive Officer, for the
construction of the Company's facilities in Little Rock, Fort Smith and
Harrison, Arkansas. In 1998 the Company paid East-Harding, Inc. approximately
$7.4 million pursuant to these contracts.
68
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of February 15, 1999,
for (1) each person who is known by the Company to beneficially own more than
5.0% of the outstanding shares of common stock, (2) each director, (3) each
executive officer named in the Summary Compensation Table and (4) all of the
current directors and executive officers of the Company as a group. This table
is based upon information supplied by officers, directors and principal
stockholders and a review of information on file with the SEC.
<TABLE>
<CAPTION>
Name Shares Owned(/1/) Percentage of Class
---- ----------------- -------------------
<S> <C> <C>
George Gleason(/2/)...................... 1,273,602 33.7
401(k) Plan.............................. 260,300 6.9
James Patridge........................... 2,023 *
Mark Ross(/3/)........................... 114,219 3.0
Linda Gleason(/4/,/5/)................... 39,852 1.1
Roger Collins(/4/,/6/)................... 3,750 *
Jerry Davis(/7/)......................... 6,000 *
C. E. Dougan(/4/)........................ 2,830 *
Robert East(/4/,/8/)..................... 10,900 *
Porter Hillard(/4/)...................... 2,000 *
Henry Mariani(/4/)....................... 21,000 *
R. L. Qualls(/4/)........................ 2,000 *
Kennith Smith(/4/,/9/)................... 37,315 *
Jean Arehart............................. 5,744 *
All directors and executive officers as a
group
(20 persons)............................ 1,541,900 40.8
</TABLE>
- --------
* Less than one percent.
(1) Includes beneficial ownership of shares with respect to which voting or
investment power may be deemed to be directly or indirectly controlled.
Accordingly, the shares in the foregoing table include shares owned
directly, shares held in such person's accounts under the 401(k) Plan,
shares underlying presently exercisable options granted pursuant to the
Company's stock option plans, shares owned by certain of the individual's
family members and shares held by the individual as a trustee or other
similar capacity, unless otherwise described below.
(2) The amount includes (a) 210,700 shares owned of record by a trust of which
Mr. Gleason is sole trustee and has a 25% life income interest, (b) 28,000
shares owned of record by a charitable trust for which Mr. Gleason is a
co-trustee with Ms. Gleason, (c) 11,852 shares owned directly by Ms.
Gleason, and (d) 400 shares owned by the minor children of Mr. Gleason.
(3) Includes (a) 36,300 shares owned of record by a trust for the benefit of
Mr. Ross and his children and for which Mr. Ross maintains a life interest
only and (b) 25,000 shares owned by Mr. Ross' spouse.
(4) Includes exercisable options for 2,000 shares granted under the Company's
Non-Employee Director Stock Option Plan.
(5) Includes 28,000 shares owned of record by a charitable trust for which Ms.
Gleason is a co-trustee with Mr. Gleason.
(6) Includes 500 shares held by spouse.
(7) Includes exercisable options for 1,000 shares granted under the Company's
Non-Employee Director Stock Option Plan.
(8) Includes 600 shares held by children of Mr. East.
(9)Includes 692 shares held by spouse.
69
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
Definitions of Material Agreements
For purposes of this prospectus:
. the "Indenture" means the Subordinated Indenture, dated as of ,
1999, as amended and supplemented from time to time, between the Company
and FMB Trust Company, National Association, as the indenture trustee,
under which the subordinated debentures will be issued,
. the "Trust Agreement" means the Amended and Restated Trust Agreement,
under which the preferred securities and the common securities will be
issued, dated as of , 1999, as amended and supplemented from time to
time, among the Company, as Depositor, First Omni Bank, National
Association, as the Delaware trustee, FMB Trust Company, National
Association, as property trustee, and the administrative trustees named
therein,
. the "Guarantee" means the Guarantee Agreement relating to the guarantee
of the Company, between the Company (the "Guarantor") and FMB Trust
Company, National Association, as the guarantee trustee, on behalf of
the holders of the preferred securities, and
. the "Expense Agreement" means the Agreement as to expenses and
liabilities between the Company and the Trust.
The preferred securities and the common securities will be issued pursuant
to the terms of the Trust Agreement, which is qualified as an indenture under
the Trust Indenture Act of 1939 (the "Trust Indenture Act"). This summary is
not complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Trust Agreement, including the definitions
portion of the Trust Agreement, and the Trust Indenture Act. The form of each
of the agreements referenced above has been filed as an exhibit to the
registration statement, which is on file with the SEC. This prospectus is a
part of the registration statement. See "Where You Can Find More Information."
General
The administrative trustees on behalf of the Trust will issue the preferred
securities and the common securities (collectively, the "trust securities").
The Company will own 100% of the common securities and you may purchase the
preferred securities. The preferred securities will represent undivided
preferred beneficial interests in the assets of the Trust and each holder will
be entitled to a preference in respect of certain distributions by the Trust
and amounts payable on redemption or liquidation of the Trust. Otherwise, the
preferred securities will generally rank the same as the common securities.
The preferred securities, as well as the subordinated debentures, are
scheduled to mature on , 2029.
The property trustee will hold the subordinated debentures which have been
issued in trust for the benefit of the holders of trust securities. The
guarantee will be subordinated to most of the Company's other obligations and
liabilities. The guarantee will not provide for the payment of distributions
(as described below) or amounts payable on redemption of the preferred
securities if the Trust does not have funds available to make such payments.
See "Description of Guarantee."
If the Company does not make required payments on the subordinated
debentures held by the Trust, taking into account the Company's right to defer
such payments for up to 20 consecutive quarters, the Trust will be unable to
pay any distributions to you. In such event, you may make a claim directly
against the Company to enforce payment of the amounts due to you. See
"Description of the Subordinated Debentures--Enforcement of Certain Rights by
Holders of Preferred Securities."
70
<PAGE>
Distributions
Distributions on the preferred securities will be fixed at an annual rate of
% of the liquidation amount of $10 per preferred security. Unpaid
distributions that are past due will accumulate additional interest at an
annual rate of % of the unpaid distributions, compounded quarterly. The term
"distribution" includes any additional amounts payable in respect of
distributions unless otherwise stated.
Distributions on the preferred securities:
. will be cumulative;
. will accumulate from , 1999, the date of initial issuance of the
preferred securities; and
. will be payable quarterly in arrears on March 31, June 30, September 30,
and December 31 in each year, commencing June , 1999.
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 a distribution is payable is not a Business Day, the payment of that
distribution will generally be made on the next Business Day (and without any
additional interest). "Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in the State of Delaware 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.
The Company may defer the payment to the Trust of interest on the
subordinated debentures at any time for one or more extension periods (each an
"Extension Period"). However, the Company may not defer any payments if it is
in default under the Indenture. No Extension Period may extend beyond the
maturity date of the subordinated debentures. If the Company elects to defer
the payment of interest, then quarterly distributions on the preferred
securities will be deferred by the Trust during the Extension Period. The
distributions will continue to accumulate, with additional interest, generally
at an annual rate of % compounded quarterly, during the Extension Period.
During any Extension Period the Company may not:
. declare or pay any dividends, make any distribution, or redeem,
purchase, acquire or make a liquidation payment on any of its common
stock; and
. make any payment of interest, principal or premium on or repay,
repurchase or redeem any debt securities issued by it (or the Trust)
that rank equal or junior to the subordinated debentures (of which there
are none at the time of this printing), or make any payments on any
guarantee by the Company of any of its subsidiaries if such guarantee
ranks equal or junior to the subordinated debenture.
The Extension Period restrictions do not apply to:
. repurchases, redemptions or other acquisitions of shares of the
Company's common stock in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any
one or more employees, officers or directors, or a dividend reinvestment
or shareholder stock purchase plan;
. any declaration of a dividend in connection with any shareholders'
rights plan, or the issuance of rights, stock or other property under
any shareholders' rights plan, or the redemption or repurchase of rights
pursuant to the plan;
. dividends or distributions in shares of common stock; or
. payments under the guarantee.
When all accumulated amounts due to you are paid during an Extension Period,
the Extension Period will terminate. However, the Company may begin another
Extension Period under the same terms outlined above.
71
<PAGE>
There is no limit on the number of times the Company can elect to begin an
Extension Period. In no way may any single Extension Period extend beyond 20
consecutive calendar quarters.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
subordinated debentures.
Redemption
If the Company repays or redeems some or all of the subordinated debentures,
whether at maturity or upon earlier redemption, the property trustee will
apply the proceeds from the repayment or redemption to redeem the same
proportionate amount of preferred securities and common securities. The
Company will make this redemption not less than 30 nor more than 60 days after
the notice of a date of redemption (the "Redemption Date"), at the Redemption
Price (as defined below). See "Description of the Subordinated Debentures--
Redemption."
If less than all the subordinated debentures are to be repaid or redeemed,
then the aggregate liquidation amount of preferred and common securities to be
redeemed will be allocated approximately 3% to the common securities and 97%
to the preferred securities, except in the case of an event of default under
the Indenture. See "--Subordination of Common Securities."
The Company will have the right, subject to Federal Reserve approval, if
then required, to redeem the subordinated debentures:
. at any time on or after , 2004 in whole or in part from time to time;
or
. prior to , 2004 in whole, but not in part, at any time within 90
days following the occurrence and continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event, each as defined
below. See "Description of the Subordinated Debentures--Optional
Redemption."
Selected Definitions
"Additional Sums" means the additional payments the Company is required by
the Indenture to make under the subordinated debentures to cover certain
charges imposed upon the Trust so that the funds available to the Trust for
payment of distributions will not be reduced. An example of the Additional
Sums could be any additional taxes, duties and other governmental charges that
the Trust may incur.
"Capital Treatment Event" means that, in the reasonable determination of the
Company, as a result of:
. any amendment to, or change, including any proposed change, in
applicable laws or regulations or official interpretations thereof or
policies with respect thereto; or
. any official or administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment,
change, pronouncement or decision is announced or is effective after the
date of this prospectus,
there is more than an insubstantial risk that the preferred securities will
not then constitute Tier 1 capital of the Company for purposes of the
capital adequacy guidelines of federal banking regulators (subject to the
limitation imposed by the Federal Reserve that proceeds of the preferred
securities will qualify for Tier 1 capital up to an amount not in excess of
25% of the Company's total Tier 1 capital).
"Investment Company Event" means that the Company or the Trust has received
an opinion of counsel, who may be an employee of or counsel to the Company,
experienced in such matters that, as a result of the occurrence of a change,
including any announced prospective change, in law or regulation or a written
change, including any announced prospective change, in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority on or after the date of this prospectus, there
is more than an insubstantial risk that the Trust is or will be considered an
"investment company" that is
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required to be registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act").
"Liquidation Amount" means the stated amount of $10 per trust security. The
liquidation amount is the amount that you are entitled to receive if the Trust
is terminated at or prior to the maturity date and its assets are distributed
to the holders of its securities. You are entitled to receive this amount from
the assets of the Trust for distribution, after it has paid liabilities owed
to its creditors, if the Trust has sufficient funds to pay this amount.
"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 holders of trust securities.
"Tax Event" means that the Company and the regular trustees, or, if the
Trust has been terminated at the time, an appropriate representative of the
holders of the subordinated debentures, have received an opinion of counsel
experienced in such matters, who may be an employee of or counsel to the
Company, to the effect that, as a result of:
. any amendment to, or change, including any announced prospective change,
in the laws, or any regulations under the laws, of the United States or
any political subdivision or taxing authority affecting taxation;
. any judicial decision or official administrative pronouncement,
including any announced prospective change;
which amendment or change is effective, or which pronouncement or decision
is announced, in each case, on or after the date of this prospectus, there is
more than an insubstantial risk that:
. The Trust is, or will be within 90 days of the date of the opinion of
counsel, subject to United States federal income tax with respect to
income accrued or received on the subordinated debentures;
. The Trust is, or will be within 90 days of the date of the opinion of
counsel, subject to more than a de minimis amount of taxes, duties or
other governmental charges; or
. interest payable to the Trust on the subordinated debentures is not, or
within 90 days of the date of the opinion of counsel will not be,
deductible, in whole or in part, by the Company for United States
federal income tax purposes.
If any event described in clause (1) or (2) of the definition of "Tax Event"
above has occurred and is continuing and the Trust is the holder of all of the
subordinated debentures, the Company will pay Additional Sums, if any, on the
subordinated debentures (other than Additional Amounts with respect to
withholding taxes).
Distribution of Subordinated Debentures
The Company may at any time elect to dissolve the Trust and, after it has
paid all of the liabilities of creditors of the Trust as provided by
applicable law, cause the subordinated debentures to be distributed to you.
However, the Company may only dissolve the Trust if it has received prior
approval of the Federal Reserve, if such approval is then required. If the
Company dissolves the Trust and distributes the subordinated debentures to
you:
. the preferred securities will no longer be outstanding;
. the Depositary or its nominee, as the record holder of the preferred
securities, will, upon the distribution of the subordinated debentures,
receive a registered global certificate or certificates representing the
subordinated debentures; and
. any certificates representing preferred securities not held by the
Depositary or its nominee will be deemed to represent the subordinated
debentures having a principal amount equal to the liquidation
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amount of the preferred securities, accruing interest at the rates
provided in the subordinated debentures from the last Distribution Date
that occurred for the preferred securities until such certificates are
surrendered.
If the subordinated debentures are distributed, the Company will use its
best efforts to list them on the Nasdaq National Market in place of the
preferred securities.
Until a holder of any such preferred securities certificates surrenders them
to the administrative trustees or their agent for replacement by certificates
representing an equal amount of subordinated debentures, no payments of
principal or interest will be made to such holder with respect to such
subordinated debentures.
Redemption Procedures
The Trust may not redeem fewer than all of the outstanding preferred
securities unless it has paid all accumulated and unpaid distributions on all
preferred securities for all quarterly distribution periods terminating on or
prior to the date of redemption. The Trust will only redeem the preferred
securities if the Company has redeemed the subordinated debentures. The Trust
may redeem preferred securities only in an amount equal to the funds it has on
hand and legally available to pay the Redemption Price. See "--Subordination
of Common Securities" and "Description of Guarantee."
Unless there is a payment default, additional interest will stop accruing on
those preferred securities called for redemption on the date they are called
for redemption.
The property trustee will give you notice of the redemption at least 30 but
not more than 60 days before the date fixed for redemption. If notice of
redemption is given, then, by 12:00 noon, New York City time, on the date of
redemption, if the funds are available for payment, the property trustee will,
for preferred securities held in book-entry form:
. deposit with The Depository Trust Company ("DTC") funds sufficient to
pay the Redemption Price; and
. give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of the preferred securities.
With respect to preferred securities not held in book-entry form, if funds
are available for payment, the property trustee will:
. deposit with the paying agent for the preferred securities funds
sufficient to pay the Redemption Price; and
. give such paying agent irrevocable instructions and authority to pay the
Redemption Price to the holders of preferred securities upon surrender
of their certificates evidencing the preferred securities.
Notwithstanding the foregoing, distributions payable on or prior to the date
of redemption for any preferred securities called for redemption will be
payable to the holders on the relevant record dates.
Once notice of redemption is given and funds are deposited as required, then
all rights of the holders of preferred securities called for redemption will
cease, except the right to receive the Redemption Price, but without interest
after the date of redemption. At that time, those preferred securities will
cease to be outstanding.
Payment of the Redemption Price on the preferred securities and any
distribution of subordinated debentures to holders of preferred securities
will be made to the applicable record holders on the relevant record date,
which date will be one Business Day prior to the relevant redemption date or
liquidation date, as applicable; provided, however, that in the event that any
preferred securities are not in book-entry form, the relevant record date for
such preferred securities will 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 will be no more than 45 days before the
liquidation date.
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If any date fixed for redemption is not a Business Day, then payment of the
Redemption Price will be made on the next day that is a Business Day, without
any interest or other payment for the delay. If the next Business Day falls in
the next calendar year, the payment will instead be made on the immediately
preceding Business Day.
If payment of the Redemption Price for the preferred securities called for
redemption is improperly withheld or refused and not paid, either by the Trust
or by the Company under the guarantee, then distributions on those preferred
securities will continue to accumulate at the then applicable rate, from the
date of redemption to the date of actual payment. In this case, the actual
payment date will be the date fixed for redemption for purposes of calculating
the Redemption Price.
The Company or its affiliates may at any time and from time to time purchase
outstanding preferred securities, by tender, in the open market or by private
agreement, and may resell preferred securities.
If the Trust plans to redeem less than all the preferred securities and
common securities, then the aggregate liquidation amount of preferred and
common securities to be redeemed will be allocated approximately 3% to the
common securities and 97% to the preferred securities, except if an Event of
Default has occurred. In such case, holders of preferred securities will be
paid first. See "--Subordination of the Common Securities" immediately below
for a more complete discussion. The property trustee will select the
particular preferred securities to be redeemed on this pro rata basis not more
than 60 days before the date of redemption by any method the property trustee
deems fair and appropriate, or if the preferred securities are then held in
book-entry form, in accordance with DTC's customary procedures.
Subordination of Common Securities
Payment of distributions on, and the Redemption Price of, the preferred
securities and common securities will be made on a proportionate basis, based
on the aggregate Liquidation Amounts of the preferred securities and common
securities. However, if a Debenture Event of Default has occurred and is
continuing, then no payment of any distribution will be made on any of the
common securities, unless all unpaid amounts due on the preferred securities
shall have been paid in full or provided for, as appropriate.
In the case of any Event of Default under the Trust Agreement resulting from
a Debenture Event of Default, the Company as the holder of the common
securities will be deemed to have waived any right to act upon the Event of
Default under the Trust Agreement until the effects of all Events of Default
under the Trust Agreement regarding the preferred securities have been cured,
waived or otherwise eliminated. Until that time, the property trustee shall
act solely on behalf of the holders of the preferred securities.
Liquidation Distribution upon Dissolution
The Company will have the right at any time to dissolve the Trust, and after
paying all the expenses and liabilities of the Trust, distribute the
subordinated debentures to you. However, the Company may only dissolve the
Trust if we have received prior approval of the Federal Reserve, if such
approval is then required. See "--Distribution of Subordinated Debentures"
above.
In addition, the Trust Agreement states that the Trust will dissolve:
. on the expiration of the term of the Trust, which currently expires on
, 2029;
. upon the bankruptcy of the Company;
. upon the filing of a certificate of dissolution or its equivalent of the
Company;
. upon our delivery of a written direction to the property trustee to
dissolve the Trust, which we may do in our discretion; or
. upon entry of a court order for the dissolution of the Trust.
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In the event of a dissolution, after the Trust pays all amounts owed to its
creditors, the holders of the preferred securities and common securities
issued by the Trust will be entitled to receive:
. cash, if the dissolution arises from redemption of the subordinated
debentures, equal to the aggregate Liquidation Amount of each preferred
security and common security specified in this prospectus, plus
accumulated and unpaid distributions to the date of payment; or
. subordinated debentures, if the dissolution does not arise from
redemption of the subordinated debentures, in an aggregate principal
amount equal to the aggregate liquidation amount of the preferred
securities and common securities of the holders to whom such
subordinated debentures are distributed.
If the Trust cannot pay the full amount due on its preferred securities and
common securities because insufficient assets are available for payment, then
the amounts payable by the Trust on its preferred securities and common
securities shall be paid pro rata. However, if a Debenture Event of Default
has occurred, the total amounts due on such preferred securities will be paid
before any distribution on such common securities.
Under current United States federal income tax law and interpretations and
assuming, as expected, the Trust is treated as a grantor trust, a distribution
of the subordinated debentures should not be a taxable event to you. 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
you. See "United States Federal Income Tax Consequences."
If the Company elects to liquidate the Trust and cause the subordinated
debentures to be distributed to you in liquidation of the Trust, the Company
will continue to have the right to shorten the maturity of the subordinated
debentures, subject to certain conditions. See "Description of the
Subordinated Debentures--Option to Accelerate Maturity."
Events of Default; Notice
The following events constitute an Event of Default (an "Event of Default")
under the terms of the Trust Agreement with respect to the preferred
securities and common securities:
. the occurrence of a Debenture Event of Default under the Indenture (see
"Description of Subordinated Debentures--Debenture Events of Default");
or
. default by the Trust in the payment of any distribution when it becomes
due and payable (other than during an Extension Period), and
continuation of such default for a period of 30 days; or
. default by the Trust in the payment of any Redemption Price of any trust
security when it becomes due and payable.
The property trustee must give notice of any uncured or unwaived Event of
Default to you, to the Company and to the administrative trustees. This notice
must be given within five Business Days after the property trustee actually
knows of the Event of Default. The Company and the administrative trustees are
required to file annual certificates with the property trustee declaring
whether it and they are in compliance with all the conditions and covenants
applicable to it and them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
preferred securities will have a preference over the common securities upon
dissolution of the Trust as described above. See "--Liquidation Distribution
upon Dissolution." Upon a Debenture Event of Default, unless the principal of
all the 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 subordinated debentures then outstanding may declare all of the
subordinated debentures to be due and payable immediately by giving the
Company written notice of that fact (and to the property trustee, if notice is
given by holders of the subordinated debentures). If the property trustee or
the holders of the subordinated debentures fail to declare the principal of
all of the subordinated debentures due and payable upon a Debenture Event of
Default, the holders of at least 25% in liquidation amount of the preferred
securities then outstanding will have the right to declare the subordinated
debentures immediately due
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and payable. In either event, payment of principal and interest on the
subordinated debentures will remain subordinated to the extent provided in the
Indenture. In addition, holders of the preferred securities have the right in
certain circumstances to bring a Direct Action (as defined below). See
"Description of the Subordinated Debentures--Enforcement of Certain Rights by
Holders of Preferred Securities."
Removal of Trustees
As the holder of the common securities, the Company may at any time remove
any trustee, unless a Debenture Event of Default has occurred and is
continuing. If a Debenture Event of Default has occurred and is continuing,
the property trustee and the Delaware trustee may be removed at such time by
the holders of a majority in liquidation amount of the outstanding preferred
securities. In no event will the holders of the preferred securities have the
right to vote to appoint, remove or replace the administrative trustees. The
Company as the holder of the common securities has the sole power to remove
the administrative trustee. The resignation or removal of any trustee and the
appointment of a successor trustee is effective only on 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 has occurred and is continuing, the Company and
the administrative trustees have the right to appoint co-trustees or a
separate property trustee. The Company may appoint these additional trustees
in order to meet the requirements of the Trust Indenture Act or the state laws
of any jurisdiction where property of the Trust may be located. Our
appointment of any additional trustees will be subject to provisions of the
Trust Agreement. In case a Debenture Event of Default has occurred and is
continuing or if the Company and the administrative trustees refuse to join in
the appointment of a property trustee pursuant to a request from the property
trustee to do so, the property trustee alone will 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 trustee will be a party, or any person succeeding
to all or substantially all the corporate trust business of such trustee,
shall be the successor of such trustee under the Trust Agreement, provided
such corporation shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may, at the Company's request, with the consent of the
administrative trustees and without your consent, consolidate, amalgamate,
merge with or into or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to another trust organized
under the laws of any state provided that:
. 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 for distributions and payments upon liquidation,
redemption and otherwise;
. the Company expressly appoints a trustee of such successor entity
possessing the same powers and duties as the property trustee as the
holder of the subordinated debentures;
. any such transaction does not adversely affect the rights, preferences
and privileges of the holders of the preferred securities (including any
Successor Securities) in any material respect;
. such successor entity has a purpose identical to that of the Trust;
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. the Successor Securities will be listed or traded on any national
securities exchange or other organization on which the preferred
securities may then be listed;
. prior to such a transaction, the Company has received an opinion of
counsel experienced in such matters, who may be counsel for the Trust,
to the effect that (a) such transaction 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 any such transaction, neither the Trust nor such
successor entity will be required to register as an investment company
under the Investment Company Act; and
. the Company or any permitted successor or designee 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.
In addition, unless all of the holders of the preferred securities and
common securities agree, the Trust may not consolidate, amalgamate, merge with
or into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if that
transaction would cause the Trust 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 preferred securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
property trustee and the administrative trustees, without the consent of the
holders of 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 will 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 Investment Company Act.
The Company and the trustees may amend the Trust Agreement (i) with the
consent of holders representing not less than a majority of the aggregate
liquidation amount of the outstanding trust securities, and (ii) upon receipt
by both the property and administrative trustees of an opinion of counsel to
the effect that the amendment or the exercise of any power granted to trustees
in accordance with the 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 as an "investment company" under the Investment Company
Act.
However, the Trust Agreement may not be amended without the consent of each
holder of trust securities to (i) change the amount or timing of any
distribution on trust securities or otherwise adversely affect the amount of
any distribution required to be made in respect of 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 subordinated 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 indenture trustee, or execute any
trust or power conferred on the property trustee with respect to the
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 subordinated debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the Indenture or
the subordinated debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
aggregate
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liquidation amount of all outstanding preferred securities or in some cases,
the prior consent of each holder of the preferred securities.
In addition to obtaining required approvals, prior to taking any of the
foregoing actions, the trustees must also obtain an opinion of counsel
experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
The trustees may not revoke any action previously authorized or approved by
a vote of the holders of the preferred securities except by subsequent vote of
the holders of the preferred securities.
The property trustee will notify each holder of the preferred securities of
any notice of default with respect to the subordinated debentures.
Any required approval of holders of the preferred securities may be given at
a meeting of holders of preferred securities convened for such purpose or
pursuant to written consent. The property trustee will cause a notice of any
meeting at which holders of the 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 preferred securities in the
manner set forth in the Trust Agreement.
If the Company or any of its affiliates, or the trustees or any of their
affiliates own any preferred securities, those preferred securities will not
be treated as outstanding for purposes of the votes or consents described
above.
Book-Entry Only Issuance--The Depository Trust Company
DTC will act as securities depositary for the preferred securities. The
Trust will issue one or more fully registered global preferred securities
certificates in the name of Cede & Co. (DTC's nominee). These certificates
will represent the total aggregate number of preferred securities. The Trust
will deposit these certificates with DTC or a custodian appointed by DTC. The
Trust will not issue certificates to represent the preferred securities,
unless DTC's services are discontinued. For a description of DTC and the
specific terms of the depositary arrangements, see "Book Entry Issuance."
Certificated Securities
If the preferred securities do not remain in book-entry only form as
described above, the following provisions would apply:
. The property trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
. Registration of transfers of preferred securities will be effected
without charge by or on behalf of the Trust, but the registration will
require payment, with the giving of such indemnity as the Trust or the
Company may require, for any tax or other governmental charges that may
be imposed.
. The Trust will not be required to register or cause to be registered the
transfer of preferred securities after they 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 those 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 preferred securities unless the property trustee is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur. If no Event of Default has
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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 preferred
securities are entitled under the Trust Agreement to vote, then the property
trustee shall take such action as is directed by the Company. If the Company
does not direct any action, then the property trustee shall take such action
as it deems advisable and in the best interests of the holders of 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 operate the Trust
in such a way so that the Trust will not be:
. required to register as an "investment company" under the Investment
Company Act; or
. characterized as other than a grantor trust for United States federal
income tax purposes.
The Company is authorized and directed to conduct its affairs so that the
subordinated debentures will be treated as indebtedness for United States
federal income tax purposes on the Company's books and accounts.
The Company and the administrative trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust of the
Trust or the Company's articles of incorporation, that either the Company or
the administrative trustees determine in either of their discretion to be
necessary or desirable to achieve that end, as long as the action does not
adversely affect the interests of the holders of the preferred securities.
The Trust may not borrow money, issue debt or mortgage or pledge any of its
assets.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
The subordinated debentures will be issued under the Subordinated Indenture,
dated as of , 1999 (the "Indenture"), between the Company and FMB Trust
Company, National Association, as the indenture trustee. The following summary
of the terms and provisions of the 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. You should also read the Indenture
for the complete terms of the subordinated debentures. The Indenture has been
filed as an exhibit to the Registration Statement. This prospectus forms a
part of the Registration Statement. The Indenture is also qualified in its
entirety by reference to the Trust Indenture Act. The Indenture is qualified
under the Trust Indenture Act. The Company believes that this section of the
prospectus describes the material terms of the subordinated debentures and the
Related Indenture.
The Trust will invest the proceeds of the issuance of the preferred
securities and common securities in the subordinated debentures that are
issued by the Company. The subordinated debentures are subordinated, unsecured
debt under the Indenture.
General
The Company will issue the subordinated debentures as unsecured debt under
the Indenture. The subordinated debentures will be limited in aggregate
principal amount to the sum of the liquidation amount of the preferred
securities and the amount of capital that the Company contributed to the Trust
in exchange for the common securities.
The subordinated debentures contain no sinking fund provisions. The entire
principal amount of the subordinated debentures will become due and payable,
together with any accrued and unpaid interest, including compound interest and
additional sums, if any, on , 2029.
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If subordinated debentures are distributed to holders of preferred
securities in liquidation of those holders' interests in the Trust, the
subordinated debentures will initially be issued as a global security. As
described in "Description of the Subordinated Debentures--Discontinuance of
the Depositary's Services," under limited circumstances, subordinated
debentures may be issued in certificated form in exchange for a global
security. See "--Book-Entry and Settlement; Depositary" below. If subordinated
debentures are issued in certificated form, the Company will issue them in
denominations of $10, and integral multiples of $10, and they may be
transferred or exchanged at the offices described below.
The Company will make payments on subordinated debentures issued as a global
security to DTC, a successor depositary or, if no depositary is used, to a
paying agent for the subordinated debentures. If the Company issues
subordinated debentures in certificated form, principal and interest will be
payable, the transfer of the subordinated debentures will be registrable, and
subordinated debentures will be exchangeable for subordinated debentures of
other denominations of a like aggregate principal amount, at the Corporate
Trust Office of the indenture trustee in Baltimore, Maryland. At the Company's
option, however, it may pay interest by check mailed to the address of the
persons entitled to the interest.
Interest
The subordinated debentures will bear interest at an annual rate of % from
the original date of issuance until the principal becomes due and payable.
Interest is payable quarterly in arrears on March 31, June 30, September 30,
and December 31, in each year, beginning June , 1999. Interest payments not
paid when due will accrue interest, compounded quarterly, at the annual rate
of %.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months, and, for any period shorter than a
quarter, on the basis of the actual number of days elapsed per 30-day month.
The interest payment provisions for the subordinated debentures correspond
to the distribution provisions for the preferred securities. See "Description
of the Preferred Securities--Distributions."
Option to Extend Interest Payment Period
As long as the Company is not in default on the payment of interest on the
subordinated debentures, the Company has the right, at any time and from time
to time, to defer payments of interest by extending the interest payment
period for a period not exceeding 20 consecutive quarters (an "Extension
Period"), but not beyond the maturity date of the subordinated debentures. At
the end of any Extension Period, the Company will pay all interest then
accrued and unpaid, together with interest on that amount, compounded
quarterly, at the annual rate of %. After termination of any Extension Period
and the payment of all amounts then due, the Company may begin a new Extension
Period.
During an Extension Period, interest will continue to accrue and holders of
subordinated debentures will be required to accrue interest income for United
States federal income tax purposes. See "United States Federal Income Tax
Consequences."
During any Extension Period:
. the Company may not declare or pay any dividends on, make any
distribution, or redeem, purchase, acquire or make a liquidation payment
on any of its common stock; and
. the Company may not make any payment of interest, principal or premium
on or repay, repurchase or redeem any debt securities issued by it that
rank equal or junior to the subordinated debentures, or make any
payments on any guarantee by the Company of any of its subsidiaries if
such guarantee ranks equal or junior to the subordinated debentures.
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The Extension Period restrictions do not apply to:
. repurchases, redemptions or other acquisitions of shares of the
Company's capital stock in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any
one or more employees, officers or directors, or a dividend reinvestment
plan or shareholder stock purchase plan;
. any declaration of a dividend in connection with any shareholders'
rights plan, or the issuance of rights, stock or other property under
any shareholders' rights plan, or the redemption or repurchase of rights
pursuant to the plan;
. dividends or distributions in shares of common stock; or
. payments by the Company under the guarantee.
The restrictions described above will also apply if the Company defaults on
its obligations under the subordinated debentures or the guarantee.
Before termination of any Extension Period, the Company may further extend
the interest payment period. However, the Extension Period, including all
previous and further extensions, may not exceed 20 consecutive quarters or
extend beyond the maturity date of the subordinated debentures. After
termination of any Extension Period and the payment of all amounts then due,
the Company may begin a new Extension Period, for up to an additional 20
consecutive calendar quarters, as described above.
If the property trustee is the sole holder of the subordinated debentures,
the Company will give the administrative trustees, the indenture trustee and
the property trustee notice of its selection of an Extension Period one
business day before the earlier of:
. the next date distributions on the preferred securities are payable; or
. the date the trustee is required to give notice of the record date to
the Nasdaq National Market or other applicable self-regulatory
organization, or to the holders of record of the preferred securities.
The indenture trustee will give notice of the Company's selection of an
Extension Period to the holders of the preferred securities. The Company may
elect to begin an Extension Period an unlimited number of times.
If the property trustee is not the sole holder of the subordinated
debentures, the Company will give the holders of the subordinated debentures
and the indenture trustee notice of its selection of an Extension Period one
business day before the earlier of:
. the next interest payment date; or
. the date upon which the Company is required to give notice of the record
date to the Nasdaq National Market, or other applicable self-regulatory
organization, or to holders of the subordinated debentures of the record
or payment date of the related interest payment.
The Company has no present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
subordinated debentures.
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the subordinated debentures the amounts (i.e., the
"Additional Sums") required to be paid so that the distributions paid by the
Trust shall not be reduced as a result of such charges.
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Redemption
The Company has the right, after receipt of prior approval of the federal
banking regulators, if approval is then required, to redeem the subordinated
debentures:
(i) at any time on or after , 2004, in whole or in part from time to
time; or
(ii) at any time in whole (but not in part), within 90 days after the
occurrence of a Tax Event, an Investment Company Event or a Capital
Treatment Event.
In either case, the Redemption Price will equal 100% of the principal amount
to be redeemed, plus any accrued and unpaid interest, to the date of
redemption.
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 subordinated debentures
to be redeemed at such holder's registered address. Interest will cease to
accrue on any subordinated debentures that the Company calls for redemption,
unless the Company defaults in payment of the Redemption Price.
The subordinated debentures will not be subject to any sinking fund.
Option to Accelerate Maturity Date
The subordinated debentures will mature on , 2029. The Company may, at
its option, shorten the maturity to any date not earlier than , 2004. The
Company may only shorten the maturity date if it receives prior approval from
the federal banking regulators, if then required. The Company may only elect
to shorten the maturity once.
If the Company elects to shorten the maturity, it will give notice to each
registered holder of the subordinated debentures, the property trustee and the
indenture trustee within 90 days of the effective date of the shortened
maturity. The property trustee must give notice to the holders of trust
securities of the new maturity date of the subordinated debentures. You may be
subject to adverse United States federal income tax consequences if the
Company shortens the maturity. See "United States Federal Income Tax
Consequences--Exercise of Right to Shorten Maturity."
Distribution upon Liquidation
As described under "Description of the Preferred Securities--Liquidation
Distribution upon Dissolution," under certain circumstances involving the
dissolution of the Trust, the subordinated debentures may be distributed to
the holders of the preferred securities and common securities in liquidation
of the Trust after the expenses of the Trust have been paid in full. If
distributed to holders of the preferred securities in liquidation, the
subordinated debentures will initially be issued in the form of one or more
global securities and the Depositary, or any successor depositary for the
preferred securities, will act as depositary for the subordinated debentures.
The Company anticipates that the depositary arrangements for the subordinated
debentures will be substantially identical to those in effect for the
preferred securities. See "Book-Entry Issuance."
If the subordinated debentures are distributed to the holders of preferred
securities upon the liquidation of the Trust, there can be no assurance as to
the market price of the subordinated debentures.
Subordination
The Indenture provides that the subordinated debentures rank junior in right
of payment to all of the Company's "Senior and Subordinated Debt," defined
below. The Company may not make payment of principal, including redemption
payments, or interest on the subordinated debentures if:
. any of its Senior and Subordinated debt is not paid when due and any
applicable grace period after the default has ended and the default has
not been cured or waived; or
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. the maturity of any of its Senior and Subordinated Debt has been
accelerated because of a default, and the acceleration has not been
rescinded.
Upon any distribution of the Company's assets to creditors upon its
dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all principal, premium, if any, and interest due or to become due on all of
the Company's Senior and Subordinated Debt must be paid in full before the
holders of subordinated debentures are entitled to receive or retain any
payment. In that event, any payment or distribution on the subordinated
debentures that would otherwise be payable in respect of the subordinated
debentures, but for the subordination provision, will be paid or delivered
directly to the holders of Senior and Subordinated Debt in accordance with the
priorities then existing among the holders of the Company's Senior and
Subordinated Debt until all of its Senior and Subordinated Debt has been paid
in full.
If the indenture trustee or any holder of subordinated debentures receives
any payment or distribution on account of the subordinated debentures before
all of the Company's Senior and Subordinated Debt is paid in full, then that
payment or distribution will be paid to the holders of the Company's Senior
and Subordinated Debt at the time outstanding.
The rights of the holders of the subordinated debentures will be subrogated
to the rights of the holders of the Company's Senior and Subordinated Debt to
the extent of any payment it has made to the holders of Senior and
Subordinated Debt that otherwise would have been made to the holders of the
subordinated debentures but for the subordination provisions.
Selected Definitions
"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:
. every obligation of such person for money borrowed;
. 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;
. every reimbursement obligation of such person with respect to letters of
credit, bankers' acceptances or similar facilities;
. 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);
. every capital lease obligation of such person; and
. every obligation of the type referred to in the foregoing clauses 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 the Company
whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on, prior to or after the date of the
Indenture, unless, in the instrument creating or evidencing the Debt, it is
provided that such obligations are not superior in right of payment to the
subordinated debentures or to other Debt which ranks equal with, or
subordinated to, the subordinated debentures. However, Senior and Subordinated
Debt will not include:
. any Debt of the Company 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 the Company;
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. any Debt of the Company to any of its subsidiaries;
. any Debt to any employee of the Company;
. the guarantee; and
. any other debt securities issued pursuant to the Indenture.
The Indenture does not limit the amount of additional Senior and
Subordinated Debt that we may incur. We expect that from time to time we may
incur additional indebtedness constituting Senior and Subordinated Debt.
Book-Entry and Settlement; Depositary
If we distribute the subordinated debentures to holders of preferred
securities in connection with the involuntary or voluntary dissolution,
winding-up or liquidation of the Trust, they will be issued in the form of one
or more global certificates registered in the name of a depositary or its
nominee. Except under the limited circumstances described immediately below
under "--Discontinuance of the Depositary's Services," subordinated debentures
represented by a global security will not be exchangeable for, and will not
otherwise be issuable as, certificated securities.
If subordinated debentures are distributed to holders of preferred
securities upon termination of the Trust, DTC will act as securities
depositary for the subordinated debentures. For a description of DTC and the
specific terms of the depositary arrangements, see "Book-Entry Only Issuance."
As of the date of this prospectus, the description of DTC's book-entry
system and DTC's practices as they relate to purchases of, transfers of,
notices concerning and payments on the preferred securities apply in all
material respects to any debt obligations represented by one or more global
securities held by DTC.
The Company may appoint a successor to DTC or any successor depositary if
the current depositary is unable or unwilling to continue as a depositary for
the global securities.
Discontinuance of the Depositary's Services
A global security will be exchangeable for subordinated debentures
registered in the names of persons other than the depositary or its nominee
only if:
. the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for the global security and no successor
depositary has been appointed;
. the depositary ceases to be a clearing agency registered under the
Exchange Act at a time the depositary is required to be so registered to
act as depositary, and no successor depositary has been appointed;
. the Company, in its sole discretion, determines that the global security
shall be exchangeable for definitive certificates; or
. there shall have occurred a Debenture Event of Default.
Any global security that is exchangeable as described above will be
exchangeable for subordinated debentures registered in the names the
depositary directs. The Company expects that the instructions will be based
upon directions received by the depositary from its participants with respect
to ownership of beneficial interests in the global security.
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Payment and Paying Agents
Payment of principal and interest on the subordinated debentures will be
made at the office of the indenture trustee. In addition, at the Company's
option, it may pay interest by check mailed to the address of the holder of
the preferred security as it appears in the securities register or by transfer
to an account of the holder of the preferred security pursuant to proper
transfer instructions that the Company has received prior to the regular
record date. However, the Company may not exercise these options if the
subordinated debentures are represented by a global subordinated debenture.
Payment of any interest on subordinated debentures will be made to the person
in whose name such subordinated debenture is registered at the close of
business on the regular record date for such interest. The Company may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agent; however, the Company will at all times be required to maintain a
Paying Agent in each place of payment for the subordinated debentures.
Any moneys deposited with the indenture trustee or any Paying Agent, or held
by the Company in trust, for the payment of the principal of or interest on
the subordinated debentures and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at the Company's
request, be repaid to it. Thereafter the holder of the Company's subordinated
debenture shall look only to the Company for payment as one of its general
unsecured creditors.
Modification of Indenture
The Indenture provides that the Company and the indenture trustee may enter
into supplemental indentures without the consent of the holders of preferred
securities to: (i) cure any ambiguity, defect, or inconsistency in the
Indenture or in the subordinated debentures provided that any such change does
not materially adversely affect the interests of the holders of the preferred
securities; (ii) evidence the assumption by a successor corporation of the
Company's obligations; (iii) add to the covenants of the Company for the
benefit of the holders of subordinated debentures or to surrender any right or
power conferred by the Indenture upon the Company; (iv) make any change that
does not adversely affect the rights of any holder of preferred securities in
any material respect; (v) qualify or maintain the qualification of the
Indenture under the Trust Indenture Act and (vi) evidence and provide for
acceptance of appointment by a successor trustee.
The Indenture also provides that the Company and the indenture trustee may,
with the consent of at least a majority of the holders in aggregate principal
amount of the subordinated debentures then outstanding and affected, add any
provisions to or change the provisions of the Indenture or the rights of the
holders of the subordinated debentures. The Company and the indenture trustee
may not, however, without the consent of each holder of the subordinated
debentures:
. extend the final maturity of the subordinated debentures;
. reduce the principal amount or premium, if any;
. reduce the rate or extend the time of payment of interest;
. reduce any amount payable on redemption; or
. reduce the percentage of holders of the subordinated debentures whose
consent is required for any modification of the Indenture.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the subordinated debentures that has occurred and is
continuing constitutes a "Debenture Event of Default" with respect to the
subordinated debentures:
. failure for 30 days to pay any interest on the subordinated debentures,
when due (not including the deferral of any due date in the case of an
Extension Period); or
. failure to pay any principal on the subordinated debentures when due
whether at maturity, upon redemption, by declaration or otherwise; or
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. certain events in bankruptcy, insolvency or reorganization of the
Company, including the voluntary commencement of bankruptcy proceedings,
entry of an order for relief against the Company in a bankruptcy
proceeding, appointment of a custodian over substantially all of its
property, a general assignment for the benefit of creditors, or a court
order for its liquidation; or
. if the Trust shall have voluntarily or involuntarily dissolved, wound up
its business or otherwise terminated its existence (except in connection
with (i) the distribution of subordinated debentures to the holders in
liquidation of their interests in the Trust; (ii) the redemption of all
of the outstanding trust securities; or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Trust
Agreement).
The holders of a majority in aggregate outstanding principal amount of the
subordinated debentures have the right to direct 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
subordinated debentures may declare the principal due and payable immediately
upon a Debenture Event of Default.
However, the holders of a majority in aggregate outstanding principal amount
of the subordinated debentures may annul such declaration and waive the
default if the default (other than the non-payment of the principal of the
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. If the holders of the subordinated debentures fail to annul
such declaration and waive such default, the holders of a majority in
aggregate liquidation amount of the preferred securities would have such
right.
In case a Debenture Event of Default occurs, the property trustee may
declare the principal of and the interest on the subordinated debentures, and
any other amounts payable under the Indenture, to be due and payable and to
enforce its other rights as a creditor with respect to the subordinated
debentures.
The Company will be required to file annually with the indenture trustee a
certificate, signed by one of its officers, stating whether or not such
officer knows of any default by the Company in the performance, observance or
fulfillment of any condition or covenant of the Indenture.
Enforcement of Certain Rights by Holders of Preferred Securities
If a Debenture Event of Default for failure to pay interest or principal on
the subordinated debentures has occurred and is continuing, you may institute
a legal proceeding directly against the Company for enforcement of payment to
you of the principal of or interest on the subordinated debentures in an
amount equal to the aggregate liquidation amount of the preferred securities
you hold ("Direct Action"). The Company's failure to pay principal or interest
during an Extension Period is not a Debenture Event of Default. If the right
to bring a Direct Action is removed, the Trust may become subject to the
reporting obligations under the Exchange Act. The Company has the right under
the Indenture to set-off any payment made to a holder of preferred securities
by the Company in connection with a Direct Action.
Unless an Event of Default under the Trust Agreement has occurred, you will
not be able to exercise directly any remedies except for those listed above.
See "Description of the Preferred Securities--Events of Default; Notice."
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Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with, convert
into 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, convert into or merge into the Company or
convey, transfer or lease its properties and assets substantially as an
entirety to the Company.
However, this does not apply if (i) in case the Company consolidates with,
converts into 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 Person expressly assumes the Company's
obligations on the 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; and (iii) certain
other conditions as prescribed in the Indenture are met.
If these conditions are met, the holders of the preferred securities have no
grounds to object to a highly leveraged or other transaction involving the
Company even if it may adversely affect holders of the subordinated
debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all 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
maturity date within one year, and the Company deposits with the indenture
trustee, in trust, funds for the purpose and in an amount sufficient to pay
and discharge the entire indebtedness on the outstanding subordinated
debentures, 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. However, the Company will continue to be obligated to pay
all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel required by the Indenture. Under these
conditions, the Company will be deemed to have satisfied and discharged the
Indenture.
Governing Law
The Indenture and the subordinated debentures will be governed by and
construed in accordance with the laws of the State of Maryland.
Information Concerning the Indenture Trustee
The indenture trustee will be unaffiliated with the Company. For matters
relating to compliance with Trust Indenture Act, the indenture trustee will
have all of the duties and responsibilities of an Indenture Trustee under the
Trust Indenture Act. The indenture trustee, other than during the occurrence
and continuance of a Debenture Event of Default, undertakes to perform only
such duties as are specifically set forth in the Indenture and, upon a
Debenture Event of Default, must use the same degree of care and skill as a
prudent person would use in the conduct of his or her own affairs. Subject to
this provision, the indenture trustee is under no obligation to exercise any
of the powers given it by the Indenture at the request of any holder of
preferred securities unless it is offered reasonable security or indemnity
against the costs, expenses and liabilities that it might incur. However, the
holders of the preferred securities will not be required to offer such an
indemnity where the holders, by exercising their voting rights, direct the
indenture trustee to take any action following a Debenture Event of Default.
Covenants of the Company
The Company has made certain covenants in the Indenture. One specific
covenant the Company has agreed to is that it will pay to the Trust the
Additional Sums so long as the Trust holds the subordinated debentures.
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In addition, the Company has also agreed to the following terms:
. the Company will maintain directly or indirectly 100% ownership of the
common securities. However, the Indenture does allow the Company to
transfer ownership of the common securities to certain successors;
. the Company will not voluntarily dissolve the Trust unless the Company
has received prior approval from the Federal Reserve, if required.
However, the Company may voluntarily dissolve the Trust if the Company
distributes the subordinated debentures to holders of the preferred
securities or if the Trust is a party to certain mergers, consolidations
or amalgamations permitted by the Trust Agreement; and
. the Company will use its reasonable best efforts to cause the Trust to
be classified as a grantor trust and thus not be taxed as a corporation
for United States federal income tax purposes.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the preferred securities
and, if there is a dissolution of the Trust, the subordinated debentures. The
preferred securities and the subordinated debentures will be issued only as
fully-registered securities registered in the name of Cede & Co. (the DTC's
nominee). One or more fully-registered global certificates will be issued for
the preferred securities and the subordinated debentures and will be deposited
with DTC or its custodian.
DTC may discontinue providing its services as securities depositary with
respect to any of the preferred securities or the subordinated debentures at
any time by giving reasonable notice to the relevant trustee and the Company.
In the event that a successor securities depositary is not obtained,
definitive preferred securities or subordinated debenture certificates
representing such preferred securities or subordinated debentures are required
to be printed and delivered. At the Company's option, it may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). After a Debenture Event of Default, the holders of a
majority in liquidation amount of preferred securities or aggregate principal
amount of subordinated debentures may determine to discontinue the system of
book-entry transfers through DTC. In any such event, definitive certificates
for such preferred securities or subordinated debentures will be printed and
delivered.
DTC has provided the Trust and the Company with the following information:
DTC 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, a "clearing corporation" within the meaning
of the New York Uniform Commercial Code, and a "clearing agency" registered
under the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds securities that its participants deposit with DTC. DTC 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 other organizations ("Direct Participants").
DTC 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 DTC system is also available
to others, such as securities brokers and dealers, banks and trust companies,
that clear transactions through or maintain a direct or indirect custodial
relationship with a Direct Participant ("Indirect Participants"). The rules
applicable to DTC and its participants are on file with the SEC.
When a purchase of preferred securities is made within the DTC system, it
must be made by or through a Direct Participant. The Direct Participant will
receive a credit for the preferred securities on DTC's records. The actual
owner of the preferred securities is the "beneficial owner." Beneficial
ownership interests will be recorded on the Direct and Indirect Participants'
records, but DTC will have no knowledge of any underlying beneficial
ownership. DTC's records reflect only the identity of the Direct Participants
to whose accounts preferred securities are credited.
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DTC will not provide written confirmation of purchases. The Direct or
Indirect Participant through whom purchases of the preferred securities are
made should send written confirmations to purchasers providing details of
their transactions, as well as periodic statements of their holdings. The
participants are responsible for keeping accurate account of the holdings of
their customers.
Transfers of ownership interests in the preferred securities will be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may
impair the ability to transfer beneficial interests in the global certificate
representing the preferred securities.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to beneficial owners will be governed
by arrangements among them, and any statutory or regulatory requirements that
may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
preferred securities are being redeemed, DTC will reduce each Direct
Participant's holdings of preferred securities in accordance with its
procedures.
In those cases where a vote by the holders of the preferred securities is
required, neither DTC nor Cede & Co. will itself consent or vote. Under its
usual procedures, DTC would mail an omnibus proxy to the Trust 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 the
preferred securities are credited on the record date, which are identified in
a listing attached to the omnibus proxy.
The Trust will make distribution payments on the preferred securities
directly to DTC. DTC's practice is to credit Direct Participants' accounts on
the relevant payment date in accordance with their respective holdings shown
on DTC's records, unless DTC has reason to believe that it will not receive
payment on such payment date.
Payments by participants (whether Direct Participants or Indirect
Participants) to beneficial owners will be governed by standing instructions
and customary practices, as is the case with securities held for the account
of customers in bearer form or registered in "street name." These payments
will be the responsibility of the participant and not of DTC, the Trust or the
Company.
Except as provided below in "Description of the Subordinated Debentures--
Discontinuance of the Depositary's Services," a beneficial owner in a global
preferred securities certificate will not be entitled to receive physical
delivery of preferred securities. Accordingly, each beneficial owner must rely
on the procedures of DTC to exercise any rights under the preferred
securities.
DTC may discontinue providing its services as securities depositary with
respect to the preferred securities at any time by giving reasonable notice to
the Trust. In the event that a successor securities depositary is not
obtained, the Trust will print and deliver preferred securities certificates.
Additionally, the administrative trustees, with our consent, may decide to
discontinue the book-entry only system of transfers with respect to the
preferred securities. In that event, the Trust will print and deliver
certificates for the preferred securities to its holders.
The Company and the Trust have obtained the information in this section
concerning DTC and DTC's book-entry system from sources that the Company and
the Trust believe to be reliable, but neither take responsibility for the
accuracy of the information.
DTC's management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its participants and other members of the
financial community that it
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has developed and is implementing a program so that its computer systems, as
the same relate to the timely payment of distributions (including principal
and income payments) to security holders, book-entry deliveries and settlement
of trades with DTC, continue to function appropriately. This program includes
a technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third-party vendors from whom DTC licenses software and hardware, and
third-party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service
providers, among others. DTC has informed the industry participants that it is
contacting (and will continue to contact) third-party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant and (ii) determine the extent of their efforts for
Year 2000 remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as it
deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry participants for informational purposes only and is
not intended to serve as a representation, warranty or contract modification
of any kind.
DESCRIPTION OF GUARANTEE
The Company will execute and deliver the preferred securities Guarantee
Agreement (the "Guarantee Agreement") concurrently with the issuance of the
preferred securities for the benefit of the holders of the preferred
securities. FMB Trust Company, National Association will act as trustee under
the guarantee as the guarantee trustee for the purposes of compliance with the
Trust Indenture Act, and the Guarantee Agreement will be qualified under the
Trust Indenture Act. The following summary of certain provisions of the
Guarantee Agreement 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, including the definitions of certain terms, and Trust Indenture
Act. The form of the Guarantee Agreement has been filed as an exhibit to the
Registration Statement of which this prospectus forms a part. You should also
read the Guarantee Agreement. The guarantee trustee will hold the Guarantee
Agreement for the benefit of the holders of the preferred securities.
General
Pursuant to the Guarantee, the Company will agree to pay in full on a
subordinated basis, to the extent set forth in the Guarantee, the Guarantee
Payments, as defined below, to the holders of the preferred securities, as and
when due, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert other than the defense of payment.
The following payments on the preferred securities, if not fully paid by the
Trust (the "Guarantee Payments"), are covered by the Guarantee Agreement,
without duplication:
. any accumulated and unpaid distributions required to be paid on the
preferred securities, if the Trust has funds available to make the
payment;
. the Redemption Price, if the Trust has funds available to make the
payment, with respect to any preferred securities called for redemption;
and
. upon a voluntary or involuntary dissolution, winding up or liquidation
of the Trust other than in connection with the distribution of the
subordinated debentures to holders of the preferred securities, the
lesser of
(1) the aggregate of the $10 liquidation amount and all accumulated and
unpaid distributions on the preferred securities to the date of
payment if the Trust has funds available to make the payment; or
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(2) the amount of assets the Trust has remaining available for
distribution to holders of preferred securities.
The Company's obligations to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of the
preferred securities or by causing the Trust to pay the amounts to the
holders.
The guarantee will be full and unconditional from the time of issuance.
However, the guarantee will not apply to any payment of distributions due if
the Trust lacks funds legally available for payment as a result of a failure
by the Company to make payments of interest or principal on the subordinated
debentures.
The Company is a holding company and it has the right to participate in any
distribution of assets of any of its subsidiaries if any of the Company's
subsidiaries are liquidated or reorganized. However, its right to participate
is subject to the prior claim of the subsidiary's creditors. Accordingly, the
Company's obligations under the guarantee will be effectively subordinated to
all existing and future liabilities of its subsidiaries, and holders of
preferred securities should look only to the Company's assets for payments.
The guarantee does not limit the Company's incurrence or issuance of other
secured or unsecured debt. The Company may issue or incur Senior and
Subordinated Debt in the future. The Company expects that it will issue or
incur Senior and Subordinated Debt in the future.
The Company has, through the Guarantee Agreement, the Trust Agreement, the
subordinated debentures, the Indenture and the Expense Agreement, taken
together, guaranteed on a subordinated basis all of the Trust's obligations
under the preferred securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes the
guarantee. It is only the combined operation of these documents that has the
effect of providing the Company's guarantee on a subordinated basis of all of
the Trust's obligations under the preferred securities. See "Relationship
Among the Preferred Securities, the Subordinated Debentures and the
Guarantee."
The Expense Agreement
The Company will enter into an agreement with of the Trust as to the
expenses and liabilities of the Trust (the "Expense Agreement"). The Company
will fully and unconditionally guarantee to each person or entity to whom the
Trust becomes indebted or liable, the full payment of any costs, expenses or
liabilities of the Trust, other than obligations of the Trust to the holders
of the preferred securities or other similar interests in the Trust.
Status of the Guarantee
The guarantee is unsecured and ranks subordinate and junior in right of
payment to all Senior and Subordinated Debt in the same manner as the
subordinated debentures. As such, it is (1) subordinate and junior in right of
payment to all of the Company's other liabilities, (2) equal to the most
senior preferred stock now or hereafter issued by the Company, and with any
guarantee now or hereafter issued by the Company in respect of any preferred
stock of its affiliates, and (3) senior to its common stock.
The guarantee will constitute a guarantee of payment and not of collection.
The guaranteed party may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee Agreement 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 preferred
securities. The guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust or upon
distribution of the subordinated debentures to the holders of the preferred
securities.
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Amendments and Assignment
Except with respect to any changes which do not materially adversely affect
the rights of holders of the 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 liquidation amount
of the outstanding preferred securities. A description of the way to obtain
any approval is described under "Description of the Preferred Securities--
Voting Rights; Amendment of the Trust Agreement." All guarantees and
agreements contained in the Guarantee Agreement will bind the Company's
successors, assigns, receivers, trustees and representatives and are for the
benefit of the holders of the preferred securities then outstanding.
Events of Default
An event of default under the Guarantee Agreement will occur if the Company
fails to perform any of its payment or other obligations under the Guarantee
Agreement. The holders of at least a majority in aggregate liquidation amount
of the preferred securities have the right to direct any proceeding for any
remedy available to the guarantee trustee relating to the guarantee or to
direct the exercise of any trust or power conferred upon the guarantee trustee
under the Guarantee Agreement.
If the guarantee trustee fails to enforce the guarantee, you may, after your
written request to the guarantee trustee to enforce the guarantee, sue the
Company directly to enforce the guarantee trustee's rights under the guarantee
without first instituting a legal proceeding against the Trust, the guarantee
trustee, or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to make a Guarantee
Payment, you may directly institute a proceeding against the Company to
enforce the guarantee.
The Company is required to file annually with the guarantee trustee a
certificate as to the Company's compliance with all the conditions and
covenants under the Guarantee Agreement.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of a
default by the Company 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 preferred securities unless it
is offered reasonable indemnity against the costs, expenses and liabilities
that it might incur.
Termination of the Guarantee
The guarantee will remain in effect as long as the preferred securities are
outstanding.
Governing Law
The Guarantee Agreement will be governed by and construed in accordance with
the laws of the State of Maryland.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Guarantee
Payments of distributions and other amounts due on the preferred securities
are guaranteed by the Company to the extent described under "Description of
Guarantee." Taken together, the Company's obligations under the subordinated
debentures, the Indenture, the Trust Agreement, the Expense Agreement and the
Guarantee Agreement provide, in the aggregate, a guarantee on a subordinated
basis for payments of distributions and other amounts due on the preferred
securities (but only to the extent the Trust has funds available for the
payment of such distributions). 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 the Company's obligations
under those documents that has the effect of providing a guarantee on a
subordinated basis of the Trust's obligations under the preferred securities.
To the extent that the Company does not make required payments on the
subordinated debentures, the Trust will not pay distributions or other amounts
due on the preferred securities. Neither the guarantee described above nor the
Guarantee Agreement covers payment of distributions when the Trust does not
have sufficient funds to pay such distributions. In those circumstances, your
remedy is to institute a legal proceeding directly against the Company to
enforce the payment of the distributions to you. The Company's obligations
under the guarantee and the Guarantee Agreement are subordinate and junior in
right of payment to all Senior and Subordinated Debt.
Sufficiency of Payments
As long as the Company makes payments required by the subordinated
debentures held by the Trust, there will be sufficient funds to cover
distributions and other payments due on the preferred securities, primarily
because:
. the aggregate principal amount of the subordinated debentures will
exceed the aggregate liquidation mount of the preferred securities by
the amount of the common securities;
. the interest rate and interest and other payment dates on the
subordinated debentures will match the distribution rate and
distribution and other payment dates for the preferred securities;
. the Company will directly pay for all costs, expenses and liabilities of
the Trust except the Trust's obligations to holders of preferred
securities; and
. the Trust Agreement further provides that the Trust will not engage in
any activity that is not consistent with the limited purposes of the
Trust.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is required to make with and to the extent
it has made, or is concurrently making a payment under the Guarantee.
Enforcement Rights of Holders of the Preferred Securities under the Guarantee
A holder of the preferred securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
Agreement without first instituting a legal proceeding against the guarantee
trustee, the Trust or any other person or entity.
A default or event of default under any Senior and Subordinated Debt would
not constitute a Debenture 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 subordinated debentures until the Senior and Subordinated
Debt have been paid in full or any payment default has been cured or waived.
The Company's failure to make the required payments on subordinated debentures
will constitute a Debenture Event of Default.
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Limited Purpose of the Trust
The preferred securities evidence a beneficial interest in the Trust, and it
exists for the sole purpose of issuing trust securities and investing those
proceeds in the subordinated debentures. A principal difference between the
rights of a holder of the preferred securities and a holder of a subordinated
debenture is that a holder of a subordinated debenture is entitled to receive
the principal amount of and interest accrued on subordinated debentures from
the Company, while a holder of the preferred securities is entitled to receive
distributions from the Trust (or from the Company under the Guarantee) if and
to the extent the Trust has funds available for the payment of such
distributions.
Rights upon Dissolution
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust involving the liquidation of the subordinated debentures, the
holders of preferred securities will be entitled to receive, out of assets
held by the Trust, the liquidation distribution in cash. See "Description of
the Preferred Securities--Liquidation Distribution upon Dissolution." Upon the
Company's voluntary or involuntary liquidation or bankruptcy, the property
trustee, as holder of the subordinated debentures, would be one of the
Company's subordinated creditors, subordinated in right of payment to all
Senior and Subordinated Debt as set forth in the Indenture. However, the
property trustee, and indirectly the holders of the preferred securities, are
entitled to receive payment in full of principal and interest, before any of
the Company's stockholders receive payments or distributions. Since the
Company is the guarantor under the Guarantee Agreement and has agreed to pay
for all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of its preferred securities), the positions of a
holder of the preferred securities and a holder of subordinated debentures
relative to other creditors and to the Company's stockholders in the event of
the Company's liquidation or bankruptcy are expected to be substantially the
same.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general summary of the material United States federal
income tax consequences of the purchase, ownership and disposition of the
preferred securities. The matters of law or legal conclusions set forth in
this summary constitute the opinion of Kutak Rock, special tax counsel to the
Company and the Trust ("Tax Counsel"). Unless otherwise stated, this summary
only deals with preferred securities held as capital assets (generally, assets
held for investment) by holders who purchase the preferred securities upon
original issuance. Your tax treatment may vary depending on your particular
situation.
This summary does not address:
. all of the tax consequences that may be relevant to holders who may be
subject to special tax treatment such as, for example, financial
institutions, insurance companies, broker-dealers, tax-exempt
organizations or investors who have acquired preferred securities as
part of a straddle, hedge or similar transaction or, except as described
below, non-U.S. Holders, as we define that term below;
. the tax consequences to holders that have a functional currency other
than the United States dollar;
. the tax consequences to shareholders, partners or beneficiaries of a
holder of preferred securities;
. any aspects of state, local or foreign tax laws; or
. the United States federal alternative minimum tax consequences of the
purchase, ownership and sale of preferred securities.
This summary and Tax Counsel's opinion is based on the United States federal
income tax law in effect as of the date of this prospectus. These laws may
change, and any change could have a retroactive effect. These laws are also
subject to various interpretations, and the IRS or the courts could later
disagree with the explanation of conclusions contained in this summary. The
IRS has not formally ruled (and we do not intend to seek a ruling)
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on the tax consequences of purchasing, holding, and selling the preferred
securities. Accordingly, the IRS could challenge the opinions expressed in
this prospectus concerning such consequences, and a court could agree with the
IRS. We urge you to consult your tax advisor as to the particular tax
consequences to you of purchasing, owning, and disposing of the preferred
securities, including the application and effect of United States federal,
state, local, foreign and other tax laws.
For purposes of this discussion, a "U.S. Holder" means:
. a citizen or resident of the United States (or someone treated as a
citizen or resident of the United States for federal income tax
purposes);
. a corporation, partnership, or other entity created or organized (or
treated as created or organized for United States federal income tax
purposes) in the United States or under the laws of the United States or
of any political subdivision of the United States;
. an estate, the income of which is includible in gross income for United
States federal income tax purposes regardless of its source; or
. a trust, the administration of which is subject to the primary
supervision of a United States court and that has one or more United
States persons who have the authority to control all substantial
decisions of the trust.
Classification of the Subordinated Debentures
In the opinion of Tax Counsel, based on current law and assuming full
compliance with the terms of the Trust and the Indenture, the subordinated
debentures should be treated for United States federal income tax purposes as
indebtedness of the Company. By accepting the preferred securities, you agree
to treat the subordinated debentures as indebtedness for United States federal
income tax purposes and to treat the preferred securities as evidence of an
indirect beneficial ownership interest in the subordinated debentures. No
assurance can be given, however, that such treatment will not be challenged by
the IRS or, if challenged, that such a challenge will not be successful.
Classification of the Trust
Tax Counsel is of the opinion that, based on current law and assuming full
compliance with the terms of the Trust and the Indenture, the Trust should be
classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, you should generally be treated as the
owner of an undivided beneficial ownership interest in the subordinated
debentures. As further discussed below, you may be required to include in
ordinary income your allocable share of interest paid or accrued on the
subordinated debentures.
Potential Extension of Interest Payment Period and Original Issue Discount
The Company has the right to defer payments of interest on the subordinated
debentures, which could cause the subordinated debentures to be treated as
having been issued with OID. In general, a debt instrument will be deemed to
have been issued with OID for United States federal income tax purposes if
there is more than a remote contingency that periodic stated interest payments
due on the instrument will not be timely paid. Because the exercise by the
Company of its option to defer the payment of stated interest on the
subordinated debentures would also prevent it from declaring dividends on any
class of equity, the Company believes that the likelihood that it would
exercise the option is remote.
As a result, the Company intends to take the position, based on the advice
of Tax Counsel, that the subordinated debentures will not be deemed to be
issued with OID. Accordingly, based on this position, stated interest payments
on the subordinated debentures will be includible in your ordinary income at
the time that those payments are paid or accrued in accordance with your
regular method of accounting and in the amount of each payment.
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If the likelihood of the Company deciding to defer any payments of interest
were not treated as remote, the subordinated debentures would be considered as
issued initially with OID in an amount equal to the sum of all the interest
payable over the term of the subordinated debentures. This would mean that you
would have to include interest income in gross income for United States
federal income tax purposes as it accrued daily on an economic accrual basis
instead of on the dates you actually received the cash payments.
The IRS has not issued any rulings or interpretations which define the
meaning of the term "remote" as used in the applicable income tax regulations.
The IRS could take a position that differs from what we state in this
prospectus.
Exercise of Deferral Option
If the Company exercises its option to defer the payment of stated interest
on the subordinated debentures, they would be treated, solely for purpose of
the OID rules, as being "re-issued" at that time with OID. Under these rules,
you would be required to include OID in ordinary income, on a current basis,
over the period that the instrument is held, even though we would not be
making any actual cash payments during the extended interest payment period.
The amount of interest income treated as OID and therefore includible in the
taxable income of a holder of the subordinated debentures would be determined
on the basis of a constant yield method over the remaining term of the
instrument, not on the basis of the stated interest amount. The actual receipt
of future payments of stated interest on the subordinated debentures would no
longer be separately reported as taxable income because it would have been
replaced, solely for tax purposes, by the amount of OID. The amount of OID
that would accrue, in total, during the extended interest payment period would
be approximately equal to the amount of the cash payment due at the end of the
period. Any OID included in income would increase your adjusted tax basis in
the preferred securities or the subordinated debentures, depending on which
you held at that time, and interest payments actually received would reduce
your adjusted tax basis.
Corporate U.S. Holders
Because the income from the preferred securities will not be considered to
be dividends for federal income tax purposes, corporate U.S. Holders of the
preferred securities will not be entitled to a dividends-received deduction
for any income received from the preferred securities.
Receipt of Subordinated Debentures or Cash Upon Termination or Redemption
If the Company exercises its right to terminate the Trust and cause the
subordinated debentures to be distributed to you on a basis proportionate to
your ownership in the preferred securities, the distribution would be treated
as a nontaxable event to you. In that event, you would have an adjusted tax
basis in the subordinated debentures that you receive equal to the adjusted
tax basis in the preferred securities that you surrender, and the holding
period of the subordinated debentures would include the period during which
you held the preferred securities. If, however, the Trust is characterized for
United States federal income tax purposes as an association taxable as a
corporation at the time of the termination, the distribution of the
subordinated debentures would be a taxable event to the holders of preferred
securities.
If the Company redeems the subordinated debentures for cash and the Trust
distributes the proceeds of the redemption to holders in redemption of their
preferred securities, the redemption would be treated as a sale of the
preferred securities in which you would recognize gain or loss as described
below.
Exercise of Right to Shorten Maturity
The Company has the right to shorten the maturity of the subordinated
debentures. If the Company exercises its right to shorten the maturity of the
subordinated debentures, this could result in a taxable event to you. Federal
income tax regulations provide that a significant modification of a debt
instrument is a taxable event. A significant modification includes shortening
the maturity of a debt instrument, provided that the instrument's rate
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of return changes by more than the greater of 25 basis points or five percent
of the annual rate of return. At the present time, the extent to which the
subordinated debenture's rate of return would change (if the Company exercised
its right to shorten the maturity) is unclear.
Sale of Preferred Securities
Upon the sale of preferred securities (including a redemption for cash), you
will recognize gain or loss 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, which amount will
be subject to tax as ordinary interest income) and your adjusted tax basis in
the preferred securities.
If the Company does not defer interest payments on the subordinated
debentures, your adjusted tax basis in the preferred securities generally will
equal the initial purchase price that you paid for the preferred securities.
If, however, the Company elects to defer interest payments on the subordinated
debentures, your adjusted tax basis in the preferred securities will equal:
(1) the initial purchase price that you paid for the preferred securities; (2)
increased by the amount of any accrual and unpaid distributions you were
required to treat as OID; and (3) reduced by the amount of cash or other
property received by you with respect to such OID.
The gain or loss generally will be capital gain or loss and will be long-
term capital gain or loss if you have held the preferred securities for more
than one year. Capital losses generally may be used by a corporate taxpayer
only to offset capital gains and may be used by individual taxpayers only to
offset capital gains plus $3,000 of other income.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID, if the subordinated
debentures are treated as having been issued, or reissued, with OID) relating
to the underlying subordinated debentures. If you dispose of your preferred
securities you will be required to include in your ordinary income:
. any portion of the amount realized that is attributable to accrued but
unpaid interest to the extent not previously included in income; or
. any amount of OID that has accrued on your proportionate share of the
underlying subordinated debentures during the taxable year of sale
through the date of disposition.
However, you can also increase your adjusted tax basis in the preferred
securities to the extent that you include these amounts in ordinary income.
Withholding of U.S. Taxes on Non-U.S. Holders
This summary assumes that the non-U.S. Holder
. is an individual;
. is not and will not become engaged in a United States trade or business;
and
. will not be present in the United States for 183 days or more during any
particular taxable year.
Payments made to a holder of preferred securities who is a non-U.S. Holder
generally will not be subject to withholding of United States federal income
tax, if:
. the beneficial owner of the preferred securities does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock entitled to vote; and
either:
(1) the beneficial owner of the preferred securities certifies to the
Trust or its agent, under penalties of perjury, that it is not a United
States person and provides his name and address; or
(2) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution"), and holds the capital
securities in
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that capacity, certifies to the Trust or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by
it or by a Financial Institution between it and the beneficial owner and
furnishes the Trust or its agent with a copy of the statement.
In addition, a non-U.S. Holder of preferred securities will not be subject
to withholding of United States federal income tax on any gain realized upon
the sale or other disposition of a capital security.
Backup Withholding
You may be subject to a "backup withholding" tax of 31% on distributions
made on the preferred securities and on the entire price received on the sale
of the preferred securities if you:
. fail to provide your Social Security or taxpayer identification number
to your broker;
. provide your broker with an incorrect Social Security or tax
identification number;
. fail to provide your broker with a certified statement that your Social
Security or tax identification number is correct and that you are not
subject to backup withholding; or
. improperly report interest and dividends on your tax return.
Backup withholding, however, does not apply to payments made to certain
exempt recipients such as corporations or tax-exempt organizations. Any
withheld amounts will be allowed as a credit against your United States
federal income tax, provided the required information is provided to the IRS.
ERISA CONSIDERATIONS
Retirement plans are generally subject to the rules of the Employee
Retirement Income Security Act of 1974 ("ERISA"), and they are also subject to
requirements in the Code. Retirement plans may purchase preferred securities
in accordance with their governing documents. When they do, the fiduciaries
for these retirement plans (usually trustees and custodians) are required to
comply with fiduciary duties under ERISA and other requirements under the
Code. Retirement plans can be employer-sponsored plans like pension plans and
profit sharing plans, individual retirement accounts (IRAs), and other types
of plans which defer the receipt of income.
If a retirement plan is sponsored and/or contributed to by a party that is
affiliated in certain ways with the Company, it and/or its affiliate could be
a "party in interest" or a "disqualified person" for purposes of ERISA and the
Code. The rules regarding these relationships are very complex. These
relationships can arise if the Company or one of the banking subsidiaries is a
fiduciary to a retirement plan, such as a trustee or custodian. They can also
arise if the Company or one of the banking subsidiaries provides any services
to or for the retirement plan.
There are many other circumstances which can cause the relationship to
exist. When one of these relationships exists, the purchase of preferred
securities by the retirement plan is likely to result in a transaction that is
not permitted by ERISA and/or the Code. These transactions are referred to as
"prohibited transactions" or "disqualifying transactions." These could lead to
excise tax penalties and even tax disqualification of a retirement plan.
However, there may be ways to exempt prohibited transactions from the excise
tax penalties and tax disqualification. This may require application to a
governmental agency.
If the Company or one of the banking subsidiaries is a party in interest or
disqualified person as to a retirement plan, that retirement plan should not
acquire preferred securities without first establishing an exemption. Entities
like partnerships and limited liability companies which have a relationship
with the Company or one of the banking subsidiaries and that may be holding
assets of retirement plans also have to address these prohibited transaction
issues. All of these rules are very complicated. If you have a relationship of
any kind with us and/or one of our affiliates, you should consult with your
benefits counsel before acquiring preferred securities.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the Trust has agreed to sell to each of the underwriters named below, and each
of the underwriters, for whom Stephens Inc. and Morgan Keegan & Company, Inc.
are acting as representatives, has severally agreed to purchase the aggregate
number of preferred securities set forth opposite its name below, at the
public offering price less the underwriting discounts and commissions set
forth on the cover page of this prospectus. In the underwriting agreement, the
several underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the preferred securities offered hereby if
any 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
Preferred
Underwriter Securities
----------- ----------
<S> <C>
Stephens Inc......................................................
Morgan Keegan & Company, Inc......................................
---------
Total........................................................... 1,500,000
=========
</TABLE>
The Trust has granted the underwriters an option, exercisable in whole or in
part, from time to time, for thirty days after the date hereof, to purchase up
to an aggregate of an additional 15% of the shares of preferred securities
(225,000 additional preferred securities) to cover over-allotments, if any, at
the public offering price, less the underwriting discounts and commissions set
forth on the cover page of this prospectus. If the underwriters exercise this
option, each of the underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage thereof
which the number of preferred securities to be purchased by it shown in the
foregoing table bears to the 1,500,000 preferred securities offered hereby.
The underwriters have advised the Trust that sales of preferred securities
to certain dealers may be made at a concession of an amount not in excess of
$ per share and that the underwriters may allow, and such dealers may re-
allow, discounts not in excess of $ per share on sales to certain other
dealers. Following completion of this offering, the public offering price, the
concession and the re-allowance may be changed by the underwriters.
In view of the fact that the proceeds of the sale of the preferred
securities will be used to purchase the subordinated debentures of the
Company, the underwriting agreement provides that the Company will pay as
compensation to the underwriters $ per preferred security (or $ in the
aggregate).
The Trust, the Company and its executive officers and directors have agreed
with the underwriters not to offer, sell, contract to sell or otherwise
dispose of any shares of the preferred securities or any securities
convertible into, or exchangeable or exerciseable for shares of the preferred
securities with limited exceptions, for a period of 90 days from the date
following completion of this offering.
The preferred securities are new securities with no established trading
market. The Company has been advised by each underwriter that it intends to
make a market in the preferred securities, but it is not obligated to do so
and such market making may be interrupted or discontinued without notice. No
assurance can be given about the liquidity of the trading market for the
preferred securities.
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In connection with this offering, certain underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the preferred
securities during and after this offering. Such transactions may include
stabilization transactions pursuant to which such persons may bid for or
purchase preferred securities for the purpose of stabilizing its market price.
The underwriters also may create a short position for the account of the
underwriters by selling more preferred securities in connection with this
offering than they are committed to purchase from the Trust, and in such case
may purchase preferred securities in the open market following completion of
this offering to cover all or a portion of such short position. The
underwriters may also cover all or a portion of such short position by
exercising the underwriters' over-allotment option referred to above. In
addition the representatives may impose "penalty bids" under contractual
arrangements with the underwriters whereby they may reclaim from an
underwriter (or dealer participating in the offering) for the account of the
other underwriters, the selling concession with respect to preferred
securities that are distributed in this offering but subsequently purchased
for the account of the underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the preferred securities at a level above that which might otherwise
prevail in the open market. None of the transactions described in this
paragraph are required, and, if they are undertaken, they may be discontinued
at any time.
The Company, the Trust and the underwriters have agreed to indemnify each
other against, and to afford certain rights of contribution to each other with
respect to, certain civil liabilities under the Securities Act.
TRANSFER AGENT
FMB Trust Company, National Association, a subsidiary of First Maryland
Bancorp, will act as registrar and transfer agent for the preferred
securities.
LEGAL MATTERS
The validity of the preferred securities offered hereby, and certain matters
relating to United States federal income tax consequences of the offering, are
being passed upon for the Company and the Trust by Kutak Rock, Little Rock,
Arkansas. Morris, James, Hitchens & Williams, Wilmington, Delaware will pass
upon certain matters relating to Delaware law for the Trust. Certain legal
matters will be passed upon for the underwriters by Giroir, Gregory, Holmes &
Hoover, PLC, Little Rock, Arkansas.
EXPERTS
The Consolidated Financial Statements of Bank of the Ozarks, Inc. at
December 31, 1998, and for the year then ended appearing in this prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, and at December 31, 1997, and for each of the two years in the
period ended December 31, 1997, by Moore Stephens Frost, independent auditors,
as set forth in their respective reports thereon appearing elsewhere herein,
and are included in reliance upon such reports given on the authority of such
firms as experts in accounting and auditing.
101
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement (on Form S-1) filed by
Bank of the Ozarks and the Trust with the SEC relating to the preferred
securities registered under this prospectus. As permitted by SEC rules, this
prospectus does not contain all of the information contained in the
registration statement and accompanying exhibits and schedules filed by Bank
of the Ozarks and the Trust with the SEC. The registration statement, the
exhibits and schedules provide additional information about the Company, the
Trust and the preferred securities. The registration statement, exhibits and
schedules are also available at the SEC's public reference rooms or through
its EDGAR database on the internet.
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. These documents are available for
inspection and copying, upon payment of a fee set by the SEC, at the public
reference rooms of the SEC in Washington, D.C. (450 Fifth Street, N.W.,
20549), New York, New York (Seven World Trade Center, Suite 1300, 10048) and
Chicago, Illinois (Citicorp Center, 500 West Madison Street, 14th Floor, Suite
1400, 60661). The SEC may be contacted at 1-800-432-0330 for more information
on the public reference rooms. The Company's filings are also available to the
public on the internet through the SEC's EDGAR database at the SEC's web site
at http://www.sec.gov.
There are not separate financial statements of the Trust in this prospectus
because:
. The Trust is a subsidiary of the Company which files consolidated
financial information under the Exchange Act.
. The Trust does not have any independent operations other than issuing
the Preferred and common securities and purchasing the subordinated
debentures of the Company.
. The Trust's only material assets will be the subordinated debentures of
the Company when issued.
. The combined obligations of the Company under the subordinated
debentures, the Guarantee, the Trust Agreement and the Indenture have
the effect of providing a full and unconditional guarantee of the
Trust's obligations under its preferred securities. See "Description of
Subordinated Securities," "Description of Preferred Securities,"
"Description of Guarantee" and "Relationship Among Preferred Securities,
the Subordinated Debentures and the Guarantee."
102
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Index to Consolidated Financial Statements
Audited Financial Statements:
Report of Ernst & Young LLP, Independent Auditors........... F-2
Report of Moore Stephens Frost, Independent Accountants..... F-3
Consolidated Balance Sheets as of December 31, 1997 and
1998....................................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1997 and 1998 .......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1997 and 1998 .............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998 .......................... F-6
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1996, 1997 and 1998..................... F-7 through F-26
Unaudited Financial Statements:
Consolidated Balance Sheets as of March 31, 1998 and 1999
(Unaudited)................................................ F-27
Consolidated Statements of Income for the Three Months Ended
March 31, 1998 and 1999 (Unaudited) ....................... F-28
Consolidated Statements of Stockholders' Equity for the
Three Months Ended
March 31, 1998 and 1999 (Unaudited) ....................... F-29
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1999 (Unaudited) ................. F-30
Notes to Consolidated Financial Statements for the Three
Months Ended March 31, 1998 and 1999 (Unaudited)........... F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Bank of the Ozarks, Inc.
We have audited the accompanying consolidated balance sheet of Bank of the
Ozarks, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the year then ended. 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 audit. The consolidated financial statements
of Bank of the Ozarks, Inc. and subsidiaries for the years ended December 31,
1996 and 1997, were audited by other auditors whose report dated January 28,
1998, expressed an unqualified opinion on those statements.
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 1998 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Bank of the Ozarks, Inc. and subsidiaries as of December 31, 1998, and the
consolidated results of their operations and their cash flows for the year
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Little Rock, Arkansas
January 20, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bank of the Ozarks, Inc.
We have audited the accompanying consolidated balance sheet of Bank of the
Ozarks, Inc. as of December 31, 1997 and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 1997. 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 audits 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Bank of the Ozarks, Inc. as of December 31, 1997, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
MOORE STEPHENS FROST
Little Rock, Arkansas
January 28, 1998
F-3
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
------------------
1997 1998
-------- --------
(Dollars in
thousands, except
per share
amounts)
<S> <C> <C>
ASSETS
Cash and due from banks.................................... $ 9,021 $ 14,168
Interest bearing deposits.................................. 6,607 856
-------- --------
Cash and cash equivalents................................ 15,628 15,024
Investment securities - available for sale................. 25,297 17,629
Investment securities - held to maturity
(estimated market value: $17,199 in 1997 and $159,050 in
1998)..................................................... 17,162 158,989
Federal funds sold......................................... 2,885 --
Loans, net of unearned income.............................. 275,463 387,526
Allowance for loan losses.................................. (3,737) (4,689)
-------- --------
Net loans................................................ 271,726 382,837
Premises and equipment, net................................ 13,439 27,155
Foreclosed assets held for sale, net....................... 148 314
Interest receivable........................................ 3,013 5,517
Intangible assets, net..................................... 1,393 3,665
Other...................................................... 1,402 1,301
-------- --------
Total assets........................................... $352,093 $612,431
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - non-interest bearing............................ $ 31,091 $ 50,138
Savings and interest-bearing transaction................. 64,742 95,471
Time..................................................... 199,722 383,431
-------- --------
Total deposits.......................................... 295,555 529,040
Notes payable.............................................. 5,072 12,448
FHLB advances and federal funds purchased.................. 14,017 26,823
Repurchase agreements...................................... -- 1,408
Accrued interest and other liabilities..................... 1,783 2,357
-------- --------
Total liabilities....................................... 316,427 572,076
Commitments and contingencies
Stockholders' equity
Common stock; $0.01 par value; Authorized 10,000,000
shares;
3,779,555 shares issued and outstanding in 1997 and
1998..................................................... 38 38
Additional paid-in capital............................... 14,314 14,314
Retained earnings........................................ 21,162 25,922
Accumulated other comprehensive income................... 152 81
-------- --------
Total stockholders' equity.............................. 35,666 40,355
-------- --------
Total liabilities and stockholders' equity............. $352,093 $612,431
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1997 1998
------- ------- -------
(Dollars in thousands,
except per share
amounts)
<S> <C> <C> <C>
Interest income
Loans............................................ $19,089 $24,230 $31,168
Investment securities - taxable.................. 2,069 2,684 6,654
Investment securities - nontaxable............... 364 233 766
Federal funds sold............................... 145 108 89
Deposits with banks.............................. 169 213 205
------- ------- -------
Total interest income.......................... 21,836 27,468 38,882
------- ------- -------
Interest expense
Deposits......................................... 9,005 11,826 18,118
Notes payable.................................... 468 553 637
FHLB advances.................................... 557 597 1,415
Federal funds purchased.......................... 1 3 348
------- ------- -------
Total interest expense......................... 10,031 12,979 20,518
------- ------- -------
Net interest income................................ 11,805 14,489 18,364
Provision for loan losses........................ (1,486) (1,139) (2,026)
------- ------- -------
Net interest income after provision for loan
losses............................................ 10,319 13,350 16,338
------- ------- -------
Other income
Trust income..................................... 214 274 335
Service charges on deposit accounts.............. 806 957 1,372
Other income, charges and fees................... 537 1,136 2,792
Gain (loss) on sale of securities................ (77) 14 255
Other............................................ 385 544 277
------- ------- -------
Total other income............................. 1,865 2,925 5,031
------- ------- -------
Other expense
Salaries and employee benefits................... 4,263 5,330 7,197
Net occupancy and equipment...................... 998 1,305 1,961
Other operating expenses......................... 1,890 2,593 3,961
------- ------- -------
Total other expense............................ 7,151 9,228 13,119
------- ------- -------
Income before income taxes......................... 5,033 7,047 8,250
Provision for income taxes....................... 2,006 2,516 2,621
------- ------- -------
Net income......................................... $ 3,027 $ 4,531 $ 5,629
======= ======= =======
Basic earnings per common share.................... $ 1.05 $ 1.38 $ 1.49
======= ======= =======
Diluted earnings per common share.................. $ 1.05 $ 1.38 $ 1.47
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income Total
------ ---------- -------- ------------- -------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1996..... $ 29 $ 1,168 $15,088 $ 9 $16,294
Comprehensive income:
Net income.................. -- -- 3,027 -- 3,027
Other comprehensive income:
Change in unrealized
appreciation on investment
securities net of $46 tax
effect.................... -- -- -- 90 90
-------
Comprehensive income......... 3,117
-------
Dividends, $.30 per share.... -- -- (864) -- (864)
---- ------- ------- ---- -------
Balance - December 31, 1996... 29 1,168 17,251 99 18,547
Comprehensive income:
Net income.................. -- -- 4,531 -- 4,531
Other comprehensive income:
Unrealized gains on
available for sale
securities net of $37 tax
effect.................... -- -- -- 60 60
Less: reclassifications
adjustment for gains
included in income net of
$4 tax effect............. -- -- -- (7) (7)
-------
Comprehensive income......... 4,584
-------
Dividends, $.20 per share.... -- -- (620) -- (620)
Issuance of 899,755 shares of
common stock................ 9 13,146 -- -- 13,155
---- ------- ------- ---- -------
Balance - December 31, 1997... 38 14,314 21,162 152 35,666
Comprehensive income:
Net income.................. -- -- 5,629 -- 5,629
Other comprehensive income:
Unrealized losses on
available for sale
securities net of $35 tax
effect.................... -- -- -- 57 57
Less: reclassifications
adjustment for gains
included in income net of
$79 tax effect............ -- -- -- (128) (128)
-------
Comprehensive income......... 5,558
-------
Dividends, $.23 per share.... -- -- (869) -- (869)
---- ------- ------- ---- -------
Balance - December 31, 1998... $ 38 $14,314 $25,922 $ 81 $40,355
==== ======= ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................ $ 3,027 $ 4,531 $ 5,629
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 575 626 1,043
Amortization..................................... 74 74 173
Provision for loan losses........................ 1,486 1,139 2,026
Provision for losses on foreclosed assets........ 11 8 35
Amortization and accretion on investments........ 9 (39) (115)
(Gain) loss on disposition of investments........ 77 (14) (255)
Gain on sale of loans............................ (274) (57) --
Increase in mortgage loans held for sale......... (1,431) (1,504) (3,750)
Gain on disposition of premises and equipment.... (1) (76) (14)
Gain on disposition of foreclosed assets......... (14) (261) (98)
Deferred income taxes............................ (291) 59 222
Changes in assets and liabilities:
Interest receivable.............................. (563) (461) (2,502)
Other, net....................................... (255) 55 (305)
Accrued interest and other liabilities........... 374 (601) 74
------- ------- --------
Net cash provided by operating activities.......... 2,804 3,479 2,163
------- ------- --------
Cash flows from investing activities
Acquisitions, net of funds acquired............... -- -- 22,123
Proceeds from sales and maturities of investment
securities available for sale.................... 28,784 31,171 54,036
Purchases of investment securities available for
sale............................................. (32,904) (19,453) (20,260)
Proceeds from maturities of investment securities
held to maturity................................. 1,862 6,576 67,386
Purchases of investment securities held to
maturity......................................... -- (21,007) (234,804)
Decrease (increase) in federal funds sold......... 3,730 (2,535) 3,149
Net increase in loans............................ (62,577) (61,152) (110,019)
Proceeds from sale of loans...................... 2,252 811 --
Proceeds from dispositions of bank premises and
equipment....................................... 1 178 30
Purchase of bank premises and equipment.......... (997) (7,295) (14,109)
Proceeds from dispositions of foreclosed assets.. 221 632 525
------- ------- --------
Net cash used in investing activities.............. (59,628) (72,074) (231,943)
------- ------- --------
Cash flows from financing activities
Net increase in deposits.......................... 49,184 63,907 208,455
Net proceeds from FHLB advances and federal funds
purchased........................................ 4,780 1,290 14,214
Proceeds from notes payable....................... 1,500 10,000 14,410
Payments of notes payable......................... (24) (10,324) (7,034)
Dividends paid.................................... (864) (620) (869)
Proceeds from issuance of common stock............ -- 13,155 --
------- ------- --------
Net cash provided by financing activities.......... 54,576 77,408 229,176
------- ------- --------
Net (decrease) increase in cash and cash
equivalents....................................... (2,248) 8,813 (604)
Cash and cash equivalents - beginning of year...... 9,063 6,815 15,628
------- ------- --------
Cash and cash equivalents - end of year............ $ 6,815 $15,628 $ 15,024
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements
(Dollars in thousands)
1. Summary of Significant Accounting Policies
Organization - Bank of Ozarks, Inc. (the "Company") is a multi-bank holding
company headquartered in Little Rock, Arkansas, which operates under the rules
and regulations of the Board of Governors of the Federal Reserve System and
which, at December 31, 1998, owned two affiliate state chartered banks and a
federal savings bank - Bank of the Ozarks, wca; Bank of the Ozarks, nwa; and
Bank of the Ozarks. On January 7, 1999, the Company merged its federal savings
bank into Bank of the Ozarks, wca. The bank subsidiaries, which are subject to
the regulation of certain federal and state agencies and undergo periodic
examinations by those regulatory authorities, have offices located in
northern, western, and central Arkansas.
Principles of consolidation - The consolidated financial statements include
the accounts of the Company and its wholly owned bank subsidiaries.
Significant intercompany transactions and amounts have been eliminated in
consolidation.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and cash equivalents - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks and interest
bearing deposits with banks.
Investment securities - Management determines the appropriate classification
of debt securities at the time of purchase and re-evaluates such designation
as of each balance sheet date. Debt securities are classified as held-to-
maturity when the Company has the positive intent and ability to hold the
securities to maturity. Held-to-maturity securities are stated at amortized
cost.
Debt securities not classified as held-to-maturity or trading and marketable
equity securities not classified as trading securities are classified as
available-for-sale. Available-for-sale securities are stated at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest
income from investments. Interest and dividends are included in interest
income from investments.
Fair values for investment securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments. Gains or losses on
the sale of securities are recognized on the specific identification method at
the time of sale.
Loans - Loans receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, deferred fees or costs on
originated loans, and unamortized premiums or discounts on purchased loans.
Unearned discounts on installment loans are recognized as income over the
terms by the rule of 78's interest method which approximates the interest
method. Unearned purchased discounts are recorded as income over the life of
the loans utilizing the interest method to achieve a constant yield. Interest
on other loans is calculated by using the simple interest method on daily
balances of the principal amount outstanding. Loan origination fees and direct
origination costs are capitalized and recognized as adjustments to yields on
the related loans. Prior to July 1, 1998 loan origination fees and direct
origination costs were not deemed material and, therefore, were recorded as
actually received and paid.
F-8
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
Allowance for loan losses - The allowance for loan losses is established
through a provision for loan losses charged against income. Loans deemed to be
uncollectible are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely, and
subsequent recoveries, if any, are credited to the allowance.
The allowance is maintained at a level that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, historical loan loss experience and
current economic and business conditions that may affect the borrowers'
ability to pay or the value of the collateral securing the loans. The
Company's policy generally is to place a loan on nonaccrual status when
payment of principal or interest is contractually past due 90 days, or earlier
when doubt exists as to the ultimate collection of principal and interest. The
Company continues to accrue interest on certain loans contractually past due
90 days if such loans are both well secured and in the process of collection.
The Company considers a loan to be impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms thereof. The
Company applies this policy even if delays or shortfalls in payment are
expected to be insignificant. All nonaccrual loans, except consumer
installment loans, and all loans that have been restructured from their
original contractual terms are considered impaired loans. Nonaccrual consumer
installment loans are evaluated collectively since they are considered to be
small-balance, homogenous loans. The aggregate amount of impairment of loans
is utilized in evaluating the adequacy of the allowance for loan losses and
amount of provisions thereto. Losses on impaired loans are charged against the
allowance for loan losses when in the process of collection it appears likely
that such losses will be realized. The accrual of interest on impaired loans
is discontinued, when in management's opinion, the borrower may be unable to
meet payments as they become due. When interest accrual is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
Premises and equipment - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the
related assets. Accelerated methods are used for tax purposes.
Foreclosed assets held for sale - Real estate and personal properties
acquired through or in lieu of loan foreclosure are to be sold and are
initially recorded at fair value at the date of foreclosure establishing a new
cost basis. After foreclosure, real property is amortized over 60 months.
Valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost to sell. Gains
and losses from the sale of other real estate are recorded in other income,
and expenses used to maintain the properties are included as operating
expenses.
Income taxes - The Company utilizes the liability method in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based upon the difference between the values of the assets and
liabilities as reflected in the financial statement and their related tax
basis using enacted tax rates in effect for the year in which the differences
are expected to be recovered or settled. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
The Company and its subsidiaries file consolidated tax returns. The bank
subsidiaries provide for income taxes on a separate return basis, and remit to
the Company amounts determined to be currently payable.
F-9
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
Trust department income - Property, other than cash deposits, held by the
Company's trust department in fiduciary or agency capacities for its customers
are not included in the accompanying financial statements, since such items
are not assets of the Company. Trust department income has been recognized on
the cash basis in accordance with customary banking practice, which does not
differ materially from the accrual method.
Intangible assets - Intangible assets consist of goodwill and core deposit
intangibles. These assets are being amortized over periods ranging from 10 to
25 years. Goodwill represents the excess purchase price over the fair value of
net assets acquired in business acquisitions. Core deposit intangibles
represent premiums paid for deposits acquired. Accumulated amortization of
intangibles totaled $1,043 and $1,158 at December 31, 1997 and 1998,
respectively.
Earnings per share - Basic earnings per share has been calculated based on
the weighted average number of shares outstanding. Diluted earnings per share
has been calculated based on the weighted average number of shares outstanding
after consideration of the dilutive effect of the Company's outstanding stock
options.
Financial instruments - In the ordinary course of business, the Company has
entered into off-balance sheet financial instruments consisting of commitments
to extend credit, commitments under credit card arrangements, and letters of
credit. Such financial instruments are recorded in the financial statements
when they are funded or related fees are incurred or received.
Advertising and public relations expense - Advertising and public relations
expense is expensed as incurred and totaled $123, $332 and $566 for the years
ended December 31, 1996, 1997 and 1998, respectively.
Stock-based compensation - The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("ABP 25") and related interpretations in accounting for its employee stock
options. Under ABP 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recorded. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123").
Segment Disclosures - On December 31, 1998, the Company adopted SFAS No.
131. "Disclosures about Segments of an Enterprise and Related Information".
SFAS 131 established standards for reporting information about operating
segments and related disclosures about products and services, geographic areas
and major customers. As the Company operates in only one segment--community
banking--the adoption of SFAS 131 did not have a material effect on the
primary financial statements or the disclosure of segment information. All the
Company's revenues result from services offered by its bank subsidiaries. No
revenues are derived from foreign countries and no single external customer
comprises more than 10% of the Company's revenues.
Derivatives and Hedging Activities - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS No. 133, which requires the Company to recognize
all derivatives on the balance sheet at fair value, was adopted by the Company
effective July 1, 1998. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives are either
offset against the change in fair value of the assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portions of a
derivative's change in fair value will be immediately recognized in earnings.
The adoption of SFAS No. 133 did not have a significant impact on the
Company's financial position or results of operations. In connection with the
adoption of SFAS No. 133, the Company transferred investment securities with a
carrying value of $25,795 and unrealized gains of $167 from its held-to-
maturity to available-for-sale portfolio.
F-10
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
Reclassifications - Certain reclassifications of 1996 and 1997 amounts have
been made to conform with the 1998 presentation.
2. Acquisitions
In August 1998 the Company completed the purchase of the Marshall, Arkansas
branch of Superior Federal Bank, FSB. The acquisition included the branch bank
building, related assets and deposit accounts totaling $16 million. The
transaction was accounted for as a purchase with the Company reporting the
results of the acquired branch's operations from the closing date. The
resulting core deposit intangible of $1.6 million is being amortized on a
straight line basis over 10 years.
In February 1998 the Company acquired the stock of Heartland Community Bank,
FSB, from its parent company - Heartland Community Bank, Camden - for $3.1
million in cash. The Company received the federal savings bank's charter,
approximately $9.4 million in customer deposits and the related banking
facility. All other assets and liabilities of the bank were purchased and
assumed by its parent company prior to closing. The transaction was accounted
for as a purchase and the excess of purchase price over net assets acquired of
$847 is being amortized straight-line over 25 yrs. The Company has reported
the results of operations of the acquired bank from the closing date.
Pro forma disclosures related to the above acquisitions have not been
provided as the entities acquired do not meet the criteria of significant
subsidiaries. Also, separate operating results related to the specific assets
acquired and liabilities assumed by the Company were not maintained by the
previous owners as this represented only a portion of their overall
operations.
3. Investment Securities
The following is a summary of the amortized cost and estimated market values
of investment securities:
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Securities - available for sale:
Securities of United States
government and agencies............. $12,619 $ 39 $(18) $12,640
Mortgage-backed securities........... 9,340 256 (25) 9,571
State and political subdivisions..... 1,582 14 (20) 1,576
Other securities..................... 1,510 -- -- 1,510
------- ---- ---- -------
Total securities - available for sale.. $25,051 $309 $(63) $25,297
======= ==== ==== =======
Securities - held to maturity:
Securities of United States
government and agencies............. $11,943 $ 17 $ (4) $11,956
State and political subdivisions..... 5,219 27 (3) 5,243
------- ---- ---- -------
Total securities - held to maturity.. $17,162 $ 44 $ (7) $17,199
======= ==== ==== =======
</TABLE>
F-11
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Securities - available for sale:
Securities of United States
government and agencies............ $ 1,000 $ 1 $ -- $ 1,001
Mortgage-backed securities.......... 2,107 17 (7) 2,117
State and political subdivisions.... 11,205 60 -- 11,265
Other securities.................... 3,185 61 -- 3,246
-------- ---- ----- --------
Total securities - available for
sale................................. $ 17,497 $139 $ (7) $ 17,629
======== ==== ===== ========
Securities - held to maturity:
Securities of United States
government and agencies............ $155,351 $196 $(217) $155,330
State and political subdivisions.... 3,537 82 -- 3,619
Other securities.................... 101 -- -- 101
-------- ---- ----- --------
Total securities - held to maturity... $158,989 $278 $(217) $159,050
======== ==== ===== ========
</TABLE>
The amortized cost and estimated market value by contractual maturity of
investment securities classified as available-for-sale and held-to-maturity at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
------------------- -------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less................ $ 20 $ 20 $ 142 $ 142
Due from one year to five years........ 1,847 1,850 1,949 1,992
Due from five years to ten years....... 1,033 1,035 131,902 131,986
Due after ten years.................... 14,597 14,724 24,996 24,930
------- ------- -------- --------
Totals................................. $17,497 $17,629 $158,989 $159,050
======= ======= ======== ========
</TABLE>
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
For purposes of the maturity table, mortgage-backed securities which are not
due at a single maturity date have been allocated over maturity groupings
based on anticipated maturities. The mortgage-backed securities may mature
earlier than their weighted average contractual maturities because of
principal prepayments.
During the years ended December 31, 1996, 1997, and 1998, investment
securities available-for-sale with a fair value at the date of sale of
$17,214, $3,407 and $41,613 respectively, were sold. The gross realized gains
on such sales totaled $79, $14 and $322, respectively. The gross realized
losses totaled $124, $-0- and $67, respectively. The income tax expenses
related to net security gains was $5 and $87 in 1997 and 1998, respectively.
The income tax benefit related to net securities losses in 1996 was $26.
The bank subsidiaries had no trading securities during 1997 or 1998. Gross
gains of $2 and gross losses of $34 were realized on trading securities during
1996.
Assets, principally investment securities, having a carrying value of
approximately $31,335 and $97,831 at December 31, 1997 and 1998, respectively,
were pledged to secure public deposits and for other purposes required or
permitted by law.
F-12
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
4. Loans
The following is a summary of the loan portfolio by principal categories:
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
Real Estate:
Single family residential (1-4)......................... $ 96,943 $121,539
Non-farm/non-residential................................ 41,710 76,563
Agricultural............................................ 13,443 19,463
Construction/land development........................... 16,257 23,305
Multifamily residential................................. 3,897 6,207
Consumer.................................................. 53,233 66,407
Commercial and industrial................................. 37,470 52,192
Agricultural (non-real estate)............................ 10,824 20,068
Other..................................................... 1,686 1,782
-------- --------
Loans, net of unearned income............................. $275,463 $387,526
======== ========
</TABLE>
These loan categories are presented net of unearned discounts, unearned
purchase discounts and deferred costs totaling $3,759 at December 31, 1997 and
$4,961 at December 31, 1998. Loans on which the accrual of interest has been
discontinued aggregated $664 and $2,708 at December 31, 1997 and 1998,
respectively.
Mortgage loans held for resale of $2,935 and $6,685 at December 31, 1997 and
1998, respectively, are included in single family residential loans. The
carrying value of these loans approximates their fair value. Other income,
charges and fees include mortgage lending income of $68, $556 and $2,136
during 1996, 1997 and 1998, respectively.
5. Allowance for Loan Losses
The following is a summary of activity within the allowance for loan losses:
<TABLE>
<CAPTION>
Year Ended December
31,
----------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Balance - beginning of year.......................... $1,909 $3,019 $3,737
Loans charged-off.................................. (417) (469) (1,149)
Recoveries on loans previously charged-off......... 41 48 75
------ ------ ------
Net charge-offs...................................... (376) (421) (1,074)
Provision charged to operating expense............. (1,486) (1,139) (2,026)
------ ------ ------
Balance - end of year................................ $3,019 $3,737 $4,689
====== ====== ======
</TABLE>
Impairment of loans having carrying values of $581 and $2,461 at December
31, 1997 and 1998, respectively, have been recognized in conformity with SFAS
No. 114, as amended by SFAS No. 118. The average carrying value of impaired
loans was $1,042, $1,886, and $1,687 for the years ended December 31, 1996,
1997, and 1998, respectively, some of which, as a result of write-downs, did
not have an allowance for credit losses. The total allowance for credit losses
related to these loans was $105 and $443 at December 31, 1997 and 1998,
respectively. The Company does not segregate income recognized on a cash basis
in its financial
F-13
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
records, and thus, such disclosure is not practicable. For impairment
recognized in conformity with SFAS 114, as amended, the entire change in
present value of expected cash flows is reported as bad debt expense in the
same manner in which impairment initially was recognized or as a reduction in
the amount of bad debt expense that otherwise would be reported.
Real estate securing loans having a carrying value of $683 and $628 was
transferred to foreclosed assets held for sale in 1997 and 1998, respectively.
The bank subsidiaries are not committed to lend additional funds to debtors
whose loans have been modified.
6. Premises and Equipment
The following is a summary of premises and equipment:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Land....................................................... $ 4,140 $ 6,691
Construction in process.................................... 985 437
Buildings and improvements................................. 5,274 15,113
Leasehold improvements..................................... 1,637 1,615
Equipment.................................................. 4,763 7,565
------- -------
16,799 31,421
Accumulated depreciation................................... (3,360) (4,266)
------- -------
Total premises and equipment............................... $13,439 $27,155
======= =======
</TABLE>
The Company capitalized $145 and $275 of interest on construction projects
during the years ended December 31, 1997 and 1998, respectively.
7. Deposits
The aggregate amount of time deposits with a minimum denomination of $100
was $57,981 and $143,540 at December 31, 1997 and 1998, respectively.
The following is a summary of the scheduled maturities of all time deposits:
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
Zero to one year.......................................... $166,316 $359,218
One year to two years..................................... 25,344 14,471
Two years to three years.................................. 3,470 5,868
Three years to four years................................. 2,172 1,884
Four years to five years.................................. 1,354 997
Thereafter................................................ 1,066 993
-------- --------
Total time deposits....................................... $199,722 $383,431
======== ========
</TABLE>
F-14
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
8. Notes Payable
The following is a summary of notes payable:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ -------
<S> <C> <C>
Note payable to a bank, interest at 8.804%, payable in
installments through December 2007. Note secured by stock
of the bank subsidiaries and paid in 1998.................. $5,000 $ --
Note payable to a bank, interest payable quarterly at a
variable rate equal to the prime rate minus 1.25% but not
to exceed 7.75% (rate was 6.5% at December 31, 1998). This
note payable is a revolving line of credit for up to $22
million maturing March 31, 2003. Note secured by stock of
the bank subsidiaries...................................... -- 12,340
Other....................................................... 72 108
------ -------
$5,072 $12,448
====== =======
</TABLE>
Maturities of notes payable at December 31, 1998 are as follows: 1999 - $24;
2000 - $24; and 2003 -$12,400.
The revolving line of credit requires the Company's bank subsidiaries, Bank
of the Ozarks, wca and Bank of the Ozarks, nwa, to maintain (i) a return on
average assets for each calendar year equal to at least 1.0%, (ii) a ratio of
capital, as defined in the line of credit, to assets at levels acceptable to
bank regulatory authorities but at least 7.0% at each calendar year end and
(iii) net charges to the reserve for loan losses at less than 1.0% of net
loans during any calendar year. In addition, the line of credit requires (i)
that the parent company's aggregate indebtedness not exceed 60.0% of the
Company's tangible net worth through March 31, 1999, reducing 5% a year
thereafter and (ii) borrowings under the line of credit not exceed 50.0% of
the tangible book value of all subsidiary bank stock pledged to secure such
borrowings. At December 31, 1998, the Company was in compliance with these
requirements.
9. FHLB Advances and Federal Funds Purchased
FHLB advances and federal funds purchased include short-term borrowings with
maturities ranging from one to thirty days. Certain additional FHLB advances
have maturities of over one year. The following is a summary of information
relating to the short-term borrowings:
<TABLE>
<CAPTION>
1997 1998
----- ------
<S> <C> <C>
FHLB advances:
Average..................................................... $ 244 $5,335
December 31................................................. -- --
Maximum month-end balance during year....................... 2,750 28,090
Interest rate:
Weighted average.......................................... 5.81% 5.45%
December 31............................................... -- --
Federal funds purchased:
Average..................................................... 52 6,799
December 31................................................. -- 3,830
Maximum month-end balance during year....................... 1,006 15,420
Interest rate:
Weighted average.......................................... 5.30% 5.12%
December 31............................................... -- 4.79
</TABLE>
F-15
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
FHLB advances with original maturities exceeding one year totaled $14,017
and $22,993 at December 31, 1997 and 1998, respectively. Interest rates on
these advances ranged from 4.96% to 6.90% at December 31, 1998. Aggregate
annual maturities of these long-term FHLB advances at December 31, 1998 are as
follows: 1999 -$5,268; 2000 - $2,144; 2001 - $4,198; 2002-2007 - $198; 2008 -
$10,195. FHLB advances of $10 million maturing in 2008 may be called
quarterly but the Company has the option to refinance on a long-term basis any
amounts called. The FHLB maintains as collateral a blanket lien on the
Company's 1-4 family mortgages. At December 31, 1998, the Company's bank
subsidiaries had an aggregate of $59.6 million of unused blanket FHLB
borrowing availability.
10. Income Taxes
The following is a summary of the components of the provision for income
taxes:
<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................. $1,683 $2,180 $2,363
State............................................... 614 277 36
------ ------ ------
Total current......................................... 2,297 2,457 2,399
Deferred:
Federal............................................. (242) 55 180
State............................................... (49) 4 42
------ ------ ------
Total deferred........................................ (291) 59 222
------ ------ ------
Provision for income taxes............................ $2,006 $2,516 $2,621
====== ====== ======
</TABLE>
The reconciliation between the statutory federal income tax rate and
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
----------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.......................... 34.0% 34.0% 34.0%
State income taxes, net of federal benefit................. 4.3 4.3 0.6
Effect of non-taxable interest income...................... (2.5) (2.7) (3.7)
Accrual for state income tax assessment.................... 6.5 -- --
Other...................................................... (2.4) .1 0.9
---- ---- ----
Effective income tax rate.................................. 39.9% 35.7% 31.8%
==== ==== ====
</TABLE>
During the year ended December 31, 1996, the Company was assessed
approximately $326 of additional state income taxes for the years ended
December 31, 1992 through 1995. This assessment related to the State of
Arkansas taking a different position than the federal income tax treatment
regarding dividends from less than 95% owned subsidiaries. The full assessment
was recorded as income tax expense during the year ended December 31, 1996 and
paid during the year ended December 31, 1997. In addition, approximately $93
of interest charged on this assessment was also recorded during the year ended
December 31, 1996.
F-16
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
The types of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts that give rise to deferred
income tax assets and liabilities and their approximate tax effects are as
follows:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses................................... $1,151 $1,514
Valuation of foreclosed assets.............................. 293 2
------ ------
Gross deferred tax assets..................................... 1,444 1,516
------ ------
Deferred tax liabilities:
Unrealized appreciation on securities available for sale.... 94 51
Accelerated depreciation on premises and equipment.......... 311 599
Other....................................................... 139 145
------ ------
Gross deferred tax liabilities................................ 544 795
------ ------
Net deferred tax assets....................................... $ 900 $ 721
====== ======
</TABLE>
11. Employee Benefit Plans
Employee Stock Ownership Plan - The Company has an employee stock ownership
plan ("ESOP") to provide benefits to substantially all employees of the
Company. The Company has historically made annual contributions to the plan as
determined solely by the Board of Directors. Participants in the plan become
fully vested after seven years of service although cash or shares are not
distributed until retirement or employment is terminated. The Company made no
contributions in 1998 and contributed $95 and $64 to the plan for in the years
ended December 31, 1996 and 1997, respectively. Management intends to merge
the ESOP into the 401(k) Plan in January 1999.
401(k) Plan - In May 1997 the Company established a qualified retirement
plan, with a salary deferral feature designed to qualify under Section 401 of
the Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan permits the
employees of the Company to defer a portion of their compensation in
accordance with the provisions of Section 401(k) of the Code. Matching
contributions may be made in amounts and at times determined by the Company.
Certain other statutory limitations with respect to the Company's contribution
under the 401(k) Plan also apply. Amounts contributed by the Company for a
participant will vest over six years and will be held in trust until
distributed pursuant to the terms of the 401(k) Plan.
Employees of the Company are eligible to participate in the 401(k) Plan when
they meet certain requirements concerning minimum age and period of credited
service. All contributions to the 401(k) Plan will be invested in accordance
with participant elections among certain investment options. Distributions
from participant accounts will not be permitted before age 65, except in the
event of death, permanent disability, certain financial hardships or
termination of employment. The Company made matching contributions to the
401(k) plan during 1997 and 1998 of $32 and $99, respectively.
F-17
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
12. Stock Options
The Company has a nonqualified stock option plan for certain key employees
and officers of the Company. It also has a nonqualified stock option plan for
non-employee directors of the Company. These two plans provide for the
granting of incentive nonqualified options to purchase up to 365,000 shares of
common stock in the Company. No option may be granted under these plans for
less than the fair market value of the common stock at the date of the grant.
The exercise period and the termination date for the employee plan options is
determined when the options are actually granted. The non-employee director
plan calls for options to purchase 1,000 shares of common stock to be granted
to non-employee directors the day after the annual stockholders' meeting.
These options are exercisable immediately and expire ten years after issuance.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1997 1998
------------------ ------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding - beginning of year....... -- $ -- 106,500 $16.42
Granted............................... 108,500 16.42 103,700 24.11
Exercised............................. -- -- -- --
Canceled.............................. (2,000) 16.00 (12,150) 16.00
------- ------ ------- ------
Outstanding--end of year.............. 106,500 $16.42 198,050 $20.42
======= ====== ======= ======
Exercisable at end of year............ 8,000 $16.00 17,000 $22.37
======= ====== ======= ======
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$16.00 to $34.13. The weighted-average fair value of options granted during
1997 and 1998 was $6.20 and $8.36, respectively. The weighted-average
remaining contractual life of the options issued in 1998 was 5.5 years.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1998: dividend yield increasing 15% per
year from the current $0.24; expected volatility ranging from .342 to .407;
risk-free interest rates ranging from 4.56% to 5.68% and expected lives
ranging from 2.75 to 6.5 years. For 1997, the following weighted-average
assumptions were used: dividend yield increasing 15% per year from $0.20;
expected volatility ranging from .326 to .342; risk from interest rates
ranging from 5.77% to 6.19% and expected lives ranging from 5 to 7.5 years.
For purposes of pro forma disclosures as required by SFAS No. 123, the
estimated fair value of the options is amortized over the option's vesting
period. The following table represents the required pro forma disclosures for
options granted subsequent to December 31, 1996:
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Pro forma net income.......................................... $4,462 $5,363
Pro forma earnings per share:
Basic....................................................... 1.36 1.42
Diluted..................................................... 1.36 1.40
</TABLE>
F-18
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
The following is a summary of currently outstanding and exercisable options
at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ --------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Options Contractual Exercise Options Exercise
Prices Outstanding Life (in years) Price Exercisable Price
- ------------- ----------- --------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 16.00 89,800 6.7 16.000 8,000 16.000
21.50 - 27.75 100,250 5.7 23.283 1,000 22.313
34.125 8,000 9.3 34.125 8,000 34.125
------- ------
198,050 17,000
======= ======
</TABLE>
13. Commitments and Contingencies
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The
Company has the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since these commitments may expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
managements credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
The Company had outstanding commitments to extend credit of approximately
$20,004 and $27,409 at December 31, 1997 and 1998, respectively. The
commitments extend over varying periods of time with the majority to be
disbursed within a one-year period.
The Company had total outstanding standby letters of credit amounting to
$1,931 and $334 at December 31, 1997 and 1998, respectively. The commitment
terms generally expire within one year.
The Company grants agri-business, commercial, residential and consumer
installment loans to customers primarily in northern, western and central
Arkansas. The Company maintains a diversified loan portfolio.
F-19
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
14. Related Party Transactions
The bank subsidiaries have entered into transactions with their executive
officers, directors, principal shareholders, and their affiliates (related
parties). The aggregate amount of loans to such related parties at December
31, 1997 and 1998 was $210 and $1,019, respectively. New loans made to such
related parties were $169 and $1,169 for the years ended December 31, 1997 and
1998, respectively. Repayments of loans made by such related parties were
$1,571 and $360 for the years ended December 31, 1997 and 1998, respectively.
During 1998, the Company constructed four banking buildings. The majority
owner of the contractor on these construction projects is a member of the
Company's Board of Directors. Total payments to the contractor during the year
ended December 31, 1998, were approximately $7,424.
15. Regulatory Matters
Federal regulatory agencies generally require member banks to maintain core
(Tier 1) capital of at least 3% of total assets plus an additional cushion of
1% to 2%, depending upon capitalization classifications. Tier 1 capital
generally consists of total stockholders' equity. Additionally, these agencies
require member banks to maintain total risk-based capital of at least 8% of
risk-weighted assets, with at least one-half of that total capital amount
consisting of Tier 1 capital. Total capital for risk-based purposes includes
Tier 1 capital plus the lesser of the allowance for loan losses or 1.25% of
risk-weighted assets.
As of December 31, 1997 and 1998, the most recent notification from the
regulators categorized the bank subsidiaries as "Well Capitalized" under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the bank
subsidiaries' category.
At December 31, 1998, the bank subsidiaries exceeded their minimum capital
requirements. As of December 31, 1998, the state bank commissioner's approval
was required before the bank subsidiaries could declare and pay any dividend
of 75% or more of the net profits of the bank subsidiaries after all taxes for
the current year plus 75% of the retained net profits for the immediately
preceding year. Approximately $5,703 was available at December 31, 1998 for
payments of dividends by the bank subsidiaries without the approval of
regulatory authorities.
The bank subsidiaries are limited by federal law in the amount of credit
which they may extend to their non-bank affiliates, including the Corporation.
Loans and other extensions of credit (loans) to a single non-bank affiliate
may not exceed 10% nor shall loans to all non-bank affiliates exceed 20% of an
individual bank's capital plus its allowance for losses on loans. Such loans
must be collateralized by assets having market values of 100% to 130% of the
loan amount depending on the nature of the collateral. At December 31, 1998,
the maximum amount available for transfer from the bank subsidiaries to the
Company in the form of loans approximated $4,856. The law imposes no
restrictions upon extensions of credit between FDIC-insured banks which are
80%-owned subsidiaries of the Corporation.
F-20
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
The bank subsidiaries are required by regulatory agencies to maintain
certain minimum balances of cash or non-interest bearing deposits primarily
with the Federal Reserve. At December 31, 1997 and 1998, these required
balances aggregated approximately $1,395 and $2,621, respectively.
The Company's and bank subsidiaries' regulatory capital positions were as
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
----------------- -----------------
Computed Computed Computed Computed
Capital Percent Capital Percent
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bank of the Ozarks, Inc. (consolidated)
Total risk-based capital................. $37,465 14.27% $41,340 10.21%
Tier 1 risk-based capital................ 34,177 13.01 36,651 9.05
Leverage ratio........................... -- 9.86 -- 6.21
Bank of the Ozarks, wca:
Total risk-based capital................. $28,349 15.44% $36,700 12.57%
Tier 1 risk-based capital................ 26,050 14.19 33,117 11.34
Leverage ratio........................... -- 11.15 -- 8.51
Bank of the Ozarks, nwa:
Total risk-based capital................. $10,764 14.13% $11,732 11.35%
Tier 1 risk-based capital................ 9,810 11.88 10,625 10.28
Leverage ratio........................... -- 9.71 -- 6.57
Bank of the Ozarks
Total risk-based capital................. -- -- $ 5,180 44.11%
Tier I Risk-based capital................ -- -- 5,180 44.11
Leverage Ratio........................... -- -- -- 14.03
</TABLE>
16. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of financial instruments.
Cash and due from banks - For these short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Investment securities - For securities held for investment purposes, fair
values are based on quoted market prices or dealer quotes. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities or the carrying amount.
Loans, net of unearned income - The fair value of loans is estimated by
discounting the future cash flows using the current rate at which similar
loans would be made to borrowers with similar credit ratings and for the
same remaining maturities.
Deposit liabilities - The fair value of demand deposits, savings accounts,
NOW accounts and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed maturity certificates
is estimated using the rate currently offered for deposits of similar
remaining maturities. The carrying amount of accrued interest payable
approximates its fair value.
F-21
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
Other borrowed funds - For these short-term instruments, the carrying
amount is a reasonable estimate of fair value. The fair value of long-term
debt is estimated based on the current rates available to the Company for
debt with similar terms and remaining maturities.
Accrued interest - The carrying amount of accrued interest payable
approximates its fair value.
Off-balance sheet instruments - Fair values for off-balance sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standing.
Commitments to extend credit and standby letters of credit - The fair value
of these commitments is estimated using the fees currently charged to enter
into similar agreements taking into account the remaining terms of the
agreements and the present credit-worthiness of the counter-parties. For
fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The fair
value of letters of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate them or otherwise settle
the obligations with the counter-parties at the reporting date.
The following table presents the estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which involves significant
judgments by management and uncertainties. Fair value is the estimated amount
at which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. Because no market exists for certain of these financial instruments and
because management does not intend to sell these financial instruments, the
Company does not know whether the fair values shown below represent values at
which the respective financial instruments could be sold individually or in
the aggregate.
<TABLE>
<CAPTION>
December 31,
----------------------------------- ---
1997 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Financial assets:
Cash and due from banks.............. $ 15,628 $ 15,628 $ 15,024 $ 15,024
Available-for-sale securities........ 25,297 25,297 17,629 17,629
Held-to-maturity securities.......... 17,162 17,199 158,989 159,050
Federal funds sold................... 2,885 2,885 -- --
Loans, net of allowance for loan
losses.............................. 271,726 270,794 382,837 382,720
Accrued interest receivable.......... 3,013 3,013 5,517 5,517
Financial liabilities:
Demand, NOW and savings account
deposits............................ $ 95,833 $ 95,833 $145,609 $145,609
Time deposits........................ 199,722 201,547 383,431 384,598
Notes Payable........................ 5,072 5,072 12,448 12,448
FHLB advances and federal funds
purchased........................... 14,017 13,983 26,823 27,430
Repurchase agreements................ -- -- 1,408 1,408
Accrued interest and other
liabilities......................... 1,783 1,783 2,357 2,357
Off balance sheet items:
Standby letters of credit............ -- $ 1,932 -- $ 334
Commitments to extend credit......... -- 19,913 -- 27,409
Unfunded credit card loans........... -- 1,352 -- 1,419
</TABLE>
F-22
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
17. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year Ended December
31,
----------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Cash paid during the period for:
Interest.......................................... $9,682 $13,255 $20,466
Income taxes...................................... 1,984 2,752 2,333
Supplemental schedule of non-cash investing and
financing activities:
Transfer of loans to foreclosed assets held for
sale............................................. $ 236 $ 683 $ 628
Loans advanced for sales of foreclosed assets..... 72 203 251
</TABLE>
18. Other Operating Expenses
The following is a summary of other operating expenses:
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Operating supplies..................................... $ 215 $ 405 $ 454
Advertising and public relations....................... 123 332 566
Other.................................................. 1,552 1,856 2,941
------ ------ ------
Total other operating expenses......................... $1,890 $2,593 $3,961
====== ====== ======
</TABLE>
19. Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings
per share ("EPS"):
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Numerator:
Net income.......................................... $3,027 $4,531 $5,629
====== ====== ======
Denominator:
Denominator for basic EPS weighted average shares... 2,880 3,272 3,780
Effect of dilutive securities:
Stock options..................................... -- 9 39
------ ------ ------
Denominator for diluted EPS - adjusted weighted
average shares and assumed conversions............. 2,880 3,281 3,819
====== ====== ======
Basic EPS............................................. $ 1.05 $ 1.38 $ 1.49
====== ====== ======
Diluted EPS........................................... $ 1.05 $ 1.38 $ 1.47
====== ====== ======
</TABLE>
F-23
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
20. Parent Company Financial Information
The following condensed balance sheets, income statements and statements of
cash flows reflect the financial position and results of operations for the
parent company:
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Assets
Cash and cash equivalents..................................... $ 3,264 $ 51
Investment in subsidiaries.................................... 36,313 51,459
Premises and equipment, net................................... 31 25
Excess cost over fair value of net assets acquired, at
amortized cost............................................... 1,337 1,261
Other......................................................... 8 11
------- -------
Total assets.............................................. $40,953 $52,807
======= =======
Liabilities and Stockholders' Equity
Notes payable................................................. $ 5,072 $12,388
Accrued interest and other liabilities........................ 215 64
------- -------
Total liabilities......................................... 5,287 12,452
------- -------
Stockholders' equity
Common stock................................................ 38 38
Additional paid-in capital.................................. 14,314 14,314
Retained earnings........................................... 21,162 25,922
Accumulated other comprehensive income...................... 152 81
------- -------
Total stockholders' equity................................ 35,666 40,355
------- -------
Total liabilities and stockholders' equity................ $40,953 $52,807
======= =======
</TABLE>
F-24
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands)
Condensed Statements of Income
<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Income
Dividends from subsidiaries........................... $1,250 $ -- $3,317
Other................................................. 1 1 2
------ ------ ------
Total income............................................ 1,251 1 3,319
------ ------ ------
Expenses
Interest.............................................. 468 554 637
Salaries and employee benefits........................ 349 284 --
Net occupancy and equipment........................... 51 71 53
Other operating expenses.............................. 243 360 620
------ ------ ------
Total expenses.......................................... 1,111 1,269 1,310
------ ------ ------
Income (loss) before income tax benefit and equity in
undistributed earnings of subsidiaries................. 140 (1,268) 2,009
Income taxes benefit.................................. 183 486 461
Equity in undistributed earnings of subsidiary........ 2,704 5,313 3,159
------ ------ ------
Net income.............................................. $3,027 $4,531 $5,629
====== ====== ======
</TABLE>
F-25
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (concluded)
(Dollars in thousands)
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December
31,
------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income......................................... $3,027 $ 4,531 $ 5,629
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation..................................... 16 18 13
Amortization..................................... 57 56 77
Equity in undistributed earnings of
subsidiaries.................................... (2,704) (5,313) (3,159)
Changes in assets and liabilities:
Accrued interest and other liabilities.......... 106 (199) (110)
Other, net...................................... (30) 18 (3)
------ ------- -------
Net cash provided by (used in) operating activities.. 472 (889) 2,447
------ ------- -------
Cash flows from investing activities
Purchases of premises and equipment................ $ (6) $ (22) $ (7)
Purchase 100% of the stock in Heartland Community
Bank, FSB......................................... -- -- (3,100)
Additional investment in subsidiaries and purchase
of minority shares of stock....................... (1,500) (9,000) (9,000)
------ ------- -------
Net cash used in investing activities................ (1,506) (9,022) (12,107)
------ ------- -------
Cash flows from financing activities
Proceeds from issuance of common stock............. -- 13,155 --
Proceeds from notes payable........................ 1,500 10,000 14,350
Payments of notes payable.......................... (24) (10,324) (7,034)
Dividends paid..................................... (864) (620) (869)
------ ------- -------
Net cash provided by financing activities............ 612 12,211 6,447
------ ------- -------
Net (decrease) increase in cash and cash
equivalents......................................... (422) 2,300 (3,213)
Cash and cash equivalents - beginning of period...... 1,386 964 3,264
------ ------- -------
Cash and cash equivalents - end of period............ $ 964 $ 3,264 $ 51
====== ======= =======
</TABLE>
F-26
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
<TABLE>
<CAPTION>
March 31,
------------------
1998 1999
-------- --------
(Dollars in
thousands,
except per share
amounts)
<S> <C> <C>
ASSETS
Cash and due from banks.................................... $ 14,021 $ 13,260
Interest bearing deposits.................................. 10,885 184
Investment securities - available for sale................. 18,461 44,778
Investment securities - held to maturity................... 51,790 170,271
Federal funds sold......................................... 7,780 2,180
Loans, net of unearned income.............................. 299,505 400,851
Allowance for loan losses.................................. (3,822) (4,850)
Premises and equipment, net................................ 16,951 27,939
Foreclosed assets held for sale, net....................... 248 855
Interest receivable........................................ 3,414 6,288
Intangible assets, net..................................... 2,162 3,520
Other...................................................... 1,260 1,645
-------- --------
Total assets........................................... $422,655 $666,921
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - non-interest bearing............................ $ 39,259 $ 56,280
Savings and interest-bearing transaction................. 69,088 104,895
Time..................................................... 243,965 420,529
-------- --------
Total deposits.......................................... 352,312 581,704
Notes payable.............................................. 5,072 13,183
FHLB advances and federal funds purchased.................. 25,993 25,425
Repurchase agreements...................................... -- 2,124
Accrued interest and other liabilities..................... 2,485 2,855
-------- --------
Total liabilities....................................... 385,862 625,291
-------- --------
Stockholders' equity
Common stock; $0.01 par value; Authorized 10,000,000
shares; 3,779,555 shares issued and outstanding......... 38 38
Additional paid-in capital............................... 14,314 14,314
Retained earnings........................................ 22,347 27,070
Accumulated other comprehensive income................... 94 208
-------- --------
Total stockholders' equity.............................. 36,793 41,630
-------- --------
Total liabilities and stockholders' equity............. $422,655 $666,921
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1998 1999
------------ -------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Interest income
Loans.......................................... $ 6,921 $ 8,617
Investment securities - taxable................ 776 2,758
Investment securities - non-taxable............ 128 347
Federal funds sold............................. 54 3
Deposits with banks............................ 114 5
------------ -------------
Total interest income........................ 7,993 11,730
------------ -------------
Interest expense
Deposits....................................... 3,488 5,717
Notes payable.................................. 108 205
FHLB advances.................................. 240 334
Federal funds purchased and repurchase
agreements.................................... -- 165
------------ -------------
Total interest expense....................... 3,836 6,421
------------ -------------
Net interest income.............................. 4,157 5,309
Provision for loan losses...................... (225) (611)
------------ -------------
Net interest income after provision for loan
losses.......................................... 3,932 4,698
------------ -------------
Other income
Trust income................................... 78 128
Service charges on deposit accounts............ 281 502
Other income, charges and fees................. 557 602
Gains on sales of securities................... 51 25
Other.......................................... 127 12
------------ -------------
Total other income........................... 1,094 1,269
------------ -------------
Other expense
Salaries and employee benefits................. 1,677 2,000
Net occupancy and equipment.................... 426 636
Other operating expenses....................... 821 1,132
------------ -------------
Total other expense.......................... 2,924 3,768
------------ -------------
Income before income taxes....................... 2,102 2,199
Provision for income taxes..................... 728 673
------------ -------------
Net income....................................... $ 1,374 $ 1,526
============ =============
Basic and diluted earnings per common share...... $ 0.36 $ 0.40
============ =============
Cash dividends declared.......................... $ 0.05 $ 0.10
============ =============
</TABLE>
See accompanying notes to consolidated financial statements
F-28
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unaudited
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income Total
------ ---------- -------- ------------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance - January
1, 1998..................... $38 $14,314 $21,162 $152 $35,666
Comprehensive income:
Net income................. -- -- 1,374 -- 1,374
Other comprehensive income:
Unrealized gains on
available for sale
securities net of $1 tax
effect................... -- -- -- (2) (2)
Less: reclassification
adjustment for gains
included in income net of
$35 tax effect........... -- -- -- (56) (56)
-------
Comprehensive income........ -- -- -- -- 1,316
-------
Cash dividends.............. -- -- (189) -- (189)
--- ------- ------- ---- -------
Ending balance - March 31,
1998........................ $38 $14,314 $22,347 $ 94 $36,793
=== ======= ======= ==== =======
Beginning balance - January
1, 1999..................... $38 $14,314 $25,922 $ 81 $40,355
Comprehensive income:
Net income................. -- -- 1,526 -- 1,526
Other comprehensive income:
Unrealized gains on
available for sale
securities net of $113
tax effect............... -- -- -- 182 182
Less: reclassification
adjustment for gains
included in income net of
$35 tax effect........... -- -- -- (55) (55)
-------
Comprehensive income........ -- -- -- -- 1,653
-------
Cash dividends.............. -- -- (378) -- (378)
--- ------- ------- ---- -------
Ending balance - March 31,
1999........................ $38 $14,314 $27,070 $208 $41,630
=== ======= ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1999
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Net income.......................................... $ 1,374 $ 1,526
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 195 331
Amortization....................................... 22 67
Provision for loan losses.......................... 225 611
Provision for losses on foreclosed assets.......... -- 16
Gains on sales of securities....................... (51) (25)
(Increase) decrease in mortgage loans held for
sale.............................................. (365) 1,481
Gain on disposition of premises and equipment...... (4) (4)
(Gain) loss on disposition of foreclosed assets.... (84) 10
Deferred income taxes.............................. (22) (67)
Changes in assets and liabilities:
Interest receivable............................... (399) (771)
Other, net........................................ 468 (276)
Accrued interest and other liabilities............ 167 499
----------- -----------
Net cash provided by operating activities........... 1,526 3,398
----------- -----------
Cash flows from investing activities:
Purchase of subsidiaries, net of funds acquired.... 7,164 --
Proceeds from sales and maturities of investment
securities available for sale..................... 7,230 6,713
Purchases of investment securities available for
sale.............................................. (280) (33,634)
Proceeds from maturities of investment securities
held to maturity.................................. 3,145 26,111
Purchases of investment securities held to
maturity.......................................... (37,781) (37,393)
Increase in federal funds sold..................... (4,450) (2,180)
Net increase in loans.............................. (24,064) (16,153)
Proceeds from issuance of loans.................... -- --
Proceeds from dispositions of bank premises and
equipment......................................... 4 15
Purchase of bank premises and equipment............ (3,038) (1,126)
Proceeds from dispositions of foreclosed assets.... 210 330
----------- -----------
Net cash used by investing activities............... (51,860) (57,317)
----------- -----------
Cash flows from financing activities:
Net increase in deposits........................... 47,402 52,664
Net changes in FHLB advances and federal funds
purchased......................................... 12,399 (1,398)
Net increase in repurchase agreements.............. -- 716
Proceeds from notes payable........................ -- 735
Dividends paid..................................... (189) (378)
----------- -----------
Net cash provided by financing activities........... 59,612 52,339
----------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ 9,278 (1,580)
Cash and cash equivalents - beginning of period..... 15,628 15,024
----------- -----------
Cash and cash equivalents - end of period........... $ 24,906 $ 13,444
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
BANK OF THE OZARKS, INC.
Notes To Consolidated Financial Statements
Unaudited
1. Principles of Consolidation
The consolidated financial statements of Bank of the Ozarks, Inc. include
the accounts of the parent company and its wholly owned subsidiaries,
including Bank of the Ozarks, wca and Bank of the Ozarks, nwa, (collectively
the "Company"). All material intercompany transactions have been eliminated.
2. Basis of Presentation
The accompanying consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") in Article 10 of Regulation S-X and
with the instructions to Form 10-Q, and in accordance with generally accepted
accounting principles for interim financial information. Certain information,
accounting policies and footnote disclosures normally included in complete
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with such rules and
regulations. It is therefore suggested that these consolidated financial
statements be read in conjunction with the audited consolidated financial
statements and notes thereto included elsewhere in this prospectus.
In the opinion of management all adjustments considered necessary,
consisting of normal recurring items, have been included for a fair
presentation of the accompanying consolidated financial statements. Operating
results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the full year.
3. Earnings Per Common Share
Basic EPS is computed by dividing reported earnings available to common
stockholders by weighted average shares outstanding. No dilution for any
potentially dilutive securities is included. Diluted EPS includes the dilutive
effect of stock options. In computing dilution for stock options, the average
share price is used for the reporting period.
Basic and diluted earnings per common share is computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1999
----------- -----------
(In thousands, except
per share amounts)
<S> <C> <C>
Common shares - weighted averages...................... 3,780 3,780
Common share equivalents - weighted averages........... 41 16
----------- -----------
3,821 3,796
=========== ===========
Net income............................................. $ 1,374 $ 1,526
Basic earnings per common share........................ $ 0.36 $ 0.40
Diluted earnings per common share...................... 0.36 0.40
</TABLE>
F-31
<PAGE>
BANK OF THE OZARKS, INC.
Notes to Consolidated Financial Statements (continued)
Unaudited
4. Federal Home Loan Bank ("FHLB") Advances
FHLB advances with original maturities exceeding one year totaled $25.4
million at March 31, 1999. Interest rates on these advances ranged from 4.16%
to 6.47% at March 31, 1999 with a weighted average rate of 5.28%. Aggregate
annual maturities (amounts in thousands) and weighted average interest rates
of FHLB advances with an original maturity of over one-year at March 31, 1999
are as follows:
<TABLE>
<CAPTION>
Weighted
Amounts Average Rate
------- ------------
<S> <C> <C>
1999....................................................... $ 2,700 6.47%
2000....................................................... 2,145 5.77
2001....................................................... 4,198 5.94
2002....................................................... 197 6.30
2003....................................................... 197 6.30
Thereafter................................................. 15,988 4.82
-------
$25,425
=======
</TABLE>
FHLB advances of $15.0 million maturing in 2008 and 2009 may be called
quarterly but the Company has the option to refinance on a long-term basis any
amounts called.
At March 31, 1999, the Company had no FHLB advances with original maturities
of one year or less.
5. Supplementary Data for Cash Flows
Cash payments for interest by the Company during the three months ended
March 31, 1998, amounted to $3.7 million and during the three months ended
March 31, 1999, amounted to $6.4 million. Cash payments for income taxes
during the three months ended March 31, 1998 and 1999 amounted to $72,000 and
$148,000, respectively.
F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,500,000 PREFERRED SECURITIES
OZARK CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10PER PREFERRED SECURITY)
GUARANTEED BY
[LOGO OF BANK OF THE OZARKS APPEARS HERE]
----------------
PROSPECTUS
----------------
STEPHENS INC.
MORGAN KEEGAN & COMPANY, INC.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses of this offering in connection with this registration
statement, other than underwriting compensation, are estimated as follows:
<TABLE>
<S> <C> <C>
SEC Registration Fee.......................................... $ 4,795
Nasdaq Listing Fees........................................... 17,500
NASD Filing Fee............................................... 2,225
Blue Sky Fees and Expenses.................................... 2,000
Accounting Fees and Expenses.................................. 80,000
Legal Fees and Expenses....................................... 90,000
Printing and Engraving........................................ 100,000
Trustee Fees and Expenses..................................... 15,000
Miscellaneous................................................. 3,480
--------
Total....................................................... $315,000
======== ===
</TABLE>
The foregoing expenses are to be paid by the Company.
Item 14. Indemnification of Directors and Officers.
Article Ninth of the Company's Amended and Restated Articles of
Incorporation provides that the Company's directors will not be personally
liable to the Company or any of its stockholders for monetary damages
resulting from breaches of their fiduciary duty as directors expect (a) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Arkansas Code
Annotated (S)4-27-833, as the same exists or hereafter may be amended, (d) for
any transaction from which the director derived an improper personal benefit,
or (e) for any action, omission, transaction, or breach of a director's duty
creating any third party liability to any person or entity other than the
Company or stockholder.
Section 4-27-850 of the Arkansas Business Corporation Act empowers Arkansas
corporations to indemnify any former or current director or officer against
expenses, judgments, fines and amounts paid in settlements actually and
reasonably incurred by him in connection with any action, suit or proceeding,
if such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal proceeding had no reasonable cause to believe his
conduct was unlawful, except that no indemnification shall be made in
connection with any action by or in the right of the corporation if such
person is adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation, unless the court determines that
despite that adjudication of liability such person is fairly and reasonably
entitled to indemnify for such expenses actually and reasonably incurred by
him.
Article Tenth of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall, to the full extent permitted by
Section 4-27-850 of the Arkansas Business Corporation Act, indemnify all
persons whom it may indemnify pursuant thereto.
The effect of the indemnification provisions contained in the Company's
Amended and Restated Articles of Incorporation is to require the Company to
indemnify its directors and officers under circumstances where such
indemnification would otherwise be discretionary.
The Company's Amended and Restated Articles of Incorporation specify that
the indemnification rights granted thereunder are enforceable contract rights
which are not exclusive of any other indemnification rights that the director
or officer may have under any by-law, vote of stockholders or disinterested
directors or
II-1
<PAGE>
otherwise. As permitted by Section 4-27-850 of the Arkansas Business
Corporation Act, the Company's Amended and Restated Articles of Incorporation
also authorize the Company to purchase directors' and officers' insurance for
the benefit of its past and present directors and officers, irrespective of
whether the Company has the power to indemnify such persons under Arkansas
law. The Company currently maintains such insurance as allowed by these
provisions.
The Company's Amended and Restated Articles of Incorporation also provide
that expenses incurred by a director or officer in defending a civil or
criminal lawsuit or proceeding arising out of actions taken in his official
capacity, or in certain other capacities, will be paid by the Company in
advance of the final disposition of the matter upon receipt of an undertaking
from the director or officer to repay the sum advanced if it is ultimately
determined that he is not entitled to be indemnified by the Company pursuant
to applicable provisions of Arkansas law.
As noted above, the Company's directors and officers have certain indemnity
rights under the Company's Amended and Restated Articles of Incorporation and
are protected from certain other liabilities by the Company's existing
directors' and officers' insurance. The Company has also entered into
supplemental indemnification agreements with its directors and with certain
officers designated by the Board of Directors (collectively the
"Indemnitees"), which broaden the scope of indemnity that would otherwise be
provided by the Company to such persons under the terms of its Amended and
Restated Articles of Incorporation.
The indemnification agreements with the Indemnitees provide that, subject to
certain important exceptions, the Indemnitees shall be indemnified to the
fullest possible extent permitted by law against any amount which they become
legally obligated to pay because of any act or omission or neglect or breach
of duty. Such amount includes all expenses (including attorneys' fees),
damages, judgments, costs and settlement amounts, actually and reasonably
incurred or paid by them in any action or proceeding, including any action by
or in the right of the Company, on account of their service as a director or
officer of the Company or any subsidiary of the Company. The indemnification
agreements further provide that expenses incurred by the Indemnitees in
defending such actions, in accordance with the terms of the agreements, shall
be paid in advance, subject to the Indemnitees' obligation to reimburse the
Company in the event it is ultimately determined that they are not entitled to
be indemnified for such expenses under any of the provisions of the
indemnification agreements.
No indemnification is provided under the indemnification agreements on
account of conduct which is adjudged to be deliberately dishonest and material
to establishing the liability for which indemnification is sought. In
addition, no indemnification is provided if a final court adjudication shall
determine that such indemnification is not lawful, or in respect of any suit
in which judgment is rendered for an accounting of profits made from a
purchase or sale of securities of the Company in violation of Section 16(b) of
the Securities Exchange Act of 1934, or of any similar statutory provision, or
on account of any remuneration, personal profit or advantage which is adjudged
to have been obtained in violation of law. The indemnification agreements also
contain provisions designed to protect the Company from unreasonable
settlements or redundant legal expenditures.
The indemnification agreements also provide for contribution by the Company,
with certain exceptions, to amounts paid by the Indemnitees in any situation
in which the Company and such individuals are jointly liable (or would be if
the Company were joined in the litigation) if for any reason indemnification
is not available. Such contribution would be based on the relative benefits to
the Company and the individuals of the transaction from which liability arose,
and on the relative fault in the transaction of the Company and the
individuals. This provision could be applicable in the event a court found
that indemnification under the federal securities laws is against public
policy and thus not enforceable, as well as under state laws.
The indemnification agreements provide for substantially broader indemnity
rights than those currently granted to the directors and officers of the
Company under the Company's Amended and Restated Articles of Incorporation,
which afforded directors and officers only those express indemnification
rights set forth in Section 4-27-850 of the Arkansas Business Corporation.
They are not intended to deny or otherwise limit third party or
II-2
<PAGE>
derivative suits against the Company or its directors or officers. However, to
the extent a director or officer were entitled to indemnification or
contribution thereunder, the financial burden of a third party suit would be
borne by the Company, and the Company would not benefit from derivative
recoveries since the amount of such recoveries would be repaid to the director
or officer pursuant to the agreements.
Section 8(b) of the form of Underwriting Agreement filed as Exhibit 1.1
provides that the Underwriter will indemnify and hold harmless the Company,
each of its directors and officers who have signed this registration
statement, and each controlling person of the Company from and against certain
liabilities, including liabilities under the Securities Act published rules
and regulations adopted by the SEC under the Securities Act and the Securities
Exchange Act of 1934, as amended, and provides that the Underwriter will
reimburse any legal or other expenses reasonably incurred by such persons in
connection with such liabilities.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement (attached).
1.2 Form of Agreement Among Underwriters (attached).
4.1 Certificate of Trust of Ozark Capital Trust (attached).
4.2 Trust Agreement of Ozark Capital Trust (attached).
4.3 Form of Ozark Capital Trust Amended and Restated Trust Agreement
(attached).
4.4 Form of Preferred Securities Certificates (included as an exhibit to
Exhibit 4.3).
4.5 Form of Agreement as to Expenses and Liabilities (included as an
exhibit to Exhibit 4.3).
4.6 Form of Subordinated Indenture (attached).
4.7 Form of Subordinated Debenture (included as an exhibit to Exhibit
4.6).
4.8 Form of Preferred Securities Guarantee Agreement (attached).
5.1 Opinion of Kutak Rock regarding the legality of securities being
registered (attached).
5.2 Opinion of Morris, James, Hitchens & Williams (attached).
8.1 Opinion of Kutak Rock regarding tax matters (attached).
10.1 Bank of the Ozarks, Inc. Stock Option Plan, dated May 22, 1997
(previously filed as Exhibit No. 10.1 to the Company's Registration
Statement on Form S-1 filed with the Commission on May 22, 1997, as
amended, Commission File No. 333-27641, and incorporated herein by
this reference).
10.2 Bank of the Ozarks, Inc. Non-Employee Director Stock Option Plan,
dated May 22, 1997 (previously filed as Exhibit No. 10.2 to the
Company's Registration Statement on Form S-1 filed with the Commission
on May 22, 1997, as amended, Commission File No. 333-27641, and
incorporated herein by this reference).
10.3 Loan Agreement with Union Planters National Bank, Memphis, Tennessee,
dated March 25, 1998 (previously filed as Exhibit No. 10 to the
Company's Quarterly Report on Form 10-Q filed with the Commission for
the period ended March 31, 1998, and incorporated herein by this
reference).
10.4 Real Estate Contract--Fort Smith (Sebastian County), dated February 6,
1997 (previously filed as Exhibit No. 10.4 to the Company's
Registration Statement on Form S-1 filed with the Commission on May
22, 1997, as amended, Commission File No. 333-27641, and incorporated
herein by this reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.5 Offer & Acceptance--(Chenal Parkway) Little Rock (Pulaski County),
dated December 12, 1996 (previously filed as Exhibit No. 10.5 to the
Company's Registration Statement on Form S-1 filed with the Commission
on May 22, 1997, as amended, Commission File No. 333-27641, and
incorporated herein by this reference).
10.6 Ground Lease--Marshall (Searcy County), dated October 15, 1993
(previously filed as Exhibit No. 10.6 to the Company's Registration
Statement on Form S-1 filed with the Commission on May 22, 1997, as
amended, Commission File No. 333-27641, and incorporated herein by
this reference).
10.7 Ground Lease--Harrison (Boone County), dated December 22, 1994
(previously filed as Exhibit No. 10.7 to the Company's Registration
Statement on Form S-1 filed with the Commission on May 22, 1997, as
amended, Commission File No. 333-27641, and incorporated herein by
this reference).
10.8 Ground Lease--Clarksville (Johnson County), dated January 1, 1995
(previously filed as Exhibit No. 10.7 to the Company's Registration
Statement on Form S-1 filed with the Commission on May 22, 1997, as
amended, Commission File No. 333-27641, and incorporated herein by
this reference).
10.9 Employment Agreement, dated May 22, 1997, between the Registrant and
George Gleason (previously filed as Exhibit No. 10.9 to the Company's
Registration Statement on Form S-1 filed with the Commission on May
22, 1997, as amended, Commission File No. 333-27641, and incorporated
herein by this reference).
10.10 Form of Indemnification Agreement between the Registrant and its
directors and certain of its executive officers (previously filed as
Exhibit No. 10.10 to the Company's Registration Statement on Form S-1
filed with the Commission on May 22, 1997, as amended, Commission File
No. 333-27641, and incorporated herein by this reference).
10.11 Amendment to Employment Agreement, dated September 16, 1997, between
the Registrant and George Gleason (previously filed as exhibit 10 to
the Company's quarterly report on Form 10-Q filed with the Commission
for the period ended September 30, 1997, and incorporated herein by
this reference).
10.12 Second Amendment to Employment Agreement, dated July 21, 1998 between
the Registrant and George Gleason (previously filed as Exhibit 10 to
the Company's Quarterly Report on Form 10-Q filed with the Commission
for the period ended June 30, 1998, and incorporated herein by
reference.)
10.13 Stock Purchase Agreement, dated November 19, 1997, between the
Registrant, Heartland Community Bank, Camden, Arkansas, and HCB
Bancshares, Inc. (previously filed as Exhibit No. 10.12 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997, and incorporated herein by this reference).
10.14 Construction Contract, dated September 2, 1997, between Bank of the
Ozarks, wca and East-Harding, Inc. (Little Rock Office) (previously
filed as Exhibit No. 10.13 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, and incorporated herein by this
reference).
10.15 Construction Contract, dated December 24, 1997, between Bank of the
Ozarks, wca and East-Harding, Inc. (Fort Smith Office) (previously
filed as Exhibit No. 10.14 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, and incorporated herein by this
reference).
10.16 Ground Lease--North Little Rock (Pulaski County), dated November 20,
1998, between the Registrant and the Indian Hills Shopping Center
Partnership d/b/a Indian Hills Shopping Center, as amended December 8,
1998 (filed as Exhibit 10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998, and incorporated herein by
this reference).
12.1 Computation of Ratio of Earnings to Fixed Charges (attached).
21.1 List of Subsidiaries of the Company (attached).
23.1 Consent of Kutak Rock (contained in Exhibit 5.1 hereto).
23.2 Consent of Moore Stephens Frost (attached).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
23.3 Consent of Ernst & Young LLP (attached).
23.4 Consent of Morris, James, Hitchens & Williams (contained in Exhibit
5.2 hereto).
24.1 Powers of Attorney (attached).
25.1 Form of Eligibility on Form T-1 under Trust Indenture Act of 1939, as
amended, of FMB Trust Company, National Association, as trustee under
the Subordinated Indenture, Amended and Restated Trust Agreement and
Preferred Securities Guarantee Agreement (attached).
</TABLE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
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 SEC 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.
The undersigned Registrant undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a 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 this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act,
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-5
<PAGE>
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 Little Rock, state of
Arkansas, on May 25, 1999.
Bank of the Ozarks, Inc.
(Registrant)
/s/ George Gleason
By: _________________________________
George Gleason
Chairman of the Board of
Directors and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ George Gleason Chairman of the Board of May 25, 1999
______________________________________ Directors and Chief
(George Gleason) Executive Officer
/s/ James Patridge Vice Chairman of the Board May 25, 1999
______________________________________ of Directors and Director
(James Patridge)
/s/ Mark Ross President and Director May 25, 1999
______________________________________
(Mark Ross)
/s/ Paul Moore Chief Financial Officer May 25, 1999
______________________________________ (Principal Financial
(Paul Moore) Officer and Accounting
Officer)
/s/ *Roger Collins Director May 25, 1999
______________________________________
(Roger Collins)
/s/ *Jerry Davis Director May 25, 1999
______________________________________
(Jerry Davis)
/s/ *C. E. Dougan Director May 25, 1999
______________________________________
(C. E. Dougan)
/s/ *Robert East Director May 25, 1999
______________________________________
(Robert East)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ *Linda Gleason Director May 25, 1999
______________________________________
(Linda Gleason)
/s/ *Porter Hillard Director May 25, 1999
______________________________________
(Porter Hillard)
/s/ *Henry Mariani Director May 25, 1999
______________________________________
Henry Mariani
/s/ *R. L. Qualls Director May 25, 1999
______________________________________
R. L. Qualls
/s/ *Kennith Smith Director May 25, 1999
______________________________________
Kennith Smith
/s/ George Gleason Director May 25, 1999
*By: _________________________________
(George Gleason
Attorney-in-Fact)
</TABLE>
II-7
<PAGE>
EXHIBIT 1.1
DRAFT
BANK OF THE OZARKS, INC.
and
OZARK CAPITAL TRUST
1,500,000 Shares*
Preferred Securities
UNDERWRITING AGREEMENT
----------------------
____________, 1999
STEPHENS INC.
MORGAN KEEGAN & COMPANY, INC.
As Representatives of the Several Underwriters
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
Ozark Capital Trust (the "Trust"), a business trust under the Delaware
Business Trust Act (the "Delaware Act"), and Bank of the Ozarks, Inc., an
Arkansas corporation (the "Company" and together with the Trust, the "Offerors")
confirm their agreement with the several underwriters (the "Underwriters") for
whom you are acting as representatives (the "Representatives") to issue and sell
an aggregate of 1,500,000 shares of the Trust's preferred securities (the
"Underwritten Preferred Securities") to the Underwriters. The preferred
securities are more fully described in the Registration Statement and the
Prospectus hereinafter mentioned.
For the sole purpose of covering over-allotments in connection with the
sale of the Underwritten Preferred Securities, the Trust proposes to grant to
the Underwriters the option (the "Option") described in Section 2 hereof to
purchase all or any part of 225,000 shares of preferred securities (the "Option
Preferred Securities") owned by it. The Underwritten Preferred Securities and
the Option Preferred Securities purchased pursuant to this Underwriting
Agreement are herein called the "Preferred Securities" and the proposed offering
of the Preferred Securities by the Underwriters is hereinafter referred to as
the "Public Offering."
- ----------------------
* Plus up to 225,000 additional shares to cover over-allotments; if any.
<PAGE>
The Preferred Securities will be guaranteed by the Company with respect to
distributions and amounts payable upon liquidation or redemption pursuant to the
terms and conditions set forth in the Preferred Securities Guarantee Agreement
(the "Guarantee") to be dated as of Closing Time (as defined below) executed and
delivered by the Company and FMB Trust Company, National Association (the
"Guarantee Trustee"). The Company and the Trust each understand that the
Underwriters propose to make a public offering of the Preferred Securities as
soon as they deem advisable after this Underwriting Agreement has been executed
and delivered, and the Trust Agreement (as defined in this Underwriting
Agreement), the Indenture (as defined in this Underwriting Agreement), and the
Guarantee have been qualified under the Trust Indenture Act. The entire proceeds
from the sale of the Preferred Securities will be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities") and will be used by the Trust to purchase the __%
Subordinated Debentures (the "Debentures") issued by the Company. The Preferred
Securities and the Common Securities will be issued pursuant to the Trust
Agreement, to be dated as of Closing Time (the "Trust Agreement"), among the
Company, as Sponsor, FMB Trust Company, as property trustee (the "Property
Trustee"), First Omni Bank, National Association, as Delaware trustee (the
"Delaware Trustee"), and the identified administrative trustees (the
"Administrative Trustees" and together with the Property Trustee and the
Delaware Trustee, the "Trustees"), and the holders from time to time of
undivided beneficial interests in the assets of the Trust. The Debentures will
be issued pursuant to a subordinated indenture, to be dated as of Closing Time
(the "Indenture"), between the Company and FMB Trust Company, as debenture
trustee (the "Debenture Trustee").
The Preferred Securities, the Guarantee and the Debentures are collectively
referred to in this Underwriting Agreement as the "Securities." The Indenture,
the Trust Agreement and this Underwriting Agreement are collectively referred to
in this Underwriting Agreement as the "Operative Documents."
The Offerors have filed with the Securities and Exchange Commission (the
"Commission"), pursuant to the Securities Act of 1933, as amended (the "Act"),
published rules and regulations adopted by the Commission under the Act (the
"Rules") and the Trust Indenture Act of 1939, as amended and the rules and
regulations thereunder, (the "Trust Indenture Act") a registration statement on
Form S-1 ("Form S-1") (File No. 333-_______), including a preliminary
prospectus, relating to the Preferred Securities, and such amendments to such
registration statement as may have been filed with the Commission to the date of
this Underwriting Agreement. The term "preliminary prospectus" means any
preliminary prospectus (as referred to in Rule 430 or Rule 430A of the Rules)
included at any time as a part of the registration statement. The Offerors have
furnished to the Representatives copies of such registration statement, each
amendment to it filed with the Commission and each preliminary prospectus filed
by the Offerors with the Commission and any other offering materials used by the
Offerors. If such registration statement has not become effective, a further
amendment (the "Final Amendment") to such registration statement, including a
form of final prospectus, if necessary to permit such registration statement to
become effective, will promptly be filed by the Offerors with the Commission.
If such registration statement has become effective, a final prospectus (the
"Rule 430A Prospectus") containing information permitted to be omitted at the
time of effectiveness by Rule 430A of the Rules will promptly be filed by the
2
<PAGE>
Offerors with the Commission in accordance with the Rules. The registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including financial statements and all exhibits and any information
deemed to be included by Rule 430A, is called the "Registration Statement." The
term "Prospectus" means the prospectus as first filed with the Commission
pursuant to Rule 424(b) of the Rules, or if no such filing is required, the form
of final prospectus included in the Registration Statement at the Effective
Date.
Any reference herein to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to refer to and include any
documents incorporated by reference therein on or before the Effective Date or
the date of such preliminary prospectus or the Prospectus, as the case may be.
As Representatives, you have advised the Offerors (a) that you are
authorized to enter into this Underwriting Agreement on behalf of the several
Underwriters and (b) the Underwriters are willing, acting severally and not
jointly, to purchase the amounts of the Underwritten Preferred Securities set
forth opposite their respective names in Schedule I hereto, plus their pro rata
portion of the Option Preferred Securities if you elect to exercise the over-
allotment Option in whole or in part for the accounts of the several
Underwriters.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the Offerors
and the Underwriters hereby agree as follows:
1. Representations, Warranties and Agreements of the Offerors.
(a) The Offerors jointly and severally represent and warrant to, and agree
with, each Underwriter as follows:
(i) The Company has been duly organized, is in compliance with its
Amended and Restated Articles of Incorporation, and is validly existing as a
corporation in good standing under the laws of the State of Arkansas, with full
power and authority (corporate and other) to own its properties and conduct its
business as described in the Registration Statement and Prospectus; all
significant subsidiaries (as defined by the Act) of the Company (each, a
"Subsidiary" and collectively, the "Subsidiaries") have been duly incorporated,
will be, and are validly existing as a banking association or corporation, as
the case may be, in good standing under the laws of the jurisdiction of its
association or incorporation, as the case may be, with full power and authority
(corporate and other) to own or lease its properties and conduct its business;
the Company and the Subsidiaries are duly qualified to transact business in all
jurisdictions in which the conduct of their business or the ownership or lease
of their properties requires such qualifications; all of the outstanding shares
of capital stock of each Subsidiary are owned by the Company and have been duly
and validly authorized and issued, are fully paid and non-assessable.
(ii) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Delaware Business Trust Act
with the power and authority (trust and other) to own its property and conduct
its business as described in the Registration Statement and Prospectus, to issue
and sell the Common Securities to the Company pursuant to the Trust
3
<PAGE>
Agreement, to issue and sell the Preferred Securities, to enter into and perform
its obligations under this Underwriting Agreement and to consummate the
transactions herein contemplated; the Trust has no subsidiaries and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or the ownership of its property requires such
qualification, except to the extent that the failure to be so qualified or to be
in good standing would not have a material adverse effect on the Trust; the
Trust has conducted and will conduct no business other than the transactions
contemplated by this Underwriting Agreement and described in the Prospectus; the
Trust is not a party to or bound by any agreement or instrument other than this
Underwriting Agreement, the Trust Agreement and the agreements and instruments
contemplated by the Trust Agreement and described in the Prospectus; the Trust
has no liabilities or obligations other than those arising out of the
transactions contemplated by this Underwriting Agreement and the Trust Agreement
and described in the Prospectus; the Trust is not a party to or subject to any
action, suit or proceeding of any nature; the Trust is not, and at the Closing
Date or any Option Closing Date will not be, to the knowledge of the Offerors,
classified as an association taxable as a corporation for United States federal
income tax purposes; and the Trust is, and as of the Closing Date or any Option
Closing Date will be, treated as a consolidated subsidiary of the Company
pursuant to generally accepted accounting principles.
(iii) The capital stock of the Company and the equity securities
of the Trust conform to the description thereof contained in the Prospectus or
the financial information included therein (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The outstanding shares of
capital stock and equity securities of each Offeror have been duly authorized
and validly issued and are fully paid and nonassessable, and no such shares were
issued in violation of the preemptive or similar rights of any security holder
of an Offeror; no person has any preemptive or similar right to purchase any
shares of capital stock or equity securities of the Offerors. Except as
disclosed in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), there are no outstanding rights, options or
warrants to acquire from the Offerors any securities of the Offerors other than
options and warrants issued by the Company pursuant to its employee benefit
plans, and there are no outstanding securities convertible into or exchangeable
for any such securities and no restrictions upon the voting or transfer of any
capital stock of the Company or equity securities of the Trust pursuant to the
Company's corporate charter or bylaws, the Trust Agreement or any agreement or
other instrument to which an Offeror is a party or by which an Offeror is bound,
provided however that the holders of the Preferred Securities will have limited
voting rights as described in the Prospectus. As of the Closing Date (as
defined below) and any Option Closing Date (as defined below), if applicable,
and upon application of the estimated net proceeds of the offering the Offerors
will have the authorized capitalization set forth under the caption,
"Capitalization" in the Prospectus. No further corporate approval or authority
on behalf of the Offerors will be required for the issuance and sale of the
Preferred Securities to be sold by the Trust as contemplated herein.
(iv) (A) The Trust has all requisite power and authority to issue,
sell and deliver the Preferred Securities in accordance with and upon the terms
and conditions set forth in this Underwriting Agreement and the Trust Agreement.
All corporate and trust action required to be taken by the Offerors for the
authorization, issuance, sale and delivery of the Preferred Securities in
4
<PAGE>
accordance with such terms and conditions has been validly and sufficiently
taken. The Preferred Securities, when delivered in accordance with this
Underwriting Agreement, will be duly and validly issued and outstanding, will be
fully paid and nonassessable undivided beneficial interests in the assets of the
Trust, will be entitled to the benefits of the Trust Agreement, will not be
issued in violation of or subject to any preemptive or similar rights, and will
conform in all material respects to the description thereof in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and the Trust Agreement. None of the
Preferred Securities, immediately prior to delivery, will be subject to any
security interest, lien, mortgage, pledge, encumbrance, restriction upon voting
or transfer, preemptive rights, claim, equity or other defect.
(B) The Debentures have been duly and validly authorized, and,
when duly and validly executed, authenticated and issued as provided in the
Indenture and delivered to the Trust pursuant to the Trust Agreement, will
constitute valid and legally binding obligations of the Company entitled to the
benefits of the Indenture and will conform in all material respects to the
description thereof contained in the Prospectus.
(C) The Guarantee has been duly and validly authorized, and,
when duly and validly executed and delivered to the Guarantee Trustee for the
benefit of the Trust, will constitute a valid and legally binding obligation of
the Company and will conform in all material respects to the description thereof
contained in the Prospectus.
(D) The Agreement as to Expenses and Liabilities (the "Expense
Agreement") has been duly and validly authorized, and, when duly and validly
executed and delivered by the Company, will constitute a valid and legally
binding obligation of the Company and will conform in all material respects to
the description thereof contained in the Prospectus.
(v) Any preliminary prospectus, the Prospectus and the Registration
Statement have been carefully prepared by the Offerors in conformity with the
requirements of the Act and the Rules, including Form S-1 and the Trust
Indenture Act. The Registration Statement has been filed with the Commission
under the Act.
(vi) Neither the Commission nor any other agency, body, authority,
court or arbitrator of competent jurisdiction has, by order or otherwise,
prohibited or suspended the use of any preliminary prospectus or the Prospectus
relating to the proposed offering of the Preferred Securities or instituted
proceedings for that purpose. The Registration Statement, the Prospectus and
any preliminary prospectus and any amendments or supplements thereto at the time
they became or become effective or were filed or are filed with the Commission
contained or will contain all statements which are required to be stated therein
by, and in all material respects conformed or will conform to the requirements
of, the Act, the Rules and the Trust Indenture Act. Neither the Registration
Statement, nor any preliminary prospectus nor any amendment thereto, and neither
the Prospectus nor any supplement thereto, as of its date contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
--------
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however, that the Offerors make no representations or warranties as to
- -------
information contained in or omitted from the Registration Statement or any
preliminary prospectus or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Offerors by or on behalf of any Underwriter through the Representatives,
expressly for use in the preparation thereof.
(vii) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the consolidated financial position and
the consolidated results of operations of the Company and the Subsidiaries
consolidated, at the indicated dates and for the indicated periods. Such
financial statements have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
and all adjustments necessary for a fair presentation of results for such
periods have been made. The Summary Consolidated Financial Data and the
Selected Consolidated Financial Data included in the Prospectus present fairly
the information shown therein and have been compiled on a basis consistent with
that of the audited and unaudited financial statements from which they were
derived.
(viii) There is no action or proceeding pending or, to the knowledge of
the Offerors, threatened against the Offerors or any Subsidiary before any court
or administrative or governmental agency or other body which might (A) result in
any material adverse change in the condition (financial or otherwise), or in the
earnings, business, affairs, properties, business prospects or results of
operations of the Offerors and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, or (B) affect the performance of
this Underwriting Agreement or the consummation of the transactions herein
contemplated, except as disclosed in the Registration Statement and for which
the Company maintains a reserve in an amount which is adequate to cover
potential liabilities.
(ix) The Company and each Subsidiary has good and marketable title to
all of the material properties and assets reflected in the financial statements
hereinabove described or as described in the Prospectus as being owned by them,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those securing indebtedness described in such financial statements or as
described in the Prospectus or which do not materially affect the present or
proposed use of such properties or assets. The Company and the Subsidiaries
occupy their leased properties under valid, subsisting and binding leases with
only such exceptions as in the aggregate are not material and do not interfere
with the conduct of the business of the Company.
(x) Except as otherwise set forth in the Prospectus, the Company and
each Subsidiary have filed all Federal, State and foreign tax returns which have
been required to be filed and have paid all taxes indicated by said returns and
all assessments received by them or any of them to the extent that such taxes
have become due.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, as they may be amended or
supplemented, (A) there has not been any material adverse change in the
condition (financial or otherwise), or in the earnings, business, affairs,
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properties, business prospects or results of operations of either of the
Offerors and/or the Subsidiaries taken as a whole nor do the Offerors have
knowledge of any such change that is threatened, (B) there has not been any
transaction entered into by either of the Offerors or the Subsidiaries that is
material to the earnings, business, affairs, properties, business prospects or
operations of the Offerors or the Trust, other than transactions in the ordinary
course of business and changes and transactions contemplated by the Registration
Statement and the Prospectus, as they may be amended or supplemented, and (C)
there has not been any material change in the capital stock, long term debt or
material liabilities of the Offerors. Neither of the Offerors nor any of the
Subsidiaries have any material contingent obligations which are not disclosed in
the Registration Statement and the Prospectus.
(xii) Neither the Offerors nor any of the Subsidiaries individually or
in the aggregate are in breach or violation of or default under any indenture,
mortgage, deed of trust, lease, contract, note or other agreement or instrument
to which it is a party or by which it or any of its properties is bound and
which default may result in a material adverse change in the condition
(financial or otherwise) or in the earnings, business, affairs, properties,
business prospects or results of operations of either of the Offerors and/or the
Subsidiaries taken as a whole. The consummation of the transactions contemplated
by this Underwriting Agreement, the Trust Agreement, the Guarantee and the
Expense Agreement and the fulfillment of the terms thereof will not result in a
breach or violation of any of the material terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease,
contract, note or other agreement or instrument to which the Offerors or any
Subsidiary is a party, or of the Offerors' charter or by-laws or any law,
decree, order, rule, writ, injunction or regulation applicable to the Offerors
or any Subsidiary of a court or of any regulatory body or administrative agency
or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Offerors of this Underwriting Agreement, the Trust Agreement, the Guarantee and
the Expense Agreement and performance of their obligations thereunder (except
such additional steps as may be necessary to qualify the Preferred Securities
for public offering by the Underwriters under state securities or Blue Sky laws)
have been obtained or made and is in full force and effect.
(xiv) The Offerors and each Subsidiary hold all material licenses,
authorizations, charters, certificates and permits from governmental authorities
which are necessary to the conduct of their businesses and neither the Offerors
nor any Subsidiary has received notice of any proceeding relating to the
revocation or modification of any of such licenses, authorizations, charters,
certificates or permits. Except as described on Schedule ______ attached
hereto, the Offerors and the Subsidiaries own or otherwise possess rights to use
the licenses, inventions, copyrights, trademarks, service marks and trade names
presently employed by them in connection with the business now operated by them,
and neither the Offerors nor any Subsidiary has infringed or received any notice
of infringement of or conflict with asserted rights of others with respect to
any of the foregoing.
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(xv) Each of Ernst & Young LLP and Moore Stephens Frost, P.A., who
have certified certain of the financial statements filed with the Commission and
included as part of the Registration Statement and Prospectus, are independent
public accountants within the meaning of the Act, the Rules and Regulation S-X
of the Commission and Rule 101 of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
(xvi) There are no agreements, contracts or other documents of a
character required to be described in the Registration Statement or the
Prospectus or required by Form S-1 to be filed as exhibits to the Registration
Statement which are not described or filed as required.
(xvii) No labor dispute exists or is imminent with the Company's
employees or with employees of any Subsidiary which could materially adversely
affect the condition (financial or otherwise), earnings, business, affairs,
properties, business prospects or results of operations of the Offerors.
(xviii) Except as contemplated by Section 2 hereof and as disclosed
in the Prospectus and permitted by the Rules, the Offerors have not (themselves
or through any person) taken and will not take, directly or indirectly, any
action designed to or which might reasonably be expected to, cause or result in
a violation of Section 5 of the Act or Regulation M under the Exchange Act
("Regulation M") or in stabilization or manipulation of the price of the
Company's common stock or the Preferred Securities.
(xix) This Underwriting Agreement has been duly authorized, executed
and delivered by the Offerors and is enforceable against the Offerors in
accordance with its terms, subject to all applicable bankruptcy, insolvency,
moratorium, receivership, and other laws relating to or affecting the rights of
creditors generally and subject to the discretion of a court of equity in
administering any such rights or remedies. Each of the Indenture, the Trust
Agreement, the Guarantee and the Expense Agreement has been duly authorized by
the Company, and, when executed and delivered by the Company on the Closing
Date, each of said agreements will constitute a valid and legally binding
obligation of the Company and will be enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited by
general principles of equity and by bankruptcy, moratorium, reorganization,
fraudulent transfer or other laws relating to or affecting creditors, rights
generally and except as any indemnification or contribution provisions thereof
may be limited under applicable securities laws or public policy. Each of the
Indenture, the Trust Agreement and the Guarantee has been duly qualified under
the Trust Indenture Act and will conform in all material respects to the
description thereof contained in the Prospectus.
(xx) Neither of the Offerors nor any Subsidiary is in violation of
any law, ordinance, governmental rule or regulation or court decree to which it
may be subject, which violation might have a material adverse effect on the
condition (financial or otherwise), earnings, business, affairs, properties,
business prospects or the results of operations of either of the Offerors and/or
the Subsidiaries taken as a whole. The Preferred Securities have been approved
for quotation on the Nasdaq National Market subject to official notice of
issuance.
8
<PAGE>
(b) Any certificate signed by any officer or trustee of the Trust or the
Company, as the case may be and delivered to you or counsel for the
Representatives shall be deemed a representation and warranty by the Trust or
the Offerors to the Underwriters as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Underwritten Preferred Securities.
On the basis of the representations, warranties and covenants herein contained,
and subject to the terms and conditions herein set forth, the Trust agrees to
sell to each Underwriter, severally and not jointly, and each Underwriter
agrees, severally and not jointly, to purchase, at a price of $10 per share, the
number of the Underwritten Preferred Securities set forth opposite the name of
each Underwriter in Schedule I attached hereto, subject to adjustment in
accordance with Section 10 hereof. Each Underwriter shall be entitled to a
commission from the Company of $0.375 per Preferred Security sold by such
Underwriter.
Payment for the Underwritten Preferred Securities shall be made by
certified or bank cashier's checks in clearing house funds (which will be next
day funds) or, upon mutual agreement of the parties, by wire transfer of U.S.
Funds to a designated account of the Trust drawn to the order of the Trust
against book entry delivery of the Preferred Securities to the Representatives
for the accounts of the several Underwriters. Payment and delivery will be made
at such place as shall be agreed upon by the Representatives and the Trust, at
8:00 A.M., Central Time, on ____________, 1999 or at such other time and date
not later than six days after the Effective Date as you and the Offerors shall
agree upon, such time and date of payment being herein referred to as the
"Closing Date." Appropriate documentation regarding the Underwritten Preferred
Securities will be delivered as the Representatives request in writing not later
than the second full business day prior to the Closing Date, and will be made
available for inspection at such location as the Representatives may reasonably
request, at least one full business day prior to the Closing Date.
In addition, on the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, the Trust hereby grants an Option to the several Underwriters to
purchase the Option Preferred Securities at the price per share as set forth in
the first paragraph of this Section 2. The Option may be exercised in whole or
in part (but only once) at any time upon written notice (or oral notice,
subsequently confirmed in writing) given not less than 30 days following the
date of this Underwriting Agreement, by you, as the Representatives of the
several Underwriters, to the Trust setting forth the number of Option Preferred
Securities as to which the several Underwriters are exercising the Option and
the names and denominations in which the Option Preferred Securities are to be
registered. Closing of the purchase of the Option Preferred Securities, if any,
shall occur no later than four business days following the date upon which
notice of exercise of the Option is given to the Trust. The number of Option
Preferred Securities to be purchased by each Underwriter shall be in the same
proportion as the total number of Underwritten Preferred Securities being
purchased by such Underwriter bears to the total number of Underwritten
Preferred Securities being purchased by all Underwriters as a group, as more
particularly indicated on Schedule I, subject to adjustment in accordance with
Section 10 and as adjusted by you in such manner to avoid fractional shares.
The Option may be exercised only to cover over-allotments in the sale of the
Underwritten Preferred Securities by the Underwriters. You, as Representatives,
may cancel such Option at any time prior to its expiration by giving written
9
<PAGE>
notice (or oral notice, subsequently confirmed in writing) of such cancellation
to the Offerors. To the extent, if any, that the Option is exercised, payment
for the Option Preferred Securities shall be made at such closing by a certified
or bank cashier's check in clearing house funds (which will be next day funds)
or, upon mutual agreement of the parties, by wire transfer of U.S. Funds to a
designated account of the Trust, drawn to the order of the Trust.
3. Offering by the Underwriters. It is understood that the Public
Offering of the Underwritten Preferred Securities is to be made as soon as the
Representatives deem it advisable to do so after the Registration Statement has
become effective. The Underwritten Preferred Securities are to be initially
offered to the public at the public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public offering
price and other selling terms. To the extent, if at all, that any Option
Preferred Securities are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
It is further understood that you will act as Representatives for the
Underwriters in the offering and sale of the Preferred Securities, in accordance
with an Agreement Among Underwriters which has been entered into among you and
the several other Underwriters.
4. Covenants of the Offerors.
(a) The Offerors jointly and severally covenant and agree with the several
Underwriters that:
(i) The Offerors will use its best efforts to cause the Registration
Statement to become effective and will not, either before or after
effectiveness, file any amendment thereto or supplement to the Prospectus
(including a Prospectus filed pursuant to Rule 424(b) which differs from the
Prospectus on file at the time the Registration Statement becomes effective) of
which the Representatives shall not previously have been advised and furnished
with a copy or to which the Representatives shall have reasonably objected in
writing or which is not in compliance with the Act or Rules.
(ii) The Offerors will advise the Representatives promptly of any
request of the Commission or other securities regulatory agency ("Other
Securities Regulator") for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose, or comparable action taken or initiated by any
Other Securities Regulator, and the Offerors will use their best efforts to
prevent the issuance of any stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Offerors will cooperate with the Representatives in
endeavoring to qualify the Preferred Securities for sale under the securities
laws of such jurisdictions (including foreign jurisdictions) as the
Representatives reasonably may have designated in writing, and will make such
applications, file such documents and furnish such information as may be
reasonably required for
10
<PAGE>
that purpose; provided however, the Offerors shall not be required to qualify as
-------- -------
a foreign corporation or to file a general consent to service of process in any
jurisdiction where it is not so qualified or required to file such a consent.
The Offerors will, from time to time, prepare and file such statements, reports,
and other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably request for
distribution of the Preferred Securities.
(iv) The Offerors will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any preliminary prospectus
as the Representatives may reasonably request. The Offerors will deliver to, or
upon the order of, the Representatives on the Effective Date and thereafter from
time to time during the period when delivery of a Prospectus is required under
the Act as many copies of the Prospectus in final form, or as thereafter amended
or supplemented, as the Representatives may reasonably request. The Offerors
will deliver to the Representatives at or before the Closing Date, one signed
copy of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Representatives such number of
copies of the Registration Statement, and of all amendments thereto, as the
Representatives may reasonably request.
(v) If during the period in which a Prospectus is required by law to
be delivered by an Underwriter or dealer any event shall occur as a result of
which, in the judgment of the Offerors or in the opinion of counsel for the
Underwriters, with the concurrence of the Offerors and its counsel, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Offerors
promptly will notify the Representatives and, subject to the Representatives'
prior review, prepare and file with the Commission and any appropriate Other
Securities Regulator an appropriate amendment or supplement to the Prospectus so
that the Prospectus as so amended or supplemented will not, in light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with the law.
(vi) The Offerors will make generally available to their security
holders in the manner contemplated by Rule 158(b) under the Act, as soon as it
is practicable to do so, but in any event not later than the forty-fifth day
after the fiscal quarter first occurring one year after the Effective Date, a
consolidated earnings statement of the Offerors (which need not be audited) in
reasonable detail covering a period of at least twelve consecutive months
beginning after the Effective Date, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and will advise you in writing when
such Statement has been so made available.
(vii) The Offerors will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and information
furnished by the Offerors to their stockholders or filed with any securities
exchange pursuant to the requirements of such exchange or with the Commission
pursuant to the Act or the Exchange Act, as amended. The Offerors will deliver
to the Representatives similar reports with respect to any significant
subsidiaries, as that term is defined in the Rules, which are not consolidated
in the Offerors's financial statements.
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<PAGE>
(viii) As soon as the Offerors are advised thereof, they will advise
the Representatives, and confirm the advice in writing, that the Registration
Statement and any amendments shall have become effective.
(ix) The Offerors will use the net proceeds from the sale of the
Preferred Securities in the manner forth in the Prospectus under the caption
"Use of Proceeds."
(x) Other than as permitted by the Act and the Rules, the Offerors
will not distribute any prospectus or offering materials in connection with the
offering and sale of the Preferred Securities.
(xi) The Offerors will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Offerors, a registrar for the
Preferred Securities and will use their best efforts to establish and maintain
the listing of the Preferred Securities (and, subject to distribution thereof,
the Subordinated Debentures) on the Nasdaq National Market.
(xii) Except as contemplated hereby or by the Prospectus, the Offerors
will not, for a period of 90 days after the Effective Date of the Registration
Statement, offer to sell, contract to sell, sell or otherwise dispose of any
shares of the Preferred Securities or securities convertible into shares of the
Preferred Securities without your prior written consent. Furthermore, the
Offerors will cause each executive officer and director of the Offerors (as set
forth in the Prospectus) to furnish to you, on or prior to the execution of this
Underwriting Agreement, a letter or letters, in form and substance satisfactory
to counsel for Underwriters, pursuant to which each such person shall agree not
to offer for sale, sell, distribute or otherwise dispose of any shares of
preferred securities of the Offerors during the 90 days following the Effective
Date, except with your written consent; provided however, that nothing herein
shall prevent such persons from transferring or assigning their shares of the
Preferred Securities pursuant to a bona fide gift or pledge transaction.
The foregoing covenants and agreements shall apply to any successor of the
Offerors, including without limitation, any entity into which the Offerors might
convert or merge.
5. Costs and Expenses.
(a) Expenses. The Company, as borrower under the Subordinated Debentures,
will pay all expenses incident to the performance of its, and the Trust's,
obligations under this Underwriting Agreement, including (i) the preparation,
printing and any filing of the Registration Statement (including financial
statements and any schedules or exhibits and any document incorporated therein
by reference) and of each amendment or supplement thereto, (ii) the preparation,
printing and delivery to the Underwriters of this Underwriting Agreement, the
Operative Documents and such other documents as may be required in connection
with the offering, purchase, sale and delivery of the Preferred Securities,
(iii) the preparation, issuance and delivery of the certificates for the
Preferred Securities to the Underwriters, including any stock or other transfer
taxes and any stamp or other duties payable upon the sale, issuance, or delivery
of the Preferred Securities to the Underwriters, (iv) the fees and disbursements
of the Company's counsel, accountants and other
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advisors, (v) rating agency fees, (vi) the fees and expenses of any trustee
appointed under any of the Operative Documents, including the fees and
disbursements of counsel for such trustees in connection with the Operative
Documents, (vii) the qualification of the Preferred Securities under state blue
sky laws, including filing fees and the reasonable fees and actual accountable
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, if any, (viii) the printing and delivery to the Underwriters of copies
of each preliminary prospectus and of the Prospectus and any amendments or
supplements thereto, if any, (ix) the preparation, printing and delivery
supplement thereto, if any, (x) the fees and expenses of any transfer agent or
registrar for the Preferred Securities, (xi) the filing fees incident to the
review by the National Association of Securities Dealers, Inc. (the "NASD") of
the terms of the sale of the Preferred Securities, (xii) the fees and expenses
incurred in connection with the listing of the Preferred Securities and, if
applicable, the Debentures on the Nasdaq National Market, (xiii) the fees and
expenses of the Indenture Trustee, including the fees and disbursements of
counsel for the Indenture Trustee in connection with the Indenture and the
Debentures, (xiv) the fees and expenses of the Delaware Trustee and the Property
Trustee, including the fees and disbursements of counsel for the Delaware
Trustee and Property Trustee in connection with the Trust Agreement and the
Certificate of Trust, (xv) the fees and expenses of the Guarantee Trustee, (xvi)
any fees and expenses in connection with the rating of the Preferred Securities
and the Subordinated Debentures and (xvii) the cost and charges of qualifying
the Preferred Securities with the Depositary Trust Company.
(b) Termination of Agreement. If this Underwriting Agreement is terminated
because the conditions of Section 7 hereof are not satisfied or by the
Underwriters in accordance with the provisions of Section 6 or Section 10 of
this Underwriting Agreement, the Company shall reimburse the Underwriters for
all of their actual accountable out-of-pocket costs and expenses, including
reasonable attorneys' fees and out-of-pocket expenses reasonably incurred in
connection with investigating, marketing and proposing to market the Preferred
Securities or in contemplation of performing their obligations hereunder, but
the Company shall not in any event be liable to any of the several Underwriters
for damages on account of loss of anticipated profits from the sale by them of
the Preferred Securities.
6. Conditions of Obligations of the Underwriters. The obligations of the
several Underwriters are subject to the accuracy, as of the Closing Date, of the
representations and warranties of the Offerors contained herein, and to the
performance by the Offerors of their respective obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective not later than
4:30 P.M., Central Time, on _________, 1999, unless a later time and date is
agreed to by the Representatives, and no stop order or other order suspending
the effectiveness thereof or the qualification of the Preferred Securities under
the state securities or Blue Sky laws of any jurisdiction shall have been issued
and no proceeding for that purpose shall have been taken or, to the knowledge of
the Offerors, shall be contemplated or threatened by the Commission or any Other
Securities Regulator. If the Offerors have elected to rely upon Rule 430A of
the Rules, the price of the Preferred Securities and
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any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing Pursuant to Rule 424(b) of the Act within the prescribed
time period, and prior to the Closing Date the Offerors shall have provided
evidence satisfactory to the Representatives of such timely filing, or a post-
effective amendment providing such information shall have been promptly filed
and declared effective in accordance with the requirements of Rule 430A under
the Act. All requests for additional information on the part of the Commission
or any other government or regulatory authority with jurisdiction (to be
included in the Registration Statement or Prospectus or otherwise) shall be
complied with to the satisfaction of the Commission or such authorities.
(b) The Representatives shall have received on the Closing Date and any
Option Closing Date the opinion of Kutak Rock, counsel for the Offerors, dated
the Closing Date and any Option Closing Date, addressed to the Underwriters in
form and substance satisfactory to Giroir, Gregory, Holmes & Hoover, PLC,
counsel to the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Arkansas with
corporate power and authority to own its properties and conduct its business as
described in the Prospectus; each of the Subsidiaries is validly existing as a
state banking corporation in good standing under the laws of the jurisdiction of
its organization, and has corporate power and authority to own its properties
and conduct its business as described in the Prospectus; each of the Company and
the Subsidiaries is duly qualified to transact business in all jurisdictions in
which the conduct of its business or the location of the properties owned or
leased by it requires such qualification; and all of the outstanding shares of
capital stock of the Subsidiaries have been duly authorized and validly issued,
are fully paid and non-assessable, and except as set forth in the Prospectus and
the Registration Statement and except for directors' qualifying shares, if any,
no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into any shares
of capital stock or of ownership interests in the Subsidiaries are outstanding.
(ii) The capital stock, Debentures and Guarantee of the Company and
the equity securities of the Trust conform in all material respects to the
description thereof contained in the Prospectus. The common stock of the Company
authorized and issued as of __________________ is as set forth under the caption
"Capitalization" in the Prospectus, has been duly authorized and validly issued,
and is fully paid and nonassessable. There are no outstanding rights, options
or warrants to purchase from the Company, no other outstanding securities
convertible into or exchangeable for, and no commitments, plans or arrangements
to issue, any shares of capital stock of the Company or equity securities of the
Trust, except as described in the Prospectus in connection with the Company's
employee benefit plans.
(iii) The Registration Statement has become effective under the Act
and to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
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(iv) The Registration Statement, all preliminary prospectuses, the
Prospectus and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the Rules, except that
such counsel need express no opinion as to the financial statements, schedules
and other statistical and financial information included therein.
(v) The statements under the captions "Capitalization," "Description
of the Preferred Securities," "Description of the Subordinated Debentures,"
"Description of Guarantee," "Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee," "United States Federal Income Tax
Consequences," "ERISA Considerations," and "Supervision and Regulation," in the
Prospectus insofar as such statements constitute a summary of legal and
regulatory matters and consequences, documents, instruments or proceedings
referred to therein are accurate descriptions of the matters summarized therein
and fairly present in all material respects the information called for with
respect to such legal and regulatory matters and consequences, documents,
instruments and proceedings, other than financial and statistical data as to
which said counsel expresses no opinion or belief.
(vi) Any holders of securities of the Offerors who have rights to the
registration of shares of preferred securities or other securities because of
the filing of the Registration Statement by the Offerors have waived such rights
in writing.
(vii) To the best knowledge of such counsel, after due inquiry, except
as set forth in the Registration Statement and Prospectus, no holders of
preferred securities or other securities of the Offerors have registration
rights with respect to such securities.
(viii) To the best knowledge of such counsel, after due inquiry, there
are no contracts or documents required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or Prospectus
which are not so filed or described as required, and such contracts and
statements as are summarized in the Registration Statement or Prospectus are
fairly summarized in all material respects as required.
(ix) To the best knowledge of such counsel, after due inquiry, there
are no legal, regulatory or administrative proceedings pending or threatened
against the Offerors or any Subsidiary which may be material to the earnings,
business, affairs, properties, business prospects or operations of either of the
Offerors and/or the Subsidiaries taken as a whole except as set forth in the
Prospectus.
(x) The Company has all requisite corporate power and authority to
issue, sell and deliver the Debentures in accordance with and upon the terms and
conditions set forth in this Underwriting Agreement and the Indenture as
described in the Prospectus. All corporate action required to be taken by the
Company for the authorization, issuance, sale and delivery of the Debentures in
accordance with such terms and conditions has been validly and sufficiently
taken. The Preferred Securities conform in all material respects to the
description thereof in the Registration Statement, the Prospectus and the Trust
Agreement. The Preferred Securities have been approved for quotation on the
Nasdaq National Market subject to official notice of issuance. There are no
15
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preemptive or other rights to subscribe for or to purchase, and other than as
disclosed in the Prospectus, no restrictions upon the voting or transfer of, any
shares of capital stock or equity securities of the Offerors or the Subsidiaries
pursuant to the corporate charter, bylaws or other governing documents
(including without limitation, the Trust Agreement) of the Offerors or the
Subsidiaries, or, to such counsel's knowledge, any agreement or other instrument
to which either Offeror or any of the Subsidiaries is a party or by which either
Offeror or any of the Subsidiaries may be bound, provided however that the
holders of the Preferred Securities will have limited voting rights as described
in the Prospectus.
(xi) The Company has all requisite corporate power to enter into and
perform its obligations under this Underwriting Agreement, and this Underwriting
Agreement has been duly and validly authorized, executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the Company
enforceable in accordance with its terms, except as the enforcement hereof or
thereof may be limited by general principles of equity and by bankruptcy,
insolvency, reorganization, receivership, fraudulent transfer, moratorium or
other laws relating to or affecting creditors rights generally, and except as
the indemnification and contribution provisions hereof may be limited under
applicable laws and public policy and certain remedies may not be available in
the case of a non-material breach.
(xii) Each of the Indenture, the Trust Agreement and the Guarantee
has been duly qualified under the Trust Indenture Act and has been duly
authorized, executed and delivered by the Company. Each of the Indenture and
Guarantee is a valid and legally binding obligation of the Company enforceable
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, fraudulent transfer, moratorium or other laws
affecting the rights and remedies of creditors generally and of general
principles of equity and public policy.
(xiii) The Debentures have been duly authorized, executed,
authenticated and delivered by the Company, are entitled to the benefits of the
Indenture and are legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, subject to the
effect of bankruptcy, insolvency, reorganization, receivership, fraudulent
transfer, moratorium and other laws affecting the rights and remedies of
creditors generally and of general principles of equity and public policy.
(xiv) The Expense Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and legally binding obligation of the
Company enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, fraudulent transfer,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity and public policy.
(xv) To such counsel's knowledge, neither of the Offerors nor any of
the Subsidiaries is in breach or violation of, or default under, with or without
notice or lapse of time or both, its corporate charter, bylaws or governing
document (including without limitation, the Trust Agreement). The execution,
delivery and performance of this Underwriting Agreement and the consummation of
the transactions contemplated by this Underwriting Agreement, the Indenture, the
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Guarantee, the Expense Agreement and the Trust Agreement do not and will not
conflict with, result in the creation or imposition of any lien, claim, charge,
encumbrance or restriction upon any property or assets of the Offerors or any of
the Subsidiaries or the Preferred Securities pursuant to, or constitute a breach
or violation of, or constitute a default under, with or without notice or lapse
of time or both, any of the terms, provisions or conditions of the charter,
bylaws or governing document (including, without limitation, the Trust
Agreement) of the Offerors or the Subsidiaries, or to such counsel's knowledge,
any material contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease, franchise, license or any other agreement or instrument
to which either Offeror or the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound or any order, decree,
judgment, franchise, license, Permit, rule or regulation of any court,
arbitrator, government, or governmental agency or instrumentality, domestic or
foreign, known to such counsel having jurisdiction over the Offerors or the
Subsidiaries or any of their respective properties. No authorization, approval,
consent or order of, or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body or authority) is
required under Arkansas or Maryland law in connection with the transactions
contemplated by this Underwriting Agreement in connection with the purchase and
distribution of the Preferred Securities by the Underwriters.
(xvi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Underwriting Agreement and the Trust Agreement and the consummation of the
transactions therein contemplated (other than required by state securities and
Blue Sky laws as to which such counsel need express no opinion) except such as
have been obtained or made, specifying the same.
(xvii) The Offerors and the Subsidiaries hold all material licenses,
certificates and permits from governmental authorities that are necessary for
the conduct of their respective businesses.
(xviii) Except as set forth in the Prospectus, to such counsel's
knowledge, there are no contractual encumbrances or restrictions, or legal
restrictions (excluding any encumbrances or restrictions of general application
to state banks contained in laws, rules and regulations of applicable regulatory
authorities) on the ability of the Subsidiaries (A) to pay dividends or make any
other distributions on its capital stock or to pay indebtedness owed to the
Company, (B) to make any loans or advances to, or investments in, the Company or
(C) to transfer any of its property or assets to the Company.
(xix) The Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes, and as a result, each
beneficial owner of Preferred Securities (a "Securityholder") will be treated as
owning an undivided beneficial interest in the Debentures.
(xx) Unless the Company exercises its option to extend the
interest payment period, stated interest on the Debentures generally will be
included in income by a Securityholder
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at the time such interest income is paid or accrued in accordance with the
Securityholder's regular method of tax accounting.
(xxi) Gain or loss will be recognized by a Securityholder on a
sale of 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 original issue discount
not previously included in income) and the Securityholder's adjusted tax basis
in the Preferred Securities sold or so redeemed. Gain or loss recognized by the
Securityholder on Preferred Securities held for more than one year will
generally be taxable as long-term capital gain or loss.
In rendering the opinion above, such counsel may rely as to all matters
governed by Delaware law on the opinion of counsel referred to in paragraph (c)
of this Section 6. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such firm which leads it to believe that the Registration Statement
or any amendment thereto at the time the Registration Statement or amendment
became effective or the Prospectus or any amendment or supplement thereto as of
their respective dates contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and other financial information included therein). With
respect to such statement, such firm may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(c) Morris, James, Hitchens and Williams, special Delaware counsel to the
Offerors, shall have furnished to the Underwriters their signed opinion, dated
as of Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to such counsel, to the effect that:
(i) The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
--- -
(S)(S)3801, et seq. (the "Delaware Act").
-- ---
(ii) Under the Trust Agreement and the Delaware Act, the Trust has the
requisite trust power and authority to conduct its business as described in the
Prospectus.
(iii) The Trust Agreement constitutes a legal, valid and binding
obligation of the Company and of each of the Trustees, and is enforceable
against the Company and each of the Trustees in accordance with its terms.
(iv) Under the Trust Agreement and the Delaware Act, the Trust has the
requisite trust power and authority to execute and deliver, and to perform its
obligations under, the Underwriting Agreement.
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(v) Under the Trust Agreement and the Delaware Act, the execution
and delivery by the Trust of the Underwriting Agreement, and the performance by
the Trust of its obligations thereunder, have been authorized by all requisite
trust action on the part of the Trust.
(vi) The Preferred Securities have been duly authorized and, when
issued and sold in accordance with the Trust Agreement and the Underwriting
Agreement, will be validly issued and, subject to the qualifications set forth
in this paragraph, fully paid and nonassessable undivided beneficial interests
in the assets of the Trust. The Preferred Securities holders, as beneficial
owners of the Trust, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware. We note that the
Preferred Securities holders may be obligated to make payments as provided in
the Trust Agreement.
(vii) Under the Delaware Act, the forms of certificates attached to
the Trust Agreement as Exhibits C and E are appropriate forms of certificates to
evidence ownership of the Common Securities and Preferred Securities,
respectively.
(viii) Under the Trust Agreement and the Delaware Act, the Preferred
Securities have no preemptive rights to subscribe for additional Trust
Securities.
(ix) The issuance and sale of the Preferred Securities and the Common
Securities by the Trust, the execution, delivery and performance by the Trust of
the Underwriting Agreement, and the consummation by the Trust of the
transactions contemplated by the Underwriting Agreement, are not prohibited by
(A) the Trust Agreement or (B) any Delaware statute or administrative regulation
applicable to the Trust.
(x) No authorization, approval, consent or order of any Delaware
governmental authority or Delaware agency is required to be obtained, and no
filing or registration with any Delaware governmental authority or Delaware
agency is required to be made, by the Trust solely in connection with the
issuance and sale by the Trust of the Preferred Securities.
Such opinion may state that it is limited to the laws of the State of
Delaware and that the opinion expressed in paragraph (iii) above is subject to
the effect upon the Trust Agreement of (i) bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation, fraudulent conveyance and other
similar laws relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied in a proceeding
in equity or at law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or contribution.
(d) The Representatives shall have received from Giroir, Gregory, Holmes
and Hoover, PLC, counsel to the Underwriters, an opinion dated the Closing Date,
substantially to the effects specified in subparagraphs (iii) and (iv) of
paragraph (b) of this Section 6, and that the Company is a validly organized and
existing corporation under the laws of the State of Arkansas. In rendering such
opinion, Giroir, Gregory, Holmes & Hoover, PLC may rely as to all matters
governed other than by the Federal laws on the opinion of counsel referred to in
paragraph (b) of this Section 6. In
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addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that the Registration Statement, the Prospectus or
any amendment or supplement thereto as of their respective dates contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial information included therein). With respect to such statement, such
firm may state that their belief is based upon the procedures set forth therein,
but is without independent check and verification.
(e) The Representatives shall have received at or prior to the Closing
Date from Giroir, Gregory, Holmes & Hoover, PLC a memorandum or summary, in form
and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Underwritten
Preferred Securities under the securities laws of such states and foreign
jurisdictions as the Representatives may reasonably have requested.
(f) The Representatives shall have received on the Closing Date and any
Option Closing Date signed letters from each of Ernst & Young LLP and Moore
Stephens Frost, P.A. addressed to the Underwriters dated as of the Effective
Date and again dated as of the Closing Date and any Option Closing Date, with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus. All such letters shall be in
form and substance satisfactory to the Representatives and Giroir, Gregory,
Holmes & Hoover, PLC, counsel to the Underwriters.
(g) The Representatives shall have received on the Closing Date and any
Option Closing Date a certificate of the Chairman of the Board of Directors and
the Chief Financial Officer of the Company, respectively, to the effect that, as
of the Closing Date and any Option Closing Date, each of them severally
represents as follows:
(i) (1) the representations and warranties of the Company in this
Underwriting Agreement are true and correct on and as of the Closing Date and
any Option Closing Date, as the case may be, and (2) the Company has complied
with all the agreements and has satisfied all of the conditions on its part to
be performed or satisfied at or prior to the Closing Date and any Option Closing
Date, as the case may be.
(ii) (1) the Registration Statement has become effective under the
Act; (2) no stop order suspending the effectiveness of the Registration
Statement or the use or effectiveness of the Prospectus has been issued; (3) no
proceedings for such purpose have been taken or, to his knowledge, are
contemplated by the Commission or any Other Securities Regulator; and (4) all
requests for additional information on the part of the Commission or any Other
Securities Regulator have been complied with.
(iii) he has carefully examined the Registration Statement and the
Prospectus and, in his opinion, since the Effective Date, no event has occurred
which should have been set forth in
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a supplement to or an amendment to the Prospectus which has not been so set
forth in such supplement or amendment
(h) The Underwriters shall have received from an authorized representative
of the Trust on the Closing Date, a certificate dated as of the Closing Date, to
the effect as follows:
(i) the representations and warranties of the Trust in this
Underwriting Agreement are true and correct as though made on and as of the
Closing Date (and, if applicable, the Option Closing Date);
(ii) the Trust has complied with all the agreements and satisfied all
the conditions required by this Underwriting Agreement to be performed or
satisfied by the Trust on or prior to the Closing Date and since the most recent
date as of which information is given in the Prospectus, except as contemplated
by the Prospectus, the Trust has not incurred any liabilities or obligations,
direct or contingent, or entered into any transactions not in the ordinary
course of business and there has not been any adverse change in the condition
(financial or otherwise) of the Trust.
(i) The Offerors shall have furnished to the Representatives such
additional information and further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.
(j) On the Closing Date, the Underwriters shall have received duly
executed counterparts of the Trust Agreement, the Guarantee, the Indenture and
the Expense Agreement.
(k) Since the respective dates as of which information is given in the
Prospectus, there shall not have occurred any material adverse change in the
condition (financial or otherwise), or in the earnings, business, affairs,
properties, business prospects or results of operations of the Offerors or any
Subsidiary, whether or not arising in the ordinary course of business.
The opinions and certificates mentioned in this Underwriting Agreement
shall be deemed to be in compliance with the provisions hereof only if they are
in all material respects satisfactory to the Representatives and Giroir,
Gregory, Holmes & Hoover, PLC, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Underwriting Agreement to
be fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Offerors of such termination in writing or
by confirmed telefax at or prior to the Closing Date. In such event, the
Offerors, and the Underwriters shall not be under any obligation to each other
(except to the extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Offerors. The obligations of the
Offerors to sell and deliver the Preferred Securities are subject to the
conditions that (a) at or before 4:30 P.M., Central Time, on ___________, 1999,
or such later time and date as the Offerors and the Representatives may from
time to time consent to in writing or by confirmed telefax, the
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<PAGE>
Registration Statement shall have become effective, and (b) at the Closing Date
no stop order suspending the effectiveness of the Registration Statement shall
have been issued or proceedings therefor initiated or threatened. If either of
the conditions hereinabove provided for in this Section 7 shall not have been
fulfilled when and as required by this Underwriting Agreement to be fulfilled,
this Underwriting Agreement may be terminated by the Offerors by notifying the
Representatives of such termination in writing or by confirmed telefax at or
prior to the Closing Date.
8. Indemnification.
(a) The Offerors jointly and severally agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, the Rules and the Exchange Act from and against
any and all losses, claims, damages, liabilities, joint or several, and all
expenses (including costs of investigation and legal expenses) to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon any
material breach of any representation, warranty, agreement or covenant of the
Offerors herein, or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Offerors will reimburse each Underwriter and
each such controlling person for legal and other expenses incurred in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that the Offerors will not be liable in any
-------- -------
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement, or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any preliminary
prospectus, the Prospectus, or such amendment or supplement, in reliance upon or
in conformity with written information furnished to the Offerors by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Offerors may
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Offerors, each
of their directors, each of their officers who have signed the Registration
Statement, and each person, if any, who controls the Offerors, within the
meaning of the Act, the Rules and the Exchange Act, from and against any losses,
claims, damages, liabilities or expenses to which the Offerors or any such
director, officer, or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any material
breach of any agreement of the Underwriters herein, or any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made; and will reimburse any legal or other
expenses reasonably incurred by the Offerors or any such director, officer, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding;
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<PAGE>
provided, however, that each Underwriter will be liable in such case only to the
- -------- -------
extent that such untrue statement, or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any preliminary
prospectus, the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Offerors by or
through the Representatives expressly for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action or proceeding, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action or proceeding is brought against any
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. Notwithstanding
the foregoing, the indemnified party, at any time after such assumption of
defense by the indemnifying party, shall be entitled to participate in such
defense and to engage separate counsel (at the indemnifying party's expense) if,
in the indemnified party's reasonable belief, a conflict of interest exists with
counsel engaged by the indemnifying party.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 8 is for
any reason held to be unavailable to an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Offerors on the one hand and the Underwriters
on the other hand from the offering of the Preferred Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the parties in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities, expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Offerors on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Offerors bears to the
underwriting discounts and commissions received by the Underwriters. The
relative fault of a party shall be determined by reference to, among other
things, whether the true or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by each party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or
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<PAGE>
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any such
action or claim.
The Offerors and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Preferred Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute shall be several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
preliminary prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. Representations, Warranties and Agreements to Survive Delivery. All
representations, warranties and agreements of the Offerors and officers or
trustees of the Offerors herein or in certificates delivered pursuant hereto,
and the indemnity and contribution agreements contained in Section 8 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriters or any controlling
person, or by or on behalf of the Offerors or any of their officers, trustees,
directors or controlling persons, and shall survive delivery of the Underwritten
Preferred Securities and, if applicable, the Option Preferred Securities to the
Representatives or termination of this Underwriting Agreement.
10. Default by Underwriters. If any Underwriter shall fail to purchase
and pay for the Preferred Securities which such Underwriter has agreed to
purchase and pay for hereunder (otherwise than by reason of any default on the
part of the Offerors), you, as Representatives of the Underwriters, shall use
your best efforts to procure within twenty-four hours thereafter one or more of
the other Underwriters, or any others, to purchase from the Offerors such
amounts as may be agreed upon and upon the terms set forth herein, the Preferred
Securities which the defaulting Underwriter or Underwriters failed to purchase.
If during such twenty-four hours you, as Representatives, shall not have
procured such other Underwriters, or any others, to purchase the
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Preferred Securities agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of Preferred Securities with
respect to which such result shall occur does not exceed 10% of the Preferred
Securities which the Underwriters are obligated to purchase hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
number of shares which they are obligated to purchase hereunder, to purchase the
Preferred Securities which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of Preferred Securities with respect to
which such default shall occur exceeds 10% of the Preferred Securities covered
hereby, the Offerors or you, as Representatives of the Underwriters will have
the right, by written notice given within the next twenty-four hour period to
the parties to this Underwriting Agreement, to terminate this Underwriting
Agreement without liability on the part of the non-defaulting Underwriters or of
the Offerors except to the extent provided in Section 8 hereof. In the event of
a default by any Underwriter or Underwriters, as set forth in this Section 10,
the time of closing may be postponed for such period, not to exceed seven days,
as you, as Representatives, may determine in order that the required changes in
the Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriters" includes any person
substituted for a defaulting Underwriter. Any action taken under Section 10
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Underwriting Agreement.
11. Notices. All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telefaxed and
confirmed as follows: if to the Underwriters, to Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201, Attention: W. Scott Davis; with a copy to
H. Watt Gregory, III, Giroir, Gregory, Holmes & Hoover, PLC, 111 Center Street,
Suite 1900, Little Rock, Arkansas, 72201; if to the Offerors, to Bank of the
Ozarks, Inc., 12615 Chenal Parkway, Little Rock, Arkansas 72211, Attention:
George G. Gleason, II; with a copy to Jeffrey J. Gearhart, Kutak Rock, 425 West
Capital Avenue, Suite 1100, Little Rock, Arkansas 72201; to any of the Trustees,
to the following addresses as applicable: ___________________.
12. Termination. This Underwriting Agreement may be terminated by notice
to the Offerors as follows:
(a) at any time prior to the earlier of (i) the time the Preferred
Securities are released by you for sale by notice to the Underwriters, or (ii)
11:30 A.M., Central Time, on the first business day following the Effective
Date;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or a
development involving a prospective material adverse change in or affecting
particularly the condition, financial or otherwise, of the Offerors or the
earnings, affairs or business prospects of the Offerors, whether or not arising
in the ordinary course of business, which would, in your reasonable judgment,
materially impair the investment quality of the Preferred Securities, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change on the financial markets of the United States would,
in your reasonable judgment, make the
25
<PAGE>
offering or delivery of the Preferred Securities impracticable, (iii) suspension
of trading or general trading halts in securities on the New York Stock
Exchange, the American Stock Exchange, The Nasdaq Stock Market or the over-the-
counter market or limitation on prices (other than limitations on hours or
numbers of days or trading) for securities on either such Exchange, The Nasdaq
Stock Market or the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Offerors, (v) declaration of a banking
moratorium by either federal or New York State authorities, or (vi) the taking
of any action by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 10 of this Underwriting Agreement.
13. Successors. This Underwriting Agreement has been and is made solely
for the benefit of the Underwriters, the Offerors and their respective
successors, executors, administrators, heirs, and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. The term "Successors" shall not include
any purchaser of the Preferred Securities merely because of such purchase.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Underwriting Agreement and the representations,
warranties and covenants of the Offerors in this Underwriting Agreement shall
remain in full force and effect regardless of (a) any termination of this
Underwriting Agreement, (b) any investigation made by or on behalf of the
Underwriters or controlling person or (c) delivery of any payment for the
Preferred Securities under this Underwriting Agreement.
This Underwriting Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Underwriting Agreement shall be governed by, and construed in
accordance with, the laws of the State of Arkansas applicable to contracts made
and performed within such State.
26
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Offerors and the several Underwriters in
accordance with its terms.
Very truly yours,
BANK OF THE OZARKS, INC.
By:
------------------------------------------
Its: Chairman and Chief Executive Officer
------------------------------------------
OZARK CAPITAL TRUST
By:
------------------------------------------
Its: Administrative Trustee
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
STEPHENS INC., As Representative of the
Several Underwriters named in Schedule I
By:
----------------------------------------
Authorized Officer
27
<PAGE>
SCHEDULE I
Name No. of Underwritten
Preferred Securities
-----------------------
Stephens Inc.
Morgan Keegan & Company, Inc.
Hoefer & Arnett Inc.
Sterne, Agee & Leach, Inc.
Stifel, Nicolaus & Company, Incorporated
---------
TOTAL 1,500,000
- ----- =========
28
<PAGE>
EXHIBIT 1.2
1,500,000 Preferred Securities/*/
OZARK CAPITAL TRUST
% Cumulative Trust Preferred Securities
(liquidation amount $10 per preferred security)
Guaranteed by
BANK OF THE OZARKS, INC.
__________
AGREEMENT AMONG UNDERWRITERS
----------------------------
_____________, 1999
To each of the Underwriters named in Schedule I
to the attached Underwriting Agreement
Dear Sirs:
This Agreement Among Underwriters (this "Agreement") is to confirm that the
Underwriters agree among themselves as follows with reference to their proposed
purchases severally of an aggregate of 1,500,000 shares (the "Underwritten
Preferred Securities") and up to an aggregate of 225,000 additional shares (the
"Option Preferred Securities") of ____% Cumulative Trust Preferred Securities of
Ozark Capital Trust, (the "Trust") guaranteed by Bank of the Ozarks, Inc. (the
"Company") (the Underwritten Preferred Securities and any Option Preferred
Securities which the Underwriters elect to purchase pursuant to the Underwriting
Agreement (as hereinafter defined) being collectively referred to as the
"Preferred Securities").
1. Each Underwriter agrees that it will purchase, on the terms and
subject to the conditions of an underwriting agreement in substantially the form
attached hereto (the "Underwriting Agreement"), the number of Preferred
Securities provided therein to be purchased by it (such number of Preferred
Securities, including any Preferred Securities to be so purchased by such
Underwriter pursuant to Section 10 of the Underwriting Agreement, being herein
referred to as the "underwriting obligation" of such Underwriter). Each
Underwriter authorizes us as its Representatives (the "Representatives") to
execute and deliver the Underwriting Agreement in substantially the form
attached hereto and to exercise in our discretion all of the authority vested in
us by the Underwriting Agreement. As Representatives, we are also authorized to
take all action that we may believe desirable in carrying out the provisions of
the Underwriting Agreement and this Agreement, including the authority to agree
to changes in those who are to be Underwriters and, subject to the following
paragraph, in the number of Underwritten Preferred Securities and Option
Preferred Securities to be set forth opposite the name of such Underwriter in
Schedule I to the Underwriting Agreement, and to agree to any variation in the
terms of performance of the Underwriting Agreement and this Agreement which, in
our judgment, will not have a material adverse effect upon the interests of the
Underwriters.
Notwithstanding the provisions of the preceding paragraph, the consent of
an Underwriter shall be required for any increases in the number of Preferred
Securities to be purchased by such Underwriter under the Underwriting Agreement,
except in the following cases: (a) an increase in the number of Preferred
Securities to be purchased by such Underwriter which is caused by the failure of
another Underwriter or Underwriters to perform its or their obligations under
the Underwriting Agreement; or (b) an increase in the number of such Preferred
Securities, as a
- -------------------
*Plus up to 225,000 shares to cover over-allotments, if any.
<PAGE>
result of (i) an increase in the aggregate number of Preferred Securities
proposed to be purchased by the Underwriters as a whole, (ii) a reallotment of
Preferred Securities among the Underwriters, or (iii) any other cause, which in
any such case (i) through (iii) results in an aggregate net change of 10% or
less in the number of Preferred Securities to be purchased by such Underwriter.
2. The Underwritten Preferred Securities shall be released for sale to
the public at the public offering price as soon after the execution and delivery
of the Underwriting Agreement as in our judgment is advisable, but (except with
the consent of such of the Underwriters whose underwriting obligations aggregate
fifty percent or more of the Underwritten Preferred Securities under the
Underwriting Agreement) not later than the seventh full business day after the
execution and delivery of the Underwriting Agreement.
Each Underwriter authorizes us, for its account, to exercise all or such
portion of any over-allotment option to purchase Option Preferred Securities
from time to time under the Underwriting Agreement as we in our discretion shall
determine.
3. Each Underwriter authorizes us, for its account, to reserve for sale,
and to sell and deliver to securities dealers selected by us, who may include
any of the Underwriters, such number as we may determine of the Preferred
Securities which such Underwriter agrees to purchase under the Underwriting
Agreement. Such sales shall be made for the respective accounts of the
Underwriters in the same proportions, as nearly as may be practicable and so
long as Preferred Securities of the respective Underwriters are available
therefor, as the respective numbers of Preferred Securities initially so
reserved for such sales. Such sales shall be made at the public offering price,
less a concession initially of not in excess of [$____] per share with respect
to the Preferred Securities so sold. Underwriters and such dealers may allow a
portion of such concession (the "reallowance") initially of not in excess of
[$____] per share of the Preferred Securities so sold to any member of the
National Association of Securities Dealers, Inc. (the "NASD"), acting as
principal or as buyer's agent, provided such member agrees that the reallowance
is to be retained and not reallowed in whole or in part and also agrees in
writing to comply with Section 24 of Article III of the Rules of Fair Practice
of the NASD. Underwriters and such dealers may allow the reallowance to a
foreign dealer not eligible for membership in the NASD, acting as principal or
as buyer's agent, provided such foreign dealer agrees that the reallowance is to
be retained and not reallowed in whole or in part, agrees to comply with the
interpretation with respect to Free-Riding and Withholding of the NASD in making
sales to purchasers outside the United States, and agrees in writing to comply
with Sections 8, 24, 25 (as such Section applies to foreign non-members) and 36
of such Article.
Each Underwriter also authorizes us to reserve for sale, and authorizes us
or any Underwriter designated by us to sell and deliver for its account to such
retail purchasers as we may select, at the public offering price, such number as
we may determine of the Preferred Securities which such Underwriter agrees to
purchase under the Underwriting Agreement. Such reservations and sales to
retail purchasers shall be made for the respective accounts of the Underwriters
in the same proportions, as nearly as may be practicable and so long as
Preferred Securities of the respective Underwriters are available therefor, as
the respective underwriting obligations of the Underwriters.
At or before the time the Underwritten Preferred Securities are released
for sale to the public, we will advise each Underwriter as to the number of
Underwritten Preferred Securities initially reserved for sale for its account
pursuant to this Section. Each Underwriter authorizes us from time to time to
add to the reserved Preferred Securities any Preferred Securities of such
Underwriter then remaining unsold and to release to it any reserved Preferred
Securities of such Underwriter then remaining unsold.
Each Underwriter authorizes us, on its behalf and as its Representatives,
to take all such action as we may deem advisable in respect of all matters
pertaining to sales of reserved Preferred Securities to dealers and to retail
purchasers, including the right to make variations in the selling arrangements,
and, after the Underwritten Preferred Securities are released for sale to the
public, to vary from time to time the offering price, concessions and
reallowances to dealers, and other terms of sale of the Preferred Securities
hereunder and under such selling arrangements.
2
<PAGE>
4. Sales of Preferred Securities by Underwriters, except as otherwise set
forth herein, shall be on the terms specified under the selling arrangements
then in effect.
Each Underwriter represents that in connection with the offering it has
conformed, and agrees that is will conform, with the provisions of Rule 10b-6
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
regard, among other things, to trading by underwriters.
5. We may, in our discretion, charge the account of any Underwriter with
an amount equal to the concession allowed to dealers in respect of each Share
purchased under the Underwriting Agreement by such Underwriter and not sold by
us for its account (and each Share which we believe has been substituted
therefor) which may be delivered against a purchase contract made by us for the
account of any Underwriter prior to the later of (a) the termination of all of
the provisions referred to in Section 10 hereof or (b) the covering by the
Representatives of any short position created by the Representatives for the
accounts of the Underwriters pursuant to Section 9 hereof, or in lieu of such
charge, require such Underwriter to repurchase on demand at the total cost
thereof (including commissions), plus transfer taxes, any such Preferred
Securities so delivered.
6. Upon our request each Underwriter will deliver to the Representatives
payment for the Preferred Securities purchased or to be purchased by such
Underwriter under the Underwriting Agreement in an amount equal to the public
offering price for such Preferred Securities less the concession to dealers.
Such payment shall be made in such form and at such times and places as may be
specified in such request, and each Underwriter authorizes the Representatives
to make payment for such Preferred Securities against their delivery for its
account hereunder.
7. We shall remit to each Underwriter, as promptly as practicable, the
amounts received by us from retail purchasers and dealers as payment in respect
of Preferred Securities sold by us for the account of such Underwriter pursuant
to the provisions of Section 3 hereof for which payment has been received, less
the concession to dealers (a) in the case of amounts received from retail
purchasers and (b) in the case where amounts received from dealers are equal to
the public offering price. Preferred Securities purchased by each Underwriter
under the Underwriting Agreement and not reserved or sold by us for its account
pursuant to the provisions of Section 3 hereof shall be delivered to such
Underwriter as promptly as practicable after their receipt by us. Any Preferred
Securities so purchased by any Underwriter and so reserved which remain unsold
at any time prior to the settlement of accounts hereunder may, in our
discretion, and shall, upon the request of such Underwriter, be delivered to
such Underwriter, but, until the termination of all of the provisions referred
to in Section 10 hereof, for carrying purposes only.
Each Underwriter which is a member of The Depository Trust Company
authorizes us, in our discretion, to arrange for delivery of Preferred
Securities to such Underwriter and for payment therefor by and to such
Underwriter through the facilities of Stephens Inc., 111 Center Street, Little
Rock, Arkansas 72201.
Each Underwriter, however, authorizes the Representatives, in their
discretion, as agents for such Underwriter, to advance funds, charging current
interest rates, or arrange loans for such Underwriter's account in connection
with the purchase or carrying of its Preferred Securities held for its account
under this Agreement and for any other of the purposes of this Agreement, to
execute and deliver any notes or other instruments evidencing such advances or
loans, to hold or pledge as security therefor any or all of its Preferred
Securities, and to give all instructions to the lenders with respect to any such
loans and the proceeds thereof, which instructions the lenders are hereby
authorized to accept. In the event of any such advance or loan, repayment
thereof shall, in the discretion of the Representatives, be effected prior to
the making of any remittance or delivery pursuant to this Section.
Each Underwriter agrees that, from time to time prior to the settlement of
accounts hereunder, it will furnish to us such information as we may request in
order to determine the number of Preferred Securities purchased by it under the
Underwriting Agreement which then remains unsold, and such Underwriter will upon
our request sell to us for the account of any Underwriter as many of such unsold
Preferred Securities as we may designate at the public offering price, less all
or any part of the concession to dealers as we may determine. The provisions of
Section 5 hereof shall not be applicable in respect of any such sale.
3
<PAGE>
8. In the event of failure of any Underwriter to tender payment for
Preferred Securities as provided under the Underwriting Agreement, we shall have
the right under the provisions thereof to arrange for other persons, who may
include ourselves and any other Underwriters, to purchase the Preferred
Securities which such defaulting Underwriter agreed to purchase, and we shall
also have the right, subject to Section 1 hereof, to increase pro rata the
original underwriting obligations of the non-defaulting Underwriters to provide
for the purchase of the Preferred Securities which such defaulting Underwriter
agreed to purchase, but in neither case will such arrangements relieve such
defaulting Underwriter from liability for its default.
9. Each Underwriter authorizes the Representatives, in their discretion
and for the account of such Underwriter, to over-allot Underwritten Preferred
Securities, and to purchase and sell shares of Preferred Securities, for long or
short account, in such amounts, at such prices, on such terms and in such manner
as the Representatives may determine; provided, however, that at no time (except
as set forth below in the event of default of any Underwriter in carrying out
its commitment under this Section) shall the net commitment of any Underwriter,
for either long or short account, resulting from such over-allotments and such
purchases and sales exceed 15% of the number of Underwritten Preferred
Securities which such Underwriter agrees to purchase under the Underwriting
Agreement (it being agreed for the purposes of such calculation that the net
commitment for short account of any Underwriter shall be deemed to be reduced by
the maximum number of Option Preferred Securities which such Underwriter is
entitled to purchase under the Underwriting Agreement). It is understood that
the Representatives may have made purchases of Preferred Securities for
stabilizing purposes prior to the time this Agreement became binding upon the
Underwriters or any particular Underwriter with respect to the offering of the
Preferred Securities, and each Underwriter agrees that any securities so
purchased shall be treated as having been purchased for the respective accounts
of the Underwriters pursuant to the foregoing authorization. Each Underwriter
authorizes the Representatives, in their discretion and for the account of such
Underwriter, to cover any short position, or sell any long position, created by
the Representatives for the account of such Underwriter pursuant to this
Section, in such amounts, at such prices, on such terms and in such manner as
the Representatives may determine. Such purchases and sales, through over-
allotments or otherwise, shall be for the respective accounts of the
Underwriters in the same proportions, as nearly as may be practicable, as the
respective underwriting obligations of the Underwriters; provided, however,
that, if any Underwriter defaults in carrying out its commitment under this
Section, the other Underwriters not so defaulting shall assume its commitment in
the same proportions as the respective underwriting obligations of such other
Underwriters, without, however, relieving such defaulting Underwriter from its
liability therefor. Each Underwriter agrees that it will, upon the request of
the Representatives take up at cost (but, in the discretion of the
Representatives, until the termination of all of the provisions referred to in
Section 10 hereof, for carrying purposes only) shares of Preferred Securities so
purchased by the Representatives for the account of such Underwriter, and
deliver to the Representatives shares of Preferred Securities so sold for the
account of such Underwriter, through over-allotment or otherwise. The
Representatives shall have full discretionary power to pay such commissions in
connection with such purchases and sales as it may deem proper and to charge
such commissions on purchases and sales effected by them.
In the event that the Representatives effect any stabilizing purchases
pursuant to this Section, they will notify each Underwriter promptly of the date
and time when the first stabilizing purchase is effected and the date and time
when stabilizing is terminated. Each Underwriter agrees that, without the prior
permission of the Representatives, it will not effect any stabilizing purchases.
Each Underwriter agrees that, if stabilizing is effected, it will provide the
Representatives with such information and reports as are required in relation to
such stabilization pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission") under the Exchange Act.
10. The provisions of the first paragraph of Section 4 hereof and of the
first sentence of Section 9 hereof will terminate at the close of business on
the thirtieth day after the Underwritten Preferred Securities are released by us
for sale to the public, unless any of such provisions are terminated at such
earlier time as we may determine by notice to that effect sent to each
Underwriter.
11. We may charge against the account of each Underwriter any and all
expenses incurred by us on its behalf and as its Representatives in connection
with the purchase and sale of the Preferred Securities or preparations therefor.
All expenses of a general nature incurred by us shall be borne by the
Underwriters in the same proportions
4
<PAGE>
as the respective underwriting obligations of the Underwriters. In the event
that the Representatives agree to pay any stock transfer tax or associated
carrying costs and if such tax payment is not rebated on the day of payment and
any portion of such tax payment not rebated (which each Underwriter agrees the
Representatives may agree to do), and in the event such tax payment, pending
such reimbursement, results in any expense to the Representatives, such expense
shall be deemed an expense of a general nature for purposes of the foregoing
sentence. In the event of the failure of any Underwriter to fulfill its
obligations hereunder, the expenses chargeable to such Underwriter pursuant to
this Agreement and not paid, as well as any additional expenses arising from
such default, may be charged against the other Underwriters not so defaulting in
the same proportions as the respective underwriting obligations of such other
Underwriters, without, however, relieving such defaulting Underwriter from its
liability therefor. As Representatives, our ascertainment of all expenses and
apportionment thereof shall be conclusive upon all Underwriters.
We shall not be accountable for interest on funds of any of the
Underwriters at any time in our hands, and any such funds may be held by us
unsegregated from our general funds.
12. As compensation for our services to each of the Underwriters in
connection herewith, each Underwriter agrees to pay us a management fee in an
amount equal to [$____] per share, in respect of the underwriting obligation of
such Underwriter and authorizes us, at our election, to charge its account
therefor.
13. Each of the Underwriters acknowledges that it has received copies of
the documents stated in Section 1(a) of the Underwriting Agreement to have been
filed with the Commission prior to the date of the Underwriting Agreement and
delivered to us for it. The registration statement and prospectus may be
further amended or changed, but no such amendment or change not disapproved by
us shall release any Underwriter hereunder or under the Underwriting Agreement.
14. Each Underwriter which is registered as a dealer or broker under the
Exchange Act represents that it is a member in good standing of the NASD and
that in making sales of Preferred Securities it will comply with the Rules of
Fair Practice of the NASD, including, without limitation, Section 24 of Article
III thereof. Each Underwriter which is not so registered agrees that it will
not offer or sell Preferred Securities in the United States except through us
and that in making sales of Preferred Securities outside the United States it
will comply with the interpretation with respect to Free-Riding and Withholding
of the NASD and with Sections 8, 24, 25 (insofar as such Section applies to
foreign non-members) and 36 of such Article. We will file on behalf of the
several Underwriters with the NASD such required documents and information, if
any, which have been furnished to us for filing pursuant to applicable rules,
statements and interpretations of the NASD.
15. In taking all actions hereunder, except in the performance of our own
obligations hereunder and under the Underwriting Agreement, we shall act only as
Representatives of each of the Underwriters. Nothing contained herein shall
constitute the Underwriters partners or render any of them liable to make
payments otherwise than as herein provided. If for Federal income tax purposes
the Underwriters should be deemed to constitute a partnership, then each
Underwriter elects to be excluded from the application of Subchapter K, Chapter
1, Subtitle A, of the Internal Revenue Code, as amended. Each Underwriter
authorizes the Representatives to use their discretion on behalf of such
Underwriter, to execute such evidence of such election as may be required by the
Internal Revenue Service.
16. We shall be under no liability (except for our own want of good faith
and for obligations expressly assumed by us hereunder) for or in respect of the
validity or value of, or title to, any shares of Preferred Securities; the form
of, or the statements contained in, or the validity of, the registration
statement, any preliminary prospectus, the prospectus, any amendment or
supplement thereto, any document which may be incorporated by reference therein,
or any letters or instruments executed by or on behalf of the Offerors or
others; the form or validity of the Underwriting Agreement or this Agreement;
the delivery of the Preferred Securities; the performance by the Offerors, or
others of any agreement on its or their part; the qualification for sale of the
Preferred Securities or the legality of the Preferred Securities for investment
under the laws of any jurisdiction; or any matter in connection with any of the
5
<PAGE>
foregoing; provided, however, that nothing in this Section shall be deemed to
relieve us from any liability imposed by the Securities Act of 1933, as amended
(the "Act").
17. (a) Each Underwriter agrees to indemnify, hold harmless and reimburse
each other Underwriter and each person, if any, who controls such other
Underwriter within the meaning of Section 15 of the Act, to the extent, and upon
the terms, that such Underwriter agrees to indemnify, hold harmless and
reimburse the Offerors and certain other persons pursuant to the provisions of
Section 8 of the Underwriting Agreement. This indemnity agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
such other Underwriter or controlling person or any statement made to the
Commission as to the results thereof.
(b) Each Underwriter agrees to pay, upon our request, as
contribution, its proportionate share, based upon the respective underwriting
obligations of the Underwriters, of any losses, claims, damages or liabilities,
joint or several, under the Act or otherwise, paid or incurred by any
Underwriter (including us, individually or as Representatives of the
Underwriters) to any person other than an Underwriter (including amounts paid by
an Underwriter as contribution), arising out of or based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement, any preliminary prospectus, the prospectus, any
amendment or supplement thereto, any document which may be incorporated by
reference therein, or any other selling or advertising material used with the
consent of the Representatives by the Underwriters in connection with the sale
of the Preferred Securities, or arising out of or based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) any act or
omission to act or any alleged act or omission to act by us, individually or as
Representatives of the Underwriters, or by the Underwriters, as a group but not
individually, in connection with any transaction contemplated by this Agreement
or undertaken in preparing for the purchase, sale and delivery of the Preferred
Securities; and each Underwriter will pay such proportionate share of any legal
or other expenses reasonably incurred by us or with our consent, in connection
with investigating or defending any such loss, claim, damage or liability, or
any action in respect thereof. In determining the amount of any Underwriter's
obligation under this paragraph, appropriate adjustment may be made by us to
reflect any amounts received by any one or more Underwriters, pursuant to
Section 8 of the Underwriting Agreement or otherwise, in respect of the claim
upon which such obligation is based. In respect of any claim there shall be
credited against the amount of any Underwriter's obligation under this paragraph
any loss, damage, liability or expense which is paid or incurred by such
Underwriter as a result of any such claim being asserted against it, and, if
such loss, damage, liability or expense is paid or incurred by such Underwriter
subsequent to any payment by it pursuant to this paragraph, appropriate
provision shall be made to effect such credit, by refund or otherwise. If any
claim to which the provisions of this paragraph would be applicable is asserted,
we may take such action in connection therewith as we deem necessary or
desirable, including retention of counsel for the Underwriters, and in our
discretion separate counsel for any particular Underwriter or group of
Underwriters, and the fees and disbursements of any counsel so retained by us
shall be included in the amounts of the Underwriter's obligations under this
paragraph. At our discretion, we may consent to being named as the
Representatives of a defendant class of underwriters. Any Underwriter may elect
to retain at its own expense its own counsel and, on advice of such counsel and
with our consent, may settle or consent to the settlement of any such claim. We
may settle or consent to the settlement of any such claim, on advice of counsel
retained by us, with the approval of a majority in interest of the Underwriters.
Whenever any Underwriter receives notice of the assertion of any claim to which
the provisions of this paragraph would be applicable, such Underwriter will give
prompt notice thereof to us. Whenever we receive notice of the assertion of any
such claim, we will give prompt notice thereof to each Underwriter. We also will
furnish each Underwriter with periodic reports, at such times as we deem
appropriate, as to the status of any such claim and the action taken by us in
connection therewith. In the event of the failure of any Underwriter to fulfill
its obligations under this paragraph, such obligations may be charged against
the other Underwriters not so defaulting in the same proportions as the
respective underwriting obligations of such other Underwriters, without,
however, relieving such defaulting Underwriter from its liability therefor. In
determining amounts payable pursuant to this paragraph, any loss, claim, damage,
liability or expense paid or incurred, and any amount received, by any person
controlling any Underwriter within the meaning of Section 15 of the Act which
has been paid or incurred or received by reason of such control relationship
shall be deemed to have been paid or incurred or received by such Underwriter.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6
<PAGE>
18. As promptly as may be practicable after termination of all of the
provisions referred to in Section 10 hereof and completion of transactions under
Section 9 hereof, any shares of Preferred Securities held by us for the account
of any Underwriter shall be delivered by us to such Underwriter, and the net
credit or debit balance of each Underwriter shall be paid to it or collected
from it by us, but we may establish such reserves as we may deem advisable
against any expenses or claims not then ascertained. If at such termination the
aggregate number of shares of Preferred Securities so held by us does not exceed
15% of the aggregate underwriting obligation of the Underwriters, we may in our
discretion sell such securities for the accounts of the several Underwriters at
such prices, on such terms and in such manner as we may determine. Any
Preferred Securities which are held by us for the account of any Underwriter by
reason of a default by a dealer or other purchaser in respect of the purchase
thereof pursuant to a sale under Section 3 hereof shall, in our discretion, be
purchased from time to time by the Underwriters in the same proportions, as
nearly as may be practicable, as the respective numbers of Preferred Securities
theretofore contracted for sale thereunder to dealers or other purchasers, as
the case may be, for the respective accounts of the Underwriters, at the net
price at which such Preferred Securities were contracted for sale to such dealer
or other purchaser, and we are authorized to make appropriate charges and
credits to the respective accounts of the Underwriters for this purpose.
Notwithstanding any distribution and settlement of accounts hereunder, each
Underwriter shall remain liable for its proper proportion of any transfer tax or
any other liability which may be asserted against us or any one or more of the
Underwriters in respect of this Agreement or the Underwriting Agreement based
upon the claim that the Underwriters constitute a partnership, an association,
an unincorporated business or other separate entity.
19. Any notice to any Underwriter shall be deemed to have been duly given
if mailed, sent by telex or facsimile transmission or delivered in person to
such Underwriter at the address set forth in its Underwriters' Questionnaire or
telex or facsimile transmission constituting such Questionnaire. Any such
notice shall take effect upon receipt thereof.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas.
21. This Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, which taken together shall constitute one and
the same instrument.
Please confirm that the foregoing is in accordance with your understanding
by signing a counterpart hereof as indicated below.
Very truly yours,
STEPHENS INC.
MORGAN KEEGAN & COMPANY, INC.
By:
----------------------------------------
Authorized Representative, Stephens Inc.
ACCEPTED AND CONFIRMED AS OF THE DATE FIRST WRITTEN ABOVE:
By:
--------------------------------------------
Attorney-in-fact for each of the several
Underwriters named in Schedule I to the
Underwriting Agreement.
7
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF TRUST
OF
OZARK CAPITAL TRUST
This Certificate of Trust of Ozark Capital Trust (the "Trust") has been
duly executed and is being 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 Ozark
Capital Trust.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is First Omni
Bank, National Association, 499 Mitchell Street, Millsboro, Delaware 19966,
Attn: Corporate Trust Services.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of Trust
in accordance with 12 Del. C. (S) 3810.
FIRST OMNI BANK, NATIONAL ASSOCIATION, not in its
individual capacity but solely as trustee of the
Trust
By: /s/ Donald C. Hargadon
---------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
PAUL E. MOORE, not in his individual capacity but
solely as trustee of the Trust
/s/ Paul E. Moore
-------------------------------------
<PAGE>
EXHIBIT 4.2
TRUST AGREEMENT
OF
OZARK CAPITAL TRUST
THIS TRUST AGREEMENT is made as of May 14, 1999 (this "Trust Agreement"),
by and among Bank of the Ozarks, Inc., an Arkansas corporation, as depositor
(the "Depositor"), and First Omni Bank, National Association, as trustee, and
Paul E. Moore, as trustee (jointly, the "Trustees"). The Depositor and the
Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Ozark Capital Trust" (the
"Trust"), in which name the Trustees or the Depositor, to the extent provided
herein, may conduct the business of the Trust, make and execute contracts, and
sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. Such amount shall constitute the initial trust estate.
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 constitute the governing instrument of the Trust. The Trustees are
hereby authorized and directed to execute and file a certificate of trust with
the Delaware Secretary of State in such form as the Trustees may approve.
3. The Depositor and the Trustees will enter into an Amended and Restated
Trust Agreement satisfactory to each such party to provide for the contemplated
operation of the Trust created hereby and the issuance of the Preferred or
Capital Securities and Common Securities referred to therein. Prior to the
execution and delivery of such Amended and Restated Trust Agreement, (a) the
Trustees shall not have any duty or obligation hereunder or with respect of the
trust estate, except as otherwise required by applicable law, and (b) the
Depositor shall take or cause to be taken any action as may be necessary to
obtain prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise. Notwithstanding the foregoing, the
Trustees may take all actions requested by the Depositor that the Depositor
deems necessary, convenient or incidental to effect the transactions
contemplated herein.
4. The Depositor, as sponsor of the Trust, is hereby authorized, in its
discretion, (i) to prepare and file with the Securities and Exchange Commission
(the "Commission") and to execute, in the case of the 1933 Act Registration
Statement and 1934 Act Registration Statement (as herein defined), on behalf of
the Trust, (a) a Registration Statement (the "1933 Act Registration Statement"),
including all pre-effective and post-effective amendments thereto, relating to
the registration under the Securities Act of 1933, as amended (the "1933 Act"),
of the Preferred or Capital Securities of the Trust, (b) any preliminary
prospectus or prospectus or supplement thereto relating to the Preferred or
Capital Securities of the Trust required to be filed pursuant to the 1933 Act,
and (c) a Registration Statement on Form 8-A or other appropriate form (the
"1934 Act Registration Statement"), including all pre-effective and post-
effective amendments thereto, relating to the registration of the Preferred or
Capital Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) if and at such time as determined by
<PAGE>
the Depositor, to file with the Nasdaq National Market or other exchange, or the
National Association of Securities Dealers ("NASD"), and execute on behalf of
the Trust a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred or Capital Securities of the Trust to be listed
on the Nasdaq National Market or such other exchange, (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 that shall be necessary or desirable to register the Preferred or
Capital Securities of the Trust under the securities or "Blue Sky" laws of such
jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or
desirable; (iv) to execute and deliver letters or documents to, or instruments
for filing with, a depository relating to the Preferred or Capital Securities of
the Trust; and (v) to execute, deliver and perform on behalf of the Trust an
underwriting agreement or purchase agreement with one or more underwriters or
purchasers relating to the offering of the Preferred or Capital Securities of
the Trust.
In the event that any filing referred to in this Section 4 is required by
the rules and regulations of the Commission, the Nasdaq National Market or other
exchange, NASD, or state securities or "Blue Sky" laws to be executed on behalf
of the Trust by the Trustees, the Trustees, in their capacity as trustees of the
Trust, are hereby authorized 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
Trustees, in their capacity as trustees 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 Nasdaq
National Market or other exchange, NASD, or state securities or "Blue Sky" laws.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be two and
thereafter the number of trustees of the Trust 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 of the Trust; provided, however,
that to the extent required by the Business Trust Act, one trustee of the Trust
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. Subject to the foregoing, the Depositor is entitled to
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days prior notice to the Depositor.
7. The Depositor hereby agrees to (i) reimburse the Trustees for all
reasonable expenses (including reasonable fees and expenses of counsel and other
experts) and (ii) indemnify, defend and hold harmless the Trustees and any of
the officers, directors, employees and agents of the Trustees (the "Indemnified
Persons") from and against all losses, damages, liabilities, claims, actions,
suits, costs, expenses, disbursements (including the reasonable fees and
expenses of counsel), taxes and penalties of any kind and nature whatsoever
(collectively, "Expenses"), to the extent that such Expenses arise out of or are
imposed upon or asserted at any time against such Indemnified Persons with
respect to the performance of this Trust Agreement, the creation, operation or
termination of the Trust or the transactions contemplated hereby; provided,
however, that the Depositor shall not be required to indemnify any Indemnified
Person
2
<PAGE>
for any Expenses which are a result of the willful misconduct, bad faith or
negligence of such Indemnified Person.
8. 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
principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the day and year first above written.
BANK OF THE OZARKS, INC., as Depositor
By: /s/ Paul E. Moore
--------------------------------
Name: Paul E. Moore
Title: Chief Financial Officer
FIRST OMNI BANK, NATIONAL ASSOCIATION, not in its
individual capacity but solely as trustee of the
Trust
By: /s/ Donald C. Hargadon
--------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
PAUL E. MOORE, not in his individual capacity but
solely as trustee of the Trust
/s/ Paul E. Moore
-----------------------------------
3
<PAGE>
EXHIBIT 4.3
OZARK CAPITAL TRUST
AMENDED AND RESTATED TRUST AGREEMENT
AMONG
BANK OF THE OZARKS, INC., AS DEPOSITOR
FMB TRUST COMPANY, NATIONAL ASSOCIATION,
AS PROPERTY TRUSTEE
FIRST OMNI BANK, NATIONAL ASSOCIATION,
AS DELAWARE TRUSTEE
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF ________________, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I
DEFINED TERMS
Section 1.01. Definitions .................................................................................. 1
ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 2.01. Name.......................................................................................... 10
Section 2.02. Office Of The Delaware Trustee; Principal Place Of Business................................... 10
Section 2.03. Initial Contribution Of Trust Property; Organizational Expenses............................... 10
Section 2.04. Issuance Of The Preferred Securities.......................................................... 10
Section 2.05. Issuance Of The Common Securities; Subscription And Purchase Of Subordinated Debentures....... 10
Section 2.06. Declaration Of Trust.......................................................................... 11
Section 2.07. Authorization To Enter Into Certain Transactions.............................................. 11
Section 2.08. Assets Of Trust............................................................................... 15
Section 2.09. Title to Trust Property....................................................................... 15
ARTICLE III
PAYMENT ACCOUNT
Section 3.01. Payment Account............................................................................... 16
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 4.01. Distributions................................................................................. 16
Section 4.02. Redemption.................................................................................... 17
Section 4.03. Subordination Of Common Securities............................................................ 19
Section 4.04. Payment Procedures............................................................................ 20
Section 4.05. Tax Returns And Reports....................................................................... 20
Section 4.06. Payment Of Taxes, Duties, Etc. Of The Trust................................................... 21
Section 4.07. Payments Under Indenture...................................................................... 21
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ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 5.01. Initial Ownership......................................................................... 21
Section 5.02. The Trust Securities Certificates.......................................................... 21
Section 5.03. Execution And Delivery Of Trust Securities Certificates.................................... 21
Section 5.04. Registration Of Transfer And Exchange Of Preferred Securities Certificates................. 21
Section 5.05. Mutilated, Destroyed, Lost Or Stolen Trust Securities Certificates......................... 22
Section 5.06. Persons Deemed Securityholders............................................................. 23
Section 5.07. Access To List Of Securityholders' Names And Addresses..................................... 23
Section 5.08. Maintenance Of Office Or Agency............................................................ 23
Section 5.09. Appointment Of Paying Agent................................................................ 24
Section 5.10. Ownership Of Common Securities By Depositor................................................ 24
Section 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate................ 25
Section 5.12. Notices To Clearing Agency................................................................. 25
Section 5.13. Definitive Preferred Securities Certificates............................................... 26
Section 5.14. Rights Of Securityholders.................................................................. 26
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 6.01. Limitations On Voting Rights.............................................................. 27
Section 6.02. Notice Of Meetings........................................................................ 28
Section 6.03. Meetings Of Holders Of Preferred Securities............................................... 28
Section 6.04. Voting Rights.............................................................................. 29
Section 6.05. Proxies, Etc............................................................................... 29
Section 6.06. Securityholder Action By Written Consent................................................... 29
Section 6.07. Record Date For Voting And Other Purposes.................................................. 29
Section 6.08. Acts Of Securityholders.................................................................... 29
Section 6.09. Inspection Of Records...................................................................... 30
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01. Representations And Warranties Of The Trust Company And The
Property Trustee........................................................................... 30
Section 7.02. Representations And Warranties Of The Delaware Bank And The
Delaware Trustee........................................................................... 32
Section 7.03. Representation And Warranties Of Depositor................................................. 33
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ARTICLE VIII
THE TRUSTEES
Section 8.01. Certain Duties And Responsibilities....................................................... 33
Section 8.02. Certain Notices........................................................................... 35
Section 8.03. Certain Rights Of Property Trustee........................................................ 35
Section 8.04. Not Responsible For Recitals Or Issuance Of Securities.................................... 38
Section 8.05. May Hold Securities....................................................................... 38
Section 8.06. Compensation; Indemnity; Fees............................................................. 38
Section 8.07. Corporate Property Trustee Required; Eligibility Of Trustees.............................. 39
Section 8.08. Conflicting Interests..................................................................... 40
Section 8.09. Co-Trustees And Separate Trustee.......................................................... 40
Section 8.10. Resignation And Removal; Appointment Of Successor......................................... 41
Section 8.11. Acceptance Of Appointment By Successor.................................................... 43
Section 8.12. Merger, Conversion, Consolidation Or Succession To Business............................... 43
Section 8.13. Preferential Collection Of Claims Against Depositor Or Trust.............................. 43
Section 8.14. Reports By Property Trustee............................................................... 44
Section 8.15. Reports To The Property Trustee........................................................... 44
Section 8.16. Evidence Of Compliance With Conditions Precedent.......................................... 44
Section 8.17. Number Of Trustees........................................................................ 44
Section 8.18. Delegation Of Power....................................................................... 45
Section 8.19. Voting.................................................................................... 45
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
Section 9.01. Dissolution Upon Expiration Date.......................................................... 45
Section 9.02. Early Dissolution......................................................................... 45
Section 9.03. Termination............................................................................... 46
Section 9.04. Liquidation............................................................................... 46
Section 9.05. Mergers, Consolidations, Amalgamations Or Replacements Of The Trust....................... 48
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Limitation Of Rights Of Securityholders................................................... 49
Section 10.02. Amendment................................................................................. 49
Section 10.03. Separability.............................................................................. 50
Section 10.04. Governing Law............................................................................. 50
Section 10.05. Payments Due On Non-Business Day.......................................................... 51
Section 10.06. Successors................................................................................ 51
Section 10.07. Headings.................................................................................. 51
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Section 10.08. Reports, Notices And Demands.............................................................. 51
Section 10.09. Agreement Not To Petition................................................................. 52
Section 10.10. Trust Indenture Act; Conflict With Trust Indenture Act.................................... 52
Section 10.11. Acceptance Of Terms Of Trust Agreement, Guarantee And Indenture........................... 53
Section 10.12. Counterparts.............................................................................. 53
</TABLE>
EXHIBITS
A - Certificate of Trust
B - Certificate Depository Agreement
C - Common Securities Certificates
D - Agreement as to Expenses and Liabilities
E - Preferred Securities Certificates
iv
<PAGE>
CROSS REFERENCE TABLE
Section of Trust Indenture Act of 1939, Section of Amended and Restated Trust
as Amended Agreement
310(a) 8.07; 2.07
310(b) 8.08
310(c) Inapplicable
311(a) 8.13
311(b) 8.13
312(a) 5.07
312(b) 5.07
312(c) 5.07
313(a) 8.14(a)
313(b) 8.14(b)
313(c) 8.14(b)
313(d) 8.14(c)
314(a) 8.15
314(b) Inapplicable
314(c) 8.16
314(d) Inapplicable
314(e) 1.01, 8.16
315(a) 8.01(a); 8.03(a)
315(b) 8.02; 10.08
315(c) 8.01(a)
315(d) 8.01; 8.03
315(e) Inapplicable
316(a) 6.01(b)
316(b) Inapplicable
316(c) 6.07
317(a) 8.13
317(b) 5.09
318(a) 10.10
318(b) 10.10
318(c) 10.10
Note: This Cross Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _______________, 1999,
among (i) Bank of the Ozarks, Inc., an Arkansas corporation (including any
successors or assigns, the "Depositor"), (ii) FMB Trust Company, National
Association, a national banking association, duly organized and existing under
the laws of the United States, as property trustee (the "Property Trustee" and,
in its separate corporate capacity and not in its capacity as Property Trustee,
the "Trust Company"), (iii) First Omni Bank, National Association, a national
banking association, with its principal place of business located in the State
of Delaware, as Delaware trustee (the "Delaware Trustee," and, to the extent
expressly provided herein, in its separate corporate capacity and not in its
capacity as Delaware Trustee, the "Delaware Bank"), (iv) George Gleason, an
individual, Paul Moore, an individual, and Mark Ross, an individual, each of
whose address is c/o Bank of the Ozarks, Inc. (each an "Administrative Trustee"
and collectively the "Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees referred to collectively as the
"Trustees") and (v) the several Holders, as hereinafter defined.
WITNESSETH:
WHEREAS, the Depositor, the Delaware Trustee and Paul Moore have heretofore
duly declared and formed OZARK CAPITAL TRUST, a business trust (the "Trust"),
pursuant to the Delaware Business Trust Act by the entering into of that certain
Trust Agreement, dated as of __________________, 1999 (the "Original Trust
Agreement"), and by the execution and filing on _________________, 1999, with
the Secretary of State of the State of Delaware of the Certificate of Trust, the
form of which is attached as EXHIBIT A; and
---------
WHEREAS, the Depositor, the Delaware Trustee and Paul Moore 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 and sale of the Common
Securities (as defined below) by the Trust to the Depositor, (ii) the issuance
and sale of the Preferred Securities (as defined below) 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 Subordinated Debentures
(as defined below), (iv) the appointment of the Property Trustee, and (v) 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 amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
Section 1.01. Definitions. For all purposes of this Trust Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
(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.
"Accelerated Maturity Date" has the meaning set forth in Section 1.01 of
the Indenture.
"Act" has the meaning specified in Section 6.08.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and a given period, the amount of additional interest accrued
on interest in arrears and paid by the Depositor on a Like Amount of
Subordinated Debentures for such period.
"Additional Sums" has the meaning specified in Section 2.05 of the
Indenture.
"Administrative Trustee" means each of George Gleason, Paul Moore and Mark
Ross, solely in each such person's capacity as Administrative Trustee of the
Trust continued hereunder and not in such person's individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor Administrative 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; provided, however, that an Affiliate of the
-------- -------
Depositor shall not be deemed to include 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.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having
jurisdiction in the premises adjudging such Person a bankrupt or
insolvent, or approving as properly filed a petition seeking
liquidation or reorganization of or in respect of such Person
under the United States Bankruptcy Code or any other similar
applicable federal or state law, and the continuance of any such
decree or order unvacated and unstayed for a period of 90 days;
or the commencement of an involuntary case under the United
States Bankruptcy Code in respect of such Person, which shall
continue undismissed for a period of 90 days or entry of an order
for relief in such case; or the entry of a decree or order of a
court having jurisdiction in the
2
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premises for the appointment on the ground of insolvency or
bankruptcy of a receiver, custodian, liquidator, trustee or
assignee in bankruptcy or insolvency of such Person or of its
property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated
and unstayed for a period of 90 days; or
(b)(i) the commencement by such Person of a voluntary case
or proceeding under United States bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or
foreign bankruptcy, insolvency or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or
insolvent; or (ii) the consent by such Person to the entry of a
decree or order for relief in respect of such Person in an
involuntary case or proceeding under United States bankruptcy
laws, as now or hereafter constituted, or any other applicable
federal, state or foreign bankruptcy, insolvency or other similar
law or to the commencement of any bankruptcy or insolvency case
or proceeding against such Person; or (iii) the filing by such
Person of a petition or answer or consent seeking reorganization
or relief under United States bankruptcy laws, as now or
hereafter constituted, or any other applicable federal, state or
foreign bankruptcy, insolvency or other similar law; or (iv) the
consent by such Person to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official
of such Person or any substantial part of such Person's property
or assets, or the making by such Person of an assignment for the
benefit of creditors; or (v) the admission by such Person in
writing of its inability to pay its debts generally as they
become due; or (vi) the taking of corporate action by such Person
in furtherance of any such actions.
"Bankruptcy Laws" has the meaning specified in Section 10.09.
"Book-Entry Preferred Securities Certificates" means Preferred Securities
Certificates issued in global, fully registered form to the 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 Delaware 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, as stated in the recitals to this Trust
Agreement, the certificate of trust filed with the Secretary of State of the
State of Delaware with respect to the Trust, in the form attached as EXHIBIT A,
---------
as the same may be amended or restated from time to time.
3
<PAGE>
"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.
"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 Trust Agreement 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 a common undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $10.00 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 the principal corporate trust office of the
Property Trustee at which at any particular time its corporate trust business
shall be administered, which office at the date hereof is located at 25 Charles
Street, Baltimore, MD 21201, Attention: Corporate Trust Services.
"Debenture Event of Default" means an "Event of Default" as defined in the
Indenture.
"Debenture Redemption Date" means, with respect to any Subordinated
Debentures to be redeemed under the Indenture, the date fixed for redemption
thereof under the Indenture.
"Debenture Trustee" means FMB Trust Company, National Association, a trust
company organized under the laws of the United States and any successor thereto,
as trustee under the Indenture.
"Definitive Preferred Securities Certificates" means Preferred Securities
Certificates issued in certificated, fully registered form as provided in
Section 5.13.
"Delaware Bank" has the meaning specified in the preamble to this Trust
Agreement.
"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 corporation identified as the "Delaware
Trustee" in the preamble to this Trust Agreement solely in its capacity as
Delaware Trustee of the Trust
4
<PAGE>
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor Delaware 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 4.01(a).
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 4.01.
"Event of Default" means any one of the following events that shall have
occurred and be continuing (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.
"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 9.01.
"Extension Period" means the "Extended Interest Payment Period" as defined
in the Indenture.
"Global Subordinated Debenture" has the meaning specified in the Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed and
delivered by the Depositor and Property Trustee, 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 Subordinated Indenture, dated as of _____________,
1999, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
5
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"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, 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 an aggregate Liquidation Amount equal to the aggregate
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities and (b) with respect to a distribution
of Subordinated Debentures to Holders of Trust Securities in connection with a
dissolution or liquidation of the Trust, Subordinated Debentures having an
aggregate principal amount equal to the aggregate Liquidation Amount of the
Trust Securities of the Holder to whom such Subordinated Debentures are
distributed.
"Liquidation Amount" means the stated amount of $10.00 per Trust Security.
"Liquidation Date" means the date on which Subordinated Debentures are to
be distributed to Holders of Trust Securities pursuant to Section 9.04(a) in
connection with a dissolution and liquidation of the Trust.
"Liquidation Distribution" has the meaning specified in Section 9.04(d).
"Maturity Date" has the meaning set forth in Section 2.02 of the Indenture.
"Officers' Certificate" means a certificate signed by the Chief Executive
Officer, the President or a Vice President and by the Chief Accounting Officer
or the Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers 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 and
a brief statement of the nature and scope of the examination or
investigation undertaken by each officer rendering the Officer Certificate;
(b) 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
(c) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
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"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, and
who may be an employee of any thereof, and who shall be reasonably acceptable to
the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding," when used with respect to Preferred Securities, means, as of
the date of determination, all Preferred Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the Securities
Registrar or delivered to the Securities Registrar for cancellation;
(b) Preferred 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 Preferred Securities; provided
that, if such Preferred Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange for or
in lieu of which other Preferred Securities have been executed and
delivered pursuant to Sections 5.04, 5.05, 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, except that (i) 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 actually
knows to be so owned shall be so disregarded and (ii) 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 as to such Preferred Securities so owned.
"Owner" means each Person who is the beneficial owner of Preferred
Securities represented by 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 5.09 and shall initially be the Property Trustee.
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"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee for the benefit of the
Securityholders in which all amounts paid in respect of the Subordinated
Debentures will be held and from which the Property Trustee shall make payments
to the Securityholders in accordance with Sections 4.01 and 4.02.
"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 a preferred undivided beneficial interest in the
assets of the Trust, designated "______% Cumulative Preferred Securities,"
having a Liquidation Amount of $10.00 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 commercial bank or trust company identified as
the "Property Trustee" in the preamble to this Trust Agreement solely in its
capacity as Property Trustee of the Trust heretofore formed 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 Maturity Date of the
Subordinated Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security to be
redeemed, 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 to be redeemed.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Responsible Officer" means any officer within the Corporate Trust Office
of the Property Trustee with direct responsibility for the administration of
this Trust Agreement and also means, with respect to a particular corporate
trust matter, any other officer of the Property Trustee to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.04.
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"Securityholder" means a Person in whose name a Trust Security or Trust
Securities is registered in the Securities Register; any such Person is a
beneficial owner of the Trust within the meaning of the Delaware Business Trust
Act.
"Subordinated Debentures" means the $________________ aggregate principal
amount of the Depositor's _____% Subordinated Debentures due 2029, issued
pursuant to the Indenture.
"Trust" means Ozark Capital Trust, the Delaware business trust continued
hereby and which was created as stated in the recitals 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 all exhibits hereto, including, for all purposes of
this 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 Company" has the meaning specified in the preamble to this Trust
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Trust Agreement 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.
"Trust Property" means (a) the Subordinated Debentures, (b) the rights of
the Property Trustee under the Guarantee, (c) any cash on deposit in, or owing
to, the Payment Account and (d) 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.
"Trustee" or "Trustees" means, individually or collectively, any of the
Property Trustee, the Delaware Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement dated as of
________________, 1999, among the Trust, the Depositor and the underwriters
named therein.
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ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 2.01. Name. The Trust heretofore created and continued hereby
shall continue to be known as "OZARK CAPITAL TRUST," 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 conduct the affairs of the Trust, make and execute contracts
and other instruments on behalf of the Trust and sue and be sued.
Section 2.02. Office Of The Delaware Trustee; Principal Place Of Business.
The address of the Delaware Trustee in the State of Delaware is 499 Mitchell
Street, Millsboro, Delaware 19966, 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 Bank of the Ozarks, Inc., 12615
Chenal Parkway, Little Rock, Arkansas 72231.
Section 2.03. Initial Contribution Of Trust Property; Organizational
Expenses. The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original 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.
Section 2.04. Issuance Of The Preferred Securities. On __________, 1999,
the Depositor and an Administrative Trustee, on behalf of the Trust and pursuant
to the Original 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 5.02 and deliver, in accordance with the Underwriting
Agreement, a Preferred Securities Certificate, registered in the name of the
nominee of the initial Clearing Agency, evidencing ____________ Preferred
Securities having an aggregate Liquidation Amount of $__________ against receipt
of the aggregate purchase price of such Preferred Securities of $____________,
which amount such Administrative Trustee shall promptly deliver to the Property
Trustee.
Section 2.05. Issuance Of The Common Securities; Subscription And Purchase
Of Subordinated 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 5.02 and deliver to the Depositor a Common
Securities Certificate, registered in the name of the Depositor, evidencing
_________ Common Securities having an aggregate Liquidation Amount of
$______________ against receipt of such amount from or on behalf of the
Depositor. Contemporaneously therewith, an Administrative Trustee, on behalf of
the Trust, shall subscribe to and purchase from the Depositor the Subordinated
Debentures, registered in the name of the Property Trustee on behalf of the
Trust and having an aggregate principal amount equal to $_____________, and, in
satisfaction of the purchase price for such
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Subordinated Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the sum of $_______________.
Section 2.06. 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 Subordinated Debentures, (b) to
distribute the Trust's income and assets as provided in this Trust Agreement,
and (c) to engage in those activities necessary, convenient or incidental
thereto including, without limitation, those activities specified in Sections
2.07(a), 2.07(c), 8.01 and 8.03. 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 Property in trust upon and
subject to the conditions set forth herein for the benefit of 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 a Trustee of the Trust
for the sole and limited purpose of fulfilling the requirements of Section 3807
of the Delaware Business Trust Act. In the event the Delaware Trustee shall at
any time be required to take any action or perform any duty under this Trust
Agreement, the Delaware Trustee shall be entitled to the benefits of Sections
8.1 and 8.3. No implied covenants or obligations shall be read into this Trust
Agreement against the Delaware Trustee.
Section 2.07. 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
Article VIII, and in accordance with the following provisions (i)
and (ii), the Administrative Trustees shall have the power and
authority, and are hereby authorized and directed, to enter into
on behalf of the Trust all transactions and agreements determined
by the Administrative Trustees to be appropriate in exercising
the authority, express or implied, otherwise granted to the
Administrative 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, acting singly or jointly, shall have the power and
authority and is hereby authorized and directed to act on
behalf of the Trust with respect to the following matters:
(A) to execute, deliver, issue and sell the Trust Securities on behalf of
the Trust in accordance with this Trust Agreement, and cause the Trust to
execute, deliver, perform and comply with the terms of the Underwriting
Agreement regarding the issuance and sale of the Trust Securities;
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(B) to acquire the Debentures with the proceeds of the sale of the
Preferred Securities and the Common Securities; provided, however, that the
-------- -------
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the
Securityholders;
(C) 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, instruments and documents (including,
without limitation, such certificates and cross-receipts as may be necessary in
connection with the issuance and sale of the Trust Securities and the purchase
of the Debentures) as may be necessary or desirable in connection with the
purposes and function of the Trust ;
(D) to assist in the registration 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 and to cause the Trust to take any action deemed in such
Administrative Trustee's discretion to be necessary, advisable or convenient to
comply with the Trust's obligations under the Trust Indenture Act;
(E) to assist in the listing of the Preferred Securities upon the NASDAQ
Stock Market or such securities exchange or exchanges as shall be determined by
the Depositor and, if required, 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;
(F) to send notices (other than notices of default) and other information
regarding the Trust Securities and the Subordinated Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) to appoint a Paying Agent, authenticating agent and Securities
Registrar in accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, to wind up the affairs
of and liquidate the Trust and prepare, execute and file the certificate of
cancellation with the Secretary of State of the State of Delaware;
(I) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and in each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(J) to execute and deliver an application for a taxpayer identification
number for the Trust; and
(K) to take any action incidental to the foregoing as the Administrative
Trustees may from time to time determine in their discretion is necessary or
advisable to give effect to the
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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 and authority and is hereby authorized and
directed to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Payment Account;
(B) the receipt of and taking title to the Subordinated Debentures;
(C) the receipt and collection of interest, principal and any other
payments made in respect of the Subordinated Debentures in the Payment Account;
(D) the distribution from the Trust Property of amounts owed to the
Securityholders in respect of the Trust Securities in accordance with the terms
of this Trust Agreement;
(E) the exercise of all of the rights, powers and privileges of a holder
of the Subordinated Debentures;
(F) the sending of notices of default and other information regarding the
Trust Securities and the Subordinated 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;
(I) 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) acting as Paying Agent and/or Securities Registrar to the extent
appointed as such hereunder and executing and delivering letters, documents or
instruments with the Clearing Agency relating to the Preferred Securities;
including, without limitation, the Certificate Depository Agreement; and
(K) except as otherwise provided in this Section 2.07(a)(ii), the Property
Trustee shall have none of the duties, liabilities, powers or the authority of
the Administrative Trustees set forth in Section 2.07(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
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or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trust shall not, the
Trustees shall not and the Administrative Trustees shall cause
the Trust not to (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, to such Trustee's
actual knowledge, 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, power, authority
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 authorized, ratified and
confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on the appropriate form in relation
to the Preferred Securities and the Subordinated Debentures,
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 Subordinated Debentures
and to do any and all such acts, other than actions which
must be taken by or on behalf of the Trust, and advise the
Trustees of actions they must take on behalf of the Trust,
and prepare for execution and filing 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;
(iii) the preparation for filing by the Trust and
execution on behalf of the Trust of an application to the
NASDAQ Stock Market or a national stock exchange or other
organizations for listing upon notice of issuance of any
Preferred Securities (or, if applicable, the Subordinated
Debentures) and to file or cause an Administrative Trustee
to file thereafter with such exchange or organization such
notifications and documents as may be necessary from time to
time;
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(iv) if required, 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 (or, if
applicable, the Subordinated Debentures) 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;
(vi) the negotiation of the terms of, and execution of,
the Original Trust Agreement, and the preparation of this
Trust Agreement and the selection of the Trustees;
(vii) the execution, delivery and performance of the
Certificate Depository Agreement and such other agreements
and instruments as may be necessary or incidental to the
purposes and functions of the Trust; and
(viii) 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 Investment Company Act, will be
classified as a "grantor trust" and not as an association taxable
as a corporation for United States federal income tax purposes
and so that the Subordinated Debentures will be treated as
indebtedness of the Depositor for United States federal income
tax purposes. In this connection, subject to Section 10.02, the
Depositor and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law or this Trust
Agreement, that each of the Depositor and the Administrative
Trustees determines in their discretion to be necessary or
desirable for such purposes. In no event shall the Trustees be
liable to the Trust or the Securityholders for any failure to
comply with this Section that results from a change in law or
regulations or in the interpretation thereof.
Section 2.08. Assets Of Trust. The assets of the Trust shall consist of
the Trust Property.
Section 2.09. 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 Securityholders in accordance with this Trust Agreement.
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ARTICLE III
PAYMENT ACCOUNT
Section 3.01. 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 and sole right of
withdrawal with respect to the Payment Account for the purpose of making
deposits to 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 Subordinated Debentures. Amounts held
in the Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 4.01. Distributions.
(a) 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 accumulate from _____________, 1999, and,
except during any Extension Period with respect to the Subordinated Debentures,
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 in each year, commencing June ____, 1999. The amount of each
Distribution due with respect to the Trust Securities will include amounts
accrued through the date the Distribution payment is due. 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) except that, if such Business Day is in the next succeeding
calendar year, payment of such Distribution shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. Each date on which Distributions are payable in accordance with
this Section 4.01(a) is a "Distribution Date."
(b) The Trust Securities represent undivided beneficial interests in the
Trust Property, and the 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. During any Extension Period with
respect to
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the Subordinated Debentures, Distributions on the Preferred Securities will be
deferred for a period equal to the Extension Period. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds actually received
by the Property Trustee and immediately available in the Payment Account for the
payment of such Distributions.
(d) 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 1st day of the month in which the relevant
Distribution Date occurs.
Section 4.02. Redemption.
(a) On each Debenture Redemption Date and on the Maturity Date of the
Subordinated Debentures, the Trust will be required to redeem a Like Amount of
Trust Securities at the Redemption Price.
(b) Notice of redemption shall be prepared by or on behalf of the
Administrative Trustees and delivered to the Property Trustee, and shall then 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
Securities Register. The Property Trustee shall have no responsibility for the
accuracy of any CUSIP number contained in such notice. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price, or if the Redemption Price cannot
be calculated prior to the time the notice is required to be
sent, the estimate of the Redemption Price provided pursuant to
the Indenture together with a statement that it is an estimate
and that the actual Redemption Price will be calculated on the
third Business Day prior to the Redemption Date (and, if an
estimate is provided, a further notice shall be sent of the
actual Redemption Price on the date, or as soon as practicable
thereafter, that notice of such actual Redemption Price is
received pursuant to the Indenture);
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are
to be redeemed, the identification and the aggregate Liquidation
Amount of the particular Trust Securities to be redeemed;
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(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 accumulate
on and after said date, except as provided in Section 4.02(d)
below; and
(vi) the place or places where Trust Securities are to be
surrendered for the payment of the Redemption Price.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Subordinated 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 actually received by the Property Trustee
and immediately 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 New York City time, on the Redemption
Date, subject to Section 4.02(c), the Property Trustee will, so long as and to
the extent the Preferred Securities are in book-entry-only form, 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 Owners thereof.
If and to the extent the Preferred Securities are no longer in book-entry-only
form, the Property Trustee, subject to Section 4.02(c), will deposit with the
Paying Agent funds sufficient to pay the applicable Redemption Price on such
Preferred Securities held in definitive form 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 Securities
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, but
without interest on such Redemption Price, and such Trust 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), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case, 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 accumulate, 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.
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(e) Payment of the Redemption Price on the Trust Securities shall be made
to the record 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 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 4.03(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 that are to be redeemed. The particular Preferred
Securities to be redeemed shall be selected 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 Securities Registrar (unless the
Property Trustee is then serving as Securities 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, it being understood that, in the case of Preferred Securities
registered in the name of and held of record by the Clearing Agency or its
nominee, the distribution of the proceeds of such redemption will be made in
accordance with the procedures of the Clearing Agency or its nominee. 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 or to be redeemed only in part, to
the portion of the Liquidation Amount of Preferred Securities which has been or
is to be redeemed.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, or register the transfer of or exchange of, any Preferred Security
during a period beginning at the opening of business 15 days before any
selection of the Preferred Securities to be redeemed and ending at the close of
business on the earliest date in which the relevant notice of redemption is
deemed to have been given to all holders of Preferred Securities to be so
redeemed pursuant to Section 10.8 or (ii) register the transfer of or exchange
of any Preferred Securities so selected for redemption, in whole or in part,
except for the unredeemed portion of any Preferred Securities being redeemed in
part.
Section 4.03. 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 4.02(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 and of which a Responsible Officer of the Property Trustee has
actual
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knowledge, 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 then called for
redemption, 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. The
existence of an Event of Default does not entitle the Holders of Preferred
Securities to accelerate the maturity thereof.
(b) In the case of the occurrence of any Event of Default resulting from a
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 shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities shall, to the actual knowledge of a
Responsible Officer of the Property Trustee, have 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 4.04. 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 Holder of the Common
Securities.
Section 4.05. Tax Return 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) 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 furnished to such
Securityholder or the information 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 Administrative Trustees and the Property Trustee shall comply
with United States federal withholding and backup
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withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
Section 4.06. Payment Of Taxes, Duties, Etc. Of The Trust. Upon receipt
under the Subordinated Debentures of Additional Sums, the Property Trustee, at
the written direction of an Administrative Trustee or the Depositor, shall
promptly pay from such Additional Sums 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 4.07. Payments Under Indenture. Any amount payable hereunder to
any Holder of Preferred Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received under the Indenture
pursuant to Section 5.14(b) or (c) hereof.
ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 5.01. Initial Ownership. Upon the creation of the Trust and the
contribution by the Depositor pursuant to Section 2.03 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 5.02. The Trust Securities Certificates. The Preferred Securities
Certificates shall be issued in minimum denominations of $10.00 Liquidation
Amount and integral multiples of $10.00 in excess thereof, and the Common
Securities Certificates shall be issued in denominations of $10.00 Liquidation
Amount and integral multiples of $10.00 in excess 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 hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 5.04, 5.11
and 5.13.
Section 5.03. Execution And Delivery Of Trust Securities Certificates. On
the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04
and 2.05, to be executed on behalf of the Trust by at least one of the
Administrative Trustees and delivered, without further action by the Trust or
the Depositor, in authorized denominations.
Section 5.04. Registration Of Transfer And Exchange Of Preferred
Securities Certificates. The registrar designated by the Property Trustee (the
"Securities Registrar") shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.08, a register or
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registers for the purpose of registering Trust Securities Certificates and
transfers and exchanges of Preferred Securities Certificates (herein referred to
as the "Securities Register") in which, subject to such reasonable regulations
as it may prescribe, it 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. The provisions
of this Trust Agreement, including Sections 8.01, 8.03 and 8.06, shall apply to
the Property Trustee also in its role as Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.08, 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 5.08.
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 the Depository and the Securities
Registrar duly executed by the Holder thereof or such Holder's attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange and delivered to the Property Trustee shall
be canceled and subsequently disposed of by the Property Trustee in accordance
with its 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 of business on the day of such mailing or (ii) 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 5.05. 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 protected
purchaser, the Administrative Trustees, or any one of them, on behalf of
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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. The provisions of this
Section 5.05 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 Trust Securities.
Section 5.06. Persons Deemed Securityholders. The Trustees, the Paying
Agent and 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 none of the Trustees,
the Paying Agent or the Securities Registrar shall be bound by any notice to the
contrary.
Section 5.07. 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
15 and July 15 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 regular record date (as provided in Section 4.01(d)) and (b)
promptly after receipt by any Administrative Trustee or the Depositor of a
request therefor from the Property Trustee, the list referred to in Section
5.07(a) above and/or 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 this Trust Agreement or under
the Trust Securities, and the corresponding rights of the Property Trustee shall
be as provided in the Trust Indenture Act, except to the extent Section 3819 of
the Delaware Business Trust Act would require greater access to such
information, in which case the latter shall apply. Each Holder, 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 5.08. 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, 25 South
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Charles Street, Baltimore, Maryland 21203, Attention: Corporate Trust
Administration, as the principal corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the Depositor, to
the Property Trustee and to the Securityholders of any change in the location of
the Securities Register or any such office or agency.
Section 5.09. 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
this Trust Agreement, including Sections 8.01, 8.03 and 8.06, 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.
Section 5.10. Ownership Of Common Securities By Depositor. On the Closing
Date, the Depositor shall acquire and retain beneficial and record ownership of
the Common Securities. To the fullest extent permitted by law, any attempted
transfer of the Common Securities (other than a transfer in connection with a
merger or consolidation of the Depositor into another corporation pursuant to
Section 12.01 of the Indenture) 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".
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Section 5.11. Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities, upon original issuance, will be represented
by a typewritten Book-Entry Preferred Securities Certificate or Certificates, to
be delivered to, or held by, the Property Trustee as custodian for The
Depository Trust Company, as the initial Clearing Agency. Preferred Securities
represented by such Book-Entry 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. To the extent
Preferred Securities represented by Book-Entry Preferred Securities Certificates
are Outstanding:
(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 Preferred Securities represented by the Book-
Entry Preferred Securities Certificates (including the payment of the
Liquidation Amount of and Distributions on such Preferred Securities) as
the sole Holder of such Preferred Securities 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 Preferred Securities represented by
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. Unless and until Definitive Preferred
Securities Certificates are issued pursuant to Section 5.13, the Clearing
Agency, as sole Holder of Preferred Securities, will receive payments on
the Preferred Securities and transmit such payments to the Owners. Any
Clearing Agency designated pursuant hereto will not be deemed an agent of
the Trustees 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, as set forth in Exhibit C.
---------
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.
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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 discharge properly 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 representing an aggregate Liquidation Amount equal to not
less than a majority of the aggregate Liquidation Amount of all Outstanding
Trust Securities cause the Clearing Agency to advise the Property Trustee in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of the Owners of Preferred Securities, then
the Property Trustee shall notify the Clearing Agency, and the Clearing Agency
shall notify all Owners of Preferred Securities, 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 Book-Entry
Preferred Securities Certificate or 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 Preferred
Securities represented thereby 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 2.09, 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 to subscribe for
additional Trust Securities. When issued and delivered to Holders of the
Preferred Securities against payment of the purchase price therefor, the
Preferred Securities will be validly issued, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust. The Holders of the
Preferred Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) For 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 Subordinated Debentures
fail to declare the principal of all of the Subordinated Debentures to be
immediately due and payable, the Holders of Preferred Securities
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having an aggregate Liquidation Amount of not less than 25% of the aggregate
Liquidation Amount of the Preferred Securities then Outstanding shall have the
right to make such declaration 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 Subordinated Debentures shall become
immediately due and payable, provided that the payment of principal and interest
on such Subordinated Debentures shall remain subordinated to the extent provided
in the Indenture. If, as a result of a Debenture Event of Default, the Debenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Subordinated Debentures have declared the Subordinated Debentures
due and payable and if such default has been cured and a sum sufficient to pay
all matured installments due (otherwise than by acceleration) under the
Subordinated Debentures has been deposited with the Debenture Trustee, then (if
the holders of not less than a majority in aggregate outstanding principal
amount of Subordinated Debentures have not rescinded such declaration and waived
such default) the Holders of a majority in aggregate Liquidation Amount of the
Preferred Securities may rescind such declaration and waive such default.
(c) For so long as any Preferred Securities remain outstanding, upon a
Debenture Event of Default arising from the failure to pay interest or principal
on the Subordinated Debentures, the Holders of any Preferred Securities then
Outstanding shall, to the fullest extent permitted by law, have the right to
institute directly proceedings for enforcement of payment to such Holders of
principal of or interest on the Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Preferred Securities of such
Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 6.01. Limitations On Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.02 of
this Trust Agreement 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 Subordinated 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 Subordinated Debentures, (ii) waive any past default which is waivable
under Article Seven of the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or the Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the Holders not
less than a majority in Liquidation Amount of all
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Outstanding Preferred Securities; provided, however, that where the Indenture
expressly provides that a consent thereunder would require the consent of each
holder of outstanding Subordinated 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 Administrative Trustees and the Property
Trustee shall not revoke any action previously authorized or approved by a vote
of the Holders of the Outstanding Preferred Securities, except by a subsequent
vote of the Holders of the Outstanding Preferred Securities. The Property
Trustee shall notify each Holder of the Outstanding Preferred Securities of any
notice of default received from the Debenture Trustee with respect to the
Subordinated Debentures. In addition to obtaining the foregoing approvals of the
Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Administrative Trustees and the Property Trustee shall, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will continue to be classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Administrative Trustees and the Property Trustee 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, voting as a
single 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 not less than a majority in Liquidation Amount of the Outstanding
Preferred Securities. No amendment to this Trust Agreement may be made if, as a
result of such amendment, the Trust would cease to be classified as a grantor
trust or would be classified as an association taxable as a corporation for
United States federal income tax purposes.
Section 6.02. Notice Of Meetings. Notice of all meetings of the Holders of
Preferred Securities, stating the time, place and purpose of the meeting, shall
be given by the Administrative Trustees pursuant to Section 10.08 to each Holder
of Preferred Securities, at such Securityholder's 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 6.03. Meetings Of Holders Of Preferred Securities. No annual
meeting of Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Securityholders to vote on any matter upon the
written request of the Holders of not less than 25% of the Outstanding Preferred
Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Holders of the Preferred Securities to vote on any
matters as to which the Holders of the Preferred Securities are entitled to
vote. Holders of record of not less than 50% of the Outstanding Preferred
Securities (based upon their aggregate Liquidation Amount), present in person or
by proxy, shall constitute a quorum at any meeting of such
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Securityholders. If a quorum is present at a meeting, an affirmative vote by the
Holders of record present, in person or by proxy, holding not less than a
majority of the Preferred Securities (based upon their aggregate Liquidation
Amount) held by the Holders of Preferred Securities of record present, either in
person or by proxy, at such meeting shall constitute the action of the Holders
of the Preferred Securities, unless this Trust Agreement specifically requires a
greater number of affirmative votes.
Section 6.04. 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 6.05. 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. 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 6.06. 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 not less than 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.
Section 6.07. 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 than 90 days
prior to the date of any meeting of Securityholders or the payment of any
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 6.08. 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
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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 8.01) 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 or her the execution thereof. Where such
execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such signer's 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. A Holder
of Preferred Securities 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 6.09. 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 7.01. Representations And Warranties Of The Trust Company And The
Property Trustee. The Trust Company, in its separate corporate capacity and as
Property Trustee, as of the date hereof, and each successor Property Trustee at
the time of the successor Property Trustee's acceptance of its appointment as
Property Trustee hereunder (the term "Trust Company" being used hereafter in
this Article VII to refer to such successor Property Trustee in
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its separate corporate capacity and as Property Trustee), hereby represents and
warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) the Trust Company is a national association duly organized and
validly existing under the laws of the United States of America;
(b) the Trust Company 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 Trust Company and constitutes the valid and legally
binding agreement of the Trust Company 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 principles of
equity;
(d) the execution, delivery and performance by the Trust Company of
this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Trust Company and does not require any
approval of the stockholders of the Trust Company and such execution,
delivery and performance will not (i) violate the Trust Company's charter
or by-laws, (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 which is not related to the
transactions contemplated by this Trust Agreement and to which the Trust
Company 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 of
Delaware, as the case may be, governing the banking and trust powers of the
Trust Company, or any order, judgment or decree applicable to the Trust
Company;
(e) neither the authorization, execution or delivery by the Trust
Company of this Trust Agreement nor the consummation of any of the
transactions by the Trust Company 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 law of the United States or State of
Delaware governing the banking and trust powers of the Trust Company; and
(f) there are no proceedings pending or, to the best of the Trust
Company's knowledge, threatened against or affecting the Trust Company 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 Trust Company to
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enter into or perform its obligations as one of the Trustees under this
Trust Agreement.
Section 7.02. Representations And Warranties Of The Delaware Bank And The
Delaware Trustee. The Delaware Bank in its corporate capacity and as Delaware
Trustee, as of the date hereof, and each successor Delaware Trustee at the time
of the successor Delaware Trustee's acceptance of its appointment as Delaware
Trustee hereunder (the term "Delaware Bank" being used hereafter in this Article
VIII to refer to such successor Delaware Trustee in its separate corporate
capacity and as Delaware Trustee), hereby represents and warrants (as
applicable) for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Bank is a national association duly organized and
validly existing under the laws of the United States of America;
(b) the Delaware 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 Delaware Bank and constitutes the valid and legally
binding agreement of the Delaware 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 principles of
equity;
(d) the execution, delivery and performance by the Delaware Bank of
this Trust Agreement has been duly authorized by all necessary corporate or
other action on the part of the Delaware Bank and does not require any
approval of the stockholders of the Delaware Bank and such execution,
delivery and performance will not (i) violate the Delaware Bank's charter
or by-laws, (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 which is not related to the
transactions contemplated by this Trust Agreement and to which the Delaware
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 of
Delaware, as the case may be, governing the banking or trust powers of the
Delaware Bank, or any order, judgment or decree applicable to the Delaware
Bank;
(e) neither the authorization, execution or delivery by the Delaware
Bank of this Trust Agreement nor the consummation of any of the
transactions by the Delaware Bank 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
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law of the State of Delaware governing the banking or trust powers of the
Delaware Bank; and
(f) there are no proceedings pending or, to the best of the Delaware
Bank's knowledge, threatened against or affecting the Delaware Bank 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 Delaware Bank to enter into or perform its obligations as one of the
Trustees under this Trust Agreement.
Section 7.03. Representation And Warranties Of Depositor. The Depositor
hereby represents and warrants for the benefit of the Securityholders and the
Trustees that:
(a) the Trust Securities Certificates issued on 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 Administrative 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 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 Trust Company, the Property
Trustee, the Delaware Bank or the Delaware Trustee, as the case may be, of
this Trust Agreement.
ARTICLE VIII
THE TRUSTEES
Section 8.01. 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 any Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of their duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. No
Administrative Trustee nor the Delaware Trustee shall be liable for such
Trustee's acts or omissions hereunder except as a result of such Trustee's own
bad faith, gross negligence or willful misconduct. The Property Trustee's
liability shall be determined under the Trust Indenture Act. Whether or not
herein 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. To the extent that,
at law or in
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equity, the Delaware Trustee or an Administrative Trustee has duties (including
fiduciary duties) and liabilities relating thereto to the Trust or to the
Securityholders, the Delaware Trustee or such Administrative 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
Delaware Trustee or the Administrative 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 Delaware Trustee and the Administrative
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 such Securityholder's acceptance of a Trust Security, agrees
that such Securityholder will look solely to the revenue and proceeds from the
Trust Property to the extent legally available for distribution to such
Securityholder as herein provided and that the Trustees are not personally
liable to such Securityholder for any amount distributable in respect of any
Trust Security or for any other liability in respect of any Trust Security.
This Section 8.01(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, its bad faith, 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 not less than a majority in Liquidation
Amount of the Trust Securities 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 Subordinated 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;
(iv) the Property Trustee shall not be liable for any interest on any
money received by it except as it may otherwise agree in writing with the
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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 3.01 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 negligence, default or misconduct of the
Administrative Trustees or the Depositor.
Section 8.02. Certain Notices.
(a) Within five Business Days after a Responsible Officer of the Property
Trustee obtains actual knowledge of occurrence of any Event of Default, the
Property Trustee shall transmit, in the manner and to the extent provided in
Section 10.08, notice of such Event of Default to the Securityholders, the
Administrative Trustees and the Depositor, unless such Responsible Officer shall
have actual knowledge that such Event of Default shall have been cured or waived
prior to the sending of such notice.
(b) The Administrative Trustees shall transmit to the Securityholders and
the Property Trustee in the manner and to the extent provided in Section 10.08,
notice of the Depositor's election to begin or further extend an Extension
Period on the Subordinated Debentures (unless such election shall have been
revoked) within the time specified for transmitting such notice to the holders
of the Subordinated Debentures pursuant to the Indenture as originally executed.
(c) In the event the Depositor elects to accelerate the Maturity Date in
accordance with Section 2.02 of the Indenture, the Property Trustee shall give
notice to each Holder of Trust Securities of the acceleration of the Maturity
Date and the Accelerated Maturity Date not later than five Business Days after
the Property Trustee receives the notice provided in Section 2.02(c) of the
Indenture.
Section 8.03. Certain Rights Of Property Trustee. Subject to the
provisions of Section 8.01:
(a) the Property Trustee may conclusively rely and shall be protected in
acting or refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation or instruction 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, sent 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 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
Holders of the
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Preferred Securities 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 Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor and shall have no liability whatsoever
for such action or inaction except for its own bad faith, negligence or willful
misconduct; provided, however, that if the Property Trustee does not receive
such instructions of the Depositor within 10 Business Days after it has
delivered such notice, or such 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 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) if a Responsible Officer of the Property Trustee has obtained actual
knowledge that an Event of Default has occurred and is continuing and, (i) in
performing its duties under this Declaration, the Property Trustee is required
to decide between alternative courses of action or (ii) in construing any of the
provisions in this Declaration, 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 Declaration, then,
except as to any matter as to which the Holders of Preferred Securities are
specifically entitled to vote under the terms of this Declaration, the Property
Trustee may deliver a notice to the Holders requesting written instructions of
the Holders 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 Property
Trustee shall be instructed in writing to take, or to refrain from taking, by a
majority in interest of the Outstanding Preferred Securities and shall have no
liability whatsoever for such action or inaction; provided, however, that if the
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Property Trustee does not receive such instructions of the Holders within ten
Business Days after it has delivered such notice, or such 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 Declaration as it shall deem
advisable and in the best interests of the Holders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(d) any direction or act of the Depositor or the Administrative Trustees
contemplated by this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(e) 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 conclusively rely upon an Officer's Certificate which,
upon receipt of such request, shall be promptly delivered by the Depositor or
the Administrative Trustees;
(f) 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 reregistration thereof;
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(g) the Property Trustee may consult with counsel of its choice 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;
(h) 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 such security
and/or indemnity reasonably satisfactory to and requested by the Property
Trustee against the costs, expenses and liabilities (including reasonable
attorney's fees and expenses) which might be incurred by it in compliance with
such request or direction, and including such reasonable advances as may be
requested by the Property Trustee;
(i) 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, direction, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless specifically requested and directed to do so in writing 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;
(j) 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 Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or attorney
appointed by it hereunder, but shall not be responsible for any misconduct or
negligence on the part of such person;
(k) 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 conclusively relying on or acting in accordance with such
instructions; and
(l) 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
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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.
(m) the Property Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without negligence or
willful misconduct, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
Section 8.04. 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 (as such) shall not be
accountable for the use or application by the Depositor of the proceeds of the
Subordinated Debentures. The Trustees make no representations as to the value
or condition of the Trust Property or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Trust Securities.
Section 8.05. 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, subject to Sections 8.08 and 8.13 and
except as provided in the definition of the term "Outstanding" in Article I, may
otherwise deal with the Trust with the same rights it would have if it were not
a Trustee or such other agent.
Section 8.06. Compensation; Indemnity; Fees. The Depositor agrees:
(a) to pay to the Trustees such reasonable compensation as the Depositor
and each Trustee may agree from time to time in writing 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);
(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 such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees or the
Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) the Trust Company, the Delaware Bank, each Trustee and any
predecessor Trustee, (ii) any Affiliate of the Trust Company, the Delaware Bank
or any Trustee, (iii) any officer, director, shareholder, employee,
representative or agent of the Trust Company, the Delaware Bank or any Trustee,
and (iv) any employee or agent of the Trust, (each referred to 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 arising out of or in connection with
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the creation, operation or dissolution of the Trust or any act or omission
performed or omitted by such Indemnified Person in a manner it 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 (x) loss, damage or claim to the
extent incurred by such Indemnified Person by reason of its own gross
negligence, bad faith or willful misconduct with respect to such acts or
omissions (or, in the case of the Property Trustee, by reason of its own
negligence, bad faith or willful misconduct with respect to such acts or
omissions) or (y) income or other taxes payable with respect to compensation for
its services.
(d) to the fullest extent permitted by applicable law, to advance, from
time to time, prior to the final disposition of any claim, demand, action, suit
or proceeding for which indemnification is authorized pursuant to subsection (c)
above, any expenses (including reasonable legal fees) incurred by an Indemnified
Person in defending such claim, demand, action, suit or proceeding upon receipt
by the Depositor of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified as authorized in subsection (c) above. This
indemnification shall survive the termination of this Declaration.
(e) The provisions of this Section 8.06 shall survive the termination of
this Trust Agreement and shall survive the resignation or removal of any
Trustee.
(f) The Depositor and any Trustee may 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 the 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.
(g) No Trustee may claim any Lien on any Trust Property as a result of any
amount due pursuant to this Section 8.06.
Section 8.07. 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 $500,000 (and its principal parent holding
company having a combined capital and surplus of at least $50 million). If any
such Person publishes reports of condition at least annually, pursuant to law or
to the
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requirements of its supervising or examining authority, then for the purposes of
this Section, the combined capital and 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 8.08. 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 8.09. 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 shall have power to appoint, and
upon the written request of the Property Trustee, the Depositor and the
Administrative Trustees shall for such purpose join with the Property Trustee 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
and the Administrative Trustees do not join in such appointment within 15 days
after the receipt by them 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.
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
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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 8.09.
(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 or
omission of a co-trustee or separate trustee or any other trustee hereunder.
(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.
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 Securityholders. If
the instrument of acceptance by
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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 Depositor,
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 Holder of the Common
Securities. 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 such Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Holder of the Common Securities at any time. In no event will
the Holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees.
If the Relevant Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of such Relevant
Trustee for any cause, at a time when no Debenture Event of Default shall have
occurred and be continuing, the Holder of the Common Securities, by Act of the
Holder of the Common Securities delivered to the retiring Relevant Trustee,
shall promptly appoint a successor Trustee or Trustees with respect to the Trust
Securities and the Trust, and the successor 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 is continuing,
the Holders of the Preferred Securities by Act of the Holders of a majority in
Liquidation Amount of the Preferred Securities then Outstanding delivered to the
retiring Relevant Trustee, shall promptly appoint a successor 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 Holder
of the Common Securities, by Act of the Holder of the Common Securities
delivered to an Administrative Trustee, shall promptly appoint a successor
Administrative Trustee or Administrative Trustees, and such successor
Administrative Trustee or Administrative Trustees shall comply with the
applicable requirements of Section 8.11. If no successor Trustee with respect
to the Trust Securities shall have been so appointed by the Holder of the Common
Securities or the Holders of the Preferred Securities, as the case may be, and
accepted appointment in the manner required by Section 8.11, any Securityholder
who has been a Securityholder for at least six months may, on behalf of such
Securityholder and all others similarly situated, petition a court of competent
jurisdiction for the appointment of a successor Trustee.
The Property Trustee shall give notice of each resignation and each removal
of a Relevant Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.08 and shall give notice to
the Depositor. Each notice shall include the name of the successor Trustee and
the address of its corporate trust office if it is the Property Trustee.
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Subject to 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 the Delaware Trustee, as the case may be, set
forth in Section 8.07).
Section 8.11. Acceptance Of Appointment By Successor. In case of the
appointment hereunder of a successor Trustee, the retiring Relevant Trustee and
each successor Trustee shall execute and deliver an instrument wherein each
successor Trustee shall accept such appointment and which 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 Relevant Trustee with respect to the Trust Securities and the Trust,
and upon the execution and delivery of such instrument, the resignation or
removal of the retiring Relevant 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 Relevant Trustee with respect to the Trust Securities and
the Trust; but, on request of the Trust or any successor Trustee such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
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 Trustee, the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in the
immediately preceding paragraph, as the case may be. 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.
Section 8.12. Merger, Conversion, Consolidation Or Succession To Business.
Any Person into or to which a 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 Relevant Trustee shall be
a party, or any Person 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 Person 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. If and when the Property Trustee shall be or become a creditor of the
Depositor or the Trust (or any other obligor upon the Subordinated Debentures or
the Trust Securities), the Property Trustee shall be subject to and shall take
all actions necessary in order to comply with the provisions of the Trust
Indenture Act regarding the collection of claims against the Depositor or Trust
(or any such other obligor).
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Section 8.14. Reports By Property Trustee.
(a) Not later than January 31 of each year commencing with January 31,
2000, the Property Trustee shall transmit to all Securityholders in accordance
with Section 10.08, and to the Depositor, a brief report dated as of the
preceding December 31 with respect to:
(i) its eligibility under Section 8.07 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; and
(ii) 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 securities exchange
or other organization upon which the Trust Securities are then listed, 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 the 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, provided that the Holder 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
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is increased 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 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
2.07(a)(i); 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 the Trust, 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 the consent or approval of both shall
be required.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SEction 9.01. Dissolution Upon Expiration Date. Unless earlier dissolved,
the Trust shall automatically dissolve on _______________, 2029 (the "Expiration
Date"), and thereafter the Trust Property shall be distributed in accordance
with Section 9.04.
Section 9.02. Early Dissolution. The first to occur of any of the
following events is an "Early Termination Event," upon the occurrence of which
the Trust shall dissolve:
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the
Subordinated
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Debentures to Securityholders in exchange for the Preferred Securities in
accordance with Section 9.04;
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Subordinated Debentures; and
(d) an order for dissolution of the Trust shall have been entered by
a court of competent jurisdiction.
Section 9.03. Termination. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the filing of a certificate of cancellation by the
Administrative Trustee under the Delaware Business Trust Act, and the occurrence
of all of the following:
(a) the distribution by the Property Trustee to Securityholders upon
the liquidation of the Trust pursuant to Section 9.04, or upon the
redemption of all of the Trust Securities pursuant to Section 4.02, 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.
Section 9.04. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b), or (d) of
Section 9.02 occurs or upon the Expiration Date, the Trust shall be liquidated
by the Administrative Trustees as expeditiously as the Administrative 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 Subordinated Debentures, subject to Section 9.04(d). Notice of
liquidation shall be prepared by or on behalf of the Administrative Trustees and
given by the Property Trustee by first-class mail, postage prepaid, mailed not
less 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 Subordinated Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities for Subordinated Debentures, or if
Section
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9.04(d) applies receive a Liquidation Distribution, as the Administrative
Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 9.02(c) or 9.04(d) applies, in order to effect
the liquidation of the Trust and distribution of the Subordinated Debentures to
Securityholders, the Property Trustee 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 Subordinated Debentures in exchange
for the Outstanding Trust Securities.
(c) Except where Section 9.02(c) or 9.04(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
unless the Depositor elects to issue a Global Subordinated Debenture (as defined
in the Indenture) pursuant to the provisions of the Indenture, definitive
certificates representing a Like Amount of Subordinated Debentures will be
issued to Holders of Trust Securities upon surrender of their related Trust
Securities Certificates to the Administrative Trustees or their agent for
exchange, (iii) the Depositor shall use its reasonable efforts to have the
Subordinated Debentures listed on the NASDAQ Stock Market or on such other
securities exchange or other organization as the Preferred Securities may then
be listed or traded, (iv) any Trust Securities Certificates not so surrendered
for exchange will be deemed to represent a Like Amount of Subordinated
Debentures, accruing interest at the rate provided for in the 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 the Holder surrenders such certificates, no payments of interest or
principal will be made to such Holder with respect to such Subordinated
Debentures) and (v) all rights of Securityholders holding Trust Securities will
cease, except the right of such Securityholders to receive Subordinated
Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Subordinated Debentures
in the manner provided herein is determined by the Property Trustee not to be
practical, the Trust shall be dissolved and the Trust Property shall be
liquidated 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 dissolution, the Liquidation Distribution can
be paid only in part because the Trust has insufficient assets legally 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 dissolution, pro rata (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Debenture Event
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of Default has occurred and is continuing, the Preferred Securities shall have a
priority over the Common Securities with respect to any distributions.
Section 9.05. Mergers, Consolidations, Amalgamations Or Replacements Of
The Trust. The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or be converted to, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other Person, except
pursuant to this Section 9.05. 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, be replaced by or be converted
to, 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 substantially the same powers and duties as the Property
Trustee as the holder of the Subordinated Debentures, (iii) such merger,
consolidation, amalgamation, replacement, conversion, 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, (iv) such successor entity has a purpose identical to that of
the Trust, (v) the Successor Securities will be listed or traded on any national
securities exchange or other organization on which the Preferred Securities may
then be listed, (vi) prior to such merger, consolidation, amalgamation,
replacement, conversion, conveyance, transfer or lease, the Depositor has
received an Opinion of Counsel experienced in such matters to the effect that
(a) such merger, consolidation, amalgamation, replacement, conversion,
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, conversion, conveyance, transfer or
lease, neither the Trust nor such successor entity will be required to register
as an "investment company" under the Investment Company Act and (vii) 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 be converted to or convey, transfer or lease
its properties and assets substantially as an entirety to any other Person or
permit any other Person to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger, replacement or
conversion would cause the Trust or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes.
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ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. 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 or heirs of 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 10.02. Amendment.
(a) This Trust Agreement may be amended from time to time by the Trustees
and the Depositor, without the consent of any Securityholders, (i) as provided
in Section 8.11 with respect to acceptance of appointment by a successor
Trustee, (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement, or (iii) 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 Investment Company Act; provided, however, that
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Securityholder, and any amendments of this
Trust Agreement shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 6.01(c) or Section 10.02(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Depositor (i) with the consent of Securityholders representing not less than a
majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) upon 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 Investment Company
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 6.03 or 6.06 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
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unanimous consent of the Securityholders (such consent being obtained in
accordance with Section 6.03 or 6.06 hereof), this paragraph (c) of this Section
10.02 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent in writing 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 Investment Company
Act or to 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 Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor and each other
Trustee 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, including to this
Section 10.02(g), which affects its own rights, powers, duties or immunities
under this Trust Agreement, and any such amendment or purported amendment shall
be void and ineffective without the prior written consent of such Trustee, which
consent may be withheld in its sole discretion. The Property Trustee and
Delaware 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 10.03. 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 10.04. 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). PROVIDED, HOWEVER, THAT, TO THE FULLEST
-------- -------
EXTENT PERMITTED BY LAW, THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER
OR THIS DECLARATION ANY PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE
OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER
INCONSISTENT WITH THE TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL
BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B)
AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR
EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER
GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL
OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS,
AGENTS OR
50
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EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME
OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT
OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING,
STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE
ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS
ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR
AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN
THIS DECLARATION. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY
TO THE TRUST.
Section 10.05. 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 which is a Business Day (except as otherwise provided in Sections
4.01(a) and 4.02(d)), with the same force and effect as though made on the date
fixed for such payment, and no Distribution shall accumulate thereon for the
period after such date.
Section 10.06. 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(s), including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article Twelve 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 10.07. Headings. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
Section 10.08. 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 Holder of Preferred
Securities, to such Securityholder as such Securityholder's name and address may
appear on the Securities Register; and (b) in the case of the Holder of the
Common Securities or the Depositor, to Bank of the Ozarks, Inc., 12615 Chenal
Parkway, Little Rock, Arkansas 72231, Attention: Chief Executive Officer;
Facsimile No.: (501) 978-2205. Any notice to the Holders of the Preferred
Securities shall also be given to such Owners as have, within two years
preceding the giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. 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.
51
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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 FMB Trust
Company, National Association, 25 South Charles Street, Baltimore, Maryland
21203, Attention: Corporate Trust Services; (b) with respect to the Delaware
Trustee, to First Omni Bank, National Association, 499 Mitchell Street,
Millsboro, Delaware 19966, Attention: Corporate Trust Services; and (c) with
respect to the Administrative Trustees, to them at the address above for notices
to the Depositor, marked "Attention: Administrative Trustees of Ozark Capital
Trust." Such notice, demand or other communication to or upon the Trust, the
Delaware Trustee or the Property Trustee shall be deemed to have been
sufficiently given or made only upon actual receipt of the writing by such
Person.
Section 10.09. 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, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code)
(collectively, "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 10.09, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the Depositor
(which expense shall be paid prior to the filing), 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. The provisions of this Section 10.09
shall survive the termination of this Trust Agreement.
Section 10.10. 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 to be 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 Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
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Section 10.11. 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.
Section 10.12. Counterparts. This Trust Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, and all of which counterparts together shall constitute one and the
same agreement.
[SIGNATURE PAGE FOLLOWS]
53
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BANK OF THE OZARKS, INC.,
as Depositor
By:_______________________________________
George Gleason
Chairman and Chief Executive Officer
FMB TRUST COMPANY, NATIONAL
ASSOCIATION, as Property Trustee
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
FIRST OMNI BANK, National Association, as
Delaware Trustee, and not in its
individual capacity
By:_______________________________________
Name:_____________________________________
Title:____________________________________
__________________________________________
George Gleason, as Administrative Trustee
__________________________________________
Paul Moore, as Administrative Trustee
__________________________________________
Mark Ross, as Administrative Trustee
54
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EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER NUMBER OF SECURITIES
ONE *__________*
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
OZARK CAPITAL TRUST
_____% COMMON SECURITIES
(LIQUIDATION AMOUNT $10.00 PER COMMON SECURITY)
OZARK CAPITAL TRUST, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Bank of the Ozarks,
Inc. (the "Holder") is the registered owner of_________________________________
_____________________________(_____________) securities of the Trust
representing undivided beneficial interests in the assets of the Trust and
designated the "______% Common Securities" (liquidation amount $10.00 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 ____________________, 1999, as the same may be amended from
time to time (the "Trust Agreement"), including the designation of the terms of
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 ___________, 1999.
OZARK CAPITAL TRUST
By:_______________________________________
Paul Moore, Administrative Trustee
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of _______________, 1999, between BANK OF THE OZARKS,
INC., an Arkansas corporation (the "Company"), and OZARK CAPITAL TRUST, a
Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to, and receive ______% Subordinated Debentures due 2029 (the
"Subordinated Debentures") from, the Company and to issue and sell ______%
Cumulative Preferred Securities (the "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 _______________, 1999, as
the same may be amended from time to time (the "Trust Agreement"); and
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges will be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
SECTION 1.01. GUARANTEE BY THE COMPANY. Subject to the terms and
conditions hereof, the Company, including in its capacity as holder of the
Common Securities, 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 Preferred Securities or other
similar interests in the Trust the amounts due such holders pursuant to the
terms of the 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 1.02. 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 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 Preferred Securities or any
Beneficiary must restore payment of any sums paid under the Preferred
Securities, under any Obligation,
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under the Preferred Securities Guarantee Agreement dated the date hereof by the
Company and Property Trustee as Guarantee Trustee or under this Agreement, for
any reason whatsoever. This Agreement is continuing, irrevocable, unconditional
and absolute.
SECTION 1.03. WAIVER OF NOTICE. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 1.04. NO IMPAIRMENT. The obligations, covenants, agreements and
duties of the Company 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. The Beneficiaries shall not be obligated
to give notice to, or obtain the consent of, the Company with respect to
the happening of any of the foregoing.
SECTION 1.05. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against the Company.
ARTICLE II
SECTION 2.01. BINDING EFFECT. All guarantees and agreements contained in
this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.
SECTION 2.02. AMENDMENT. So long as there remains any Beneficiary or any
Preferred Securities are outstanding, this Agreement shall not be modified or
amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.
SECTION 2.03. NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same by facsimile
2
<PAGE>
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):
Ozark Capital Trust
c/o FMB Trust Company, National Association
25 South Charles Street
Baltimore, Maryland 21203
Facsimile No.: (410) 244-4236
Attention: Corporate Trust Services
Bank of the Ozarks, Inc.
12615 Chenal Parkway
Little Rock, Arkansas 72231
Facsimile No.: (501) 978-2205
Attention: George Gleason
SECTION 2.04. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Delaware
(without regard to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above written.
BANK OF THE OZARKS, INC.
By:_______________________________________
George Gleason,
Chairman and Chief Executive Officer
OZARK CAPITAL TRUST
By:_______________________________________
Paul Moore, Administrative Trustee
3
<PAGE>
EXHIBIT E
This Preferred Security is a global security within the meaning of the
Trust Agreement hereinafter referred to and is registered in the name of The
Depository Trust Company, a New York corporation (the "Depositary") or a nominee
of the Depositary. This Preferred Security is exchangeable for Preferred
Securities registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Trust Agreement (as
defined below) and no transfer of this Preferred Security (other than a transfer
of this Preferred Security 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) may be registered except in limited circumstances.
Unless this Preferred Security Certificate is presented by an authorized
representative of the Depositary to OZARK CAPITAL TRUST 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 Depositary (and any payment hereon is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of the Depositary), 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.
<PAGE>
Certificate Number Number of Preferred Securities
**1** _____________
CUSIP NO. _______________
_________________
Certificate Evidencing Preferred Securities
of
Ozark Capital Trust
_____% Cumulative Preferred Securities
(liquidation amount $10.00 per Preferred Security)
OZARK CAPITAL TRUST, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of _______________________________________
(_______________) preferred securities of the Trust representing undivided
beneficial interests in the assets of the Trust and designated the ______%
Cumulative Preferred Securities (liquidation amount $10.00 per Preferred
Security) (the "Preferred Securities"). The 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 5.04 of the Trust Agreement (as
defined below). The designations, rights, privileges, restrictions, preferences,
and other terms and provisions of the Preferred Securities are set forth in, and
this certificate and the Preferred 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 ______________, 1999, as the
same may be amended from time to time (the "Trust Agreement"), including the
designation of the terms of Preferred Securities as set forth therein. The
Holder is entitled to the benefits of the Preferred Securities Guarantee
Agreement entered into by Bank of the Ozarks, Inc., an Arkansas corporation, and
_________________________________________, as guarantee trustee, dated as of
____________, 1999 (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 _______________, 1999.
OZARK CAPITAL TRUST
By:_______________________________________
_______________________________________
Administrative Trustee
<PAGE>
EXHIBIT 4.6
=======================================================================
SUBORDINATED INDENTURE
BANK OF THE OZARKS, INC.,
as Issuer
to
FMB TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
__% Subordinated Debentures
Dated as of _________, 1999
=======================================================================
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ARTICLE I
DEFINITIONS.......................................................................................... 1
ARTICLE II
REGISTRATION and EXCHANGE OF THE SUBORDINATED DEBENTURES
Section 2.01. Designation and Principal Amount.................................................. 8
Section 2.02. Maturity.......................................................................... 8
Section 2.03. Form and Payment.................................................................. 9
Section 2.04. Global Subordinated Debenture..................................................... 9
Section 2.05. Interest.......................................................................... 11
Section 2.06. Execution, Authentication, Delivery and Dating.................................... 12
Section 2.07. Registration and Transfer......................................................... 12
Section 2.08. Mutilated, Destroyed, Lost and Stolen Subordinated Debentures..................... 13
Section 2.09. CUSIP Numbers..................................................................... 14
ARTICLE III
REDEMPTION OF SUBORDINATED DEBENTURES
Section 3.01. Redemption........................................................................ 14
Section 3.02. Special Event Redemption.......................................................... 14
Section 3.03. Optional Redemption by Company.................................................... 15
Section 3.04. Notice of Redemption.............................................................. 15
Section 3.05. Payment Upon Redemption........................................................... 16
Section 3.06. No Sinking Fund................................................................... 17
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.01. Extension of Interest Payment Period.............................................. 17
Section 4.02. Notice of Extension............................................................... 17
Section 4.03. Limitation of Transactions During Extension....................................... 18
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ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.01. Payment of Principal and Interest......................................................... 18
Section 5.02. Maintenance of Agency..................................................................... 18
Section 5.03. Paying Agents............................................................................. 19
Section 5.04. Appointment to Fill Vacancy in Office of Trustee.......................................... 20
Section 5.05. Compliance with Consolidation Provisions.................................................. 20
Section 5.06. Restrictions on Certain Payments.......................................................... 20
Section 5.07. Covenants as to the Trust................................................................. 20
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.01. Company to Furnish Trustee Names and Addresses of Securityholders......................... 21
Section 6.02. Preservation of Information; Communications with Securityholders.......................... 21
Section 6.03. Reports by the Company.................................................................... 22
Section 6.04. Reports by the Trustee.................................................................... 22
ARTICLE VII
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
Section 7.01. Events of Default......................................................................... 23
Section 7.02. Collection of Indebtedness and Suits for Enforcement by Trustee........................... 24
Section 7.03. Application of Moneys Collected........................................................... 26
Section 7.04. Limitation on Suits....................................................................... 26
Section 7.05. Rights and Remedies Cumulative; Delay or Omission Not Waiver.............................. 27
Section 7.06. Control by Securityholders................................................................ 27
Section 7.07. Undertaking to Pay Costs.................................................................. 28
ARTICLE VIII
FORM OF SUBORDINATED DEBENTURE AND ORIGINAL ISSUE
Section 8.01. Form of Subordinated Debenture............................................................ 28
Section 8.02. Original Issue of Subordinated Debentures................................................. 28
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ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.01. Certain Duties and Responsibilities of the Trustee........................................ 29
Section 9.02. Notice of Defaults........................................................................ 30
Section 9.03. Certain Rights of Trustee................................................................. 30
Section 9.04. Trustee not Responsible for Recitals or Issuance of the Subordinated Debentures........... 31
Section 9.05. May Hold Subordinated Debentures.......................................................... 32
Section 9.06. Moneys Held in Trust...................................................................... 32
Section 9.07. Compensation and Reimbursement............................................................ 32
Section 9.08. Reliance on Officers' Certificate......................................................... 33
Section 9.09. Disqualification; Conflicting Interests................................................... 33
Section 9.10. Corporate Trustee Required; Eligibility................................................... 33
Section 9.11. Resignation and Removal; Appointment of Successor......................................... 33
Section 9.12. Acceptance of Appointment by Successor.................................................... 35
Section 9.13. Merger, Conversion, Consolidation or Succession to Business............................... 35
Section 9.14. Preferential Collection of Claims Against the Company..................................... 35
Section 9.15. Appointment of Authenticating Agent....................................................... 36
ARTICLE X
CONCERNING THE SECURITYHOLDERS
Section 10.01. Evidence of Action by Securityholders..................................................... 37
Section 10.02. Proof of Execution by Securityholders..................................................... 38
Section 10.03. Who May be Deemed Owners.................................................................. 38
Section 10.04. Certain Subordinated Debentures Owned by Company Disregarded.............................. 38
Section 10.05. Actions Binding on Future Securityholders................................................. 39
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.01. Supplemental Indentures Without the Consent of Securityholders............................ 39
Section 11.02. Supplemental Indentures With Consent of Securityholders................................... 40
Section 11.03. Effect of Supplemental Indentures......................................................... 40
Section 11.04. Subordinated Debentures Affected by Supplemental Indentures............................... 40
Section 11.05. Execution of Supplemental Indentures...................................................... 41
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ARTICLE XII
SUCCESSOR CORPORATION
Section 12.01. Company May Consolidate, Etc.............................................................. 41
Section 12.02. Successor Substituted..................................................................... 41
Section 12.03. Evidence of Consolidation, etc., to Trustee............................................... 42
ARTICLE XIII
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture................................................... 42
Section 13.02. Discharge of Obligations.................................................................. 43
Section 13.03. Deposited Moneys to be Held in Trust...................................................... 43
Section 13.04. Payment of Moneys held by Paying Agents................................................... 43
Section 13.05. Repayment to Company...................................................................... 43
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.01. No Recourse............................................................................... 43
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.01. Effect on Successors and Assigns.......................................................... 44
Section 15.02. Actions by Successor...................................................................... 44
Section 15.03. Surrender of Company Powers............................................................... 44
Section 15.04. Notices................................................................................... 44
Section 15.05. Governing Law............................................................................. 45
Section 15.06. Treatment of Subordinated Debentures as Debt.............................................. 45
Section 15.07. Compliance Certificates and Opinions...................................................... 45
Section 15.08. Payments on Business Days................................................................. 45
Section 15.09. Conflict with Trust Indenture Act......................................................... 45
Section 15.10. Counterparts.............................................................................. 45
Section 15.11. Separability.............................................................................. 46
Section 15.12. Assignment................................................................................ 46
Section 15.13. Acknowledgment of Rights.................................................................. 46
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ARTICLE XVI
SUBORDINATION OF SUBORDINATED DEBENTURES
Section 16.01. Agreement to Subordinate.................................................................. 46
Section 16.02. Default on Senior and Subordinated Debt................................................... 47
Section 16.03. Liquidation; Dissolution; Bankruptcy...................................................... 47
Section 16.04. Subrogation............................................................................... 48
Section 16.05. Trustee to Effectuate Subordination....................................................... 49
Section 16.06. Notice by the Company..................................................................... 49
Section 16.07. Rights of the Trustee; Holders of Senior and Subordinated Debt............................ 50
Section 16.08. Subordination May Not be Impaired......................................................... 50
</TABLE>
EXHIBIT A FORM OF SUBORDINATED DEBENTURE
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BANK OF THE OZARKS, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939,
AS AMENDED, AND SUBORDINATED INDENTURE,
DATED AS OF ____________, 1999
Trust Indenture Act Section Subordinated Indenture Section
310(a) 9.09
310(b) 9.08; 9.10
310(c) Inapplicable
311(a) 9.14
311(b) 9.14
311(c) Inapplicable
312(a) 6.01; 6.02(a)
312(b) 6.02
313(a) 6.04(a)
313(b) 6.04(b)
313(c) 6.04(a); 6.04(b)
313(d) 6.04(c)
314(a) 6.03
314(b) Inapplicable
314(c) 15.07(a)
314(d) Inapplicable
314(e) 15.07(b)
314(f) Inapplicable
315(a) 9.01(a); 9.03
315(b) 9.02
315(c) 9.01(a)
315(d) 9.01(b)
315(e) 7.07
316(a) 7.06; 10.04
316(b) 7.04
316(c) 2.05(a); 6.01
317(a) 7.02
317(b) 5.03
318 15.09
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Subordinated Indenture.
<PAGE>
SUBORDINATED INDENTURE (the "Indenture"), dated as of __________, 1999,
between BANK OF THE OZARKS, INC., an Arkansas corporation (the "Company") and
FMB TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as
trustee (the "Trustee");
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the execution and delivery of this Indenture to provide for the issuance of its
securities to be known as its __% Subordinated Debentures due _______________,
2029 (hereinafter referred to as the "Subordinated Debentures"), the form and
substance of such Subordinated Debentures and the terms, provisions and
conditions thereof to be set forth as provided in this Indenture; and
WHEREAS, Bank of the Ozarks Trust, a Delaware statutory business trust (the
"Trust"), has offered to the public $_____[A]___ aggregate liquidation amount of
its __% Cumulative Trust Preferred Securities (the "Preferred Securities"),
representing preferred undivided beneficial interests in the assets of the Trust
and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Company of $__[B]___
aggregate liquidation amount of its __% Common Securities, in $_[A]+[B]__
aggregate principal amount of the Subordinated Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture and has satisfied all requirements necessary to make this
Indenture a valid instrument in accordance with its terms, and to make the
Subordinated Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company; and
WHEREAS, to provide the terms and conditions upon which the Subordinated
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution, delivery and performance of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of the
Subordinated Debentures by the holders thereof, it is mutually covenanted and
agreed as follows for the equal and ratable benefit of the holders of
Subordinated Debentures:
ARTICLE I
DEFINITIONS
The terms defined in this Section (except as in this Indenture otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section and shall include the plural as
well as the singular. All other terms used in this Indenture that are defined in
the Trust Indenture Act of 1939, as amended, or that are by reference in said
Trust Indenture Act defined in the Securities Act of 1933, as amended (except as
herein otherwise expressly provided or unless the context otherwise requires),
shall have the meanings assigned to
<PAGE>
such terms in said Trust Indenture Act and in said Securities Act as in force at
the date of the execution of this Indenture.
"25% Capital Limitation" means the limitation imposed by the FRB that the
proceeds of certain qualifying securities like the Preferred Securities will
qualify as Tier 1 capital of the issuer up to an amount not to exceed 25% of the
Issuer's Tier 1 capital, or any subsequent limitation adopted by the FRB.
"Accelerated Maturity Date" means, if the Company elects to accelerate the
Maturity Date in accordance with Section 2.02, the date selected by the Company
which is prior to the Scheduled Maturity Date, but is after ___________, 2004.
"Additional Sums" shall have the meaning set forth in Section 2.05(c).
"Administrative Trustees" has the meaning set forth in the Trust Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to the
Subordinated Debentures appointed by the Trustee pursuant to Section 9.15.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
"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 and to be in full force and effect on the date of such
certification.
"Business Day" means any day other than a day on which federal or state
banking institutions in the State of Delaware are authorized or obligated by
law, executive order or regulation to close or a day on which the Trustee is
closed.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed 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 proposed
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change, pronouncement or decision is announced on or after the date of issuance
of the Preferred Securities under the Trust Agreement, 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), except for the 25% Capital Limitation, for purposes of any
then applicable capital adequacy guidelines of the FRB, as then in effect and
applicable to the Company.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company. The Certificate need not comply with the provisions of Section
15.07.
"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 Indenture 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 Securities" means common undivided beneficial interests in the
assets of the Trust which rank pari passu with Preferred Securities issued by
the Trust; provided, however, that upon the occurrence of an Event of Default,
the rights of holders of Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Company" means Bank of the Ozarks, Inc., a corporation duly organized and
existing under the laws of the State of Arkansas, and, subject to the provisions
of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.01.
"Corporate Trust Office" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be principally administered,
which office at the date hereof is located at FMB Trust Company, National
Association, 25 Charles Street, Baltimore, Maryland 21201, Attention: Corporate
Trust Services.
"Coupon Rate" shall have the meaning set forth in Section 2.05(a).
"Custodian" means any receiver, trustee, assignee, liquidator, or similar
official under any Bankruptcy Law.
"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, (a) every
obligation of such Person for money borrowed; (b) 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; (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (d) 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); (e) every capital lease obligation of such Person; and (f) every
obligation of the type referred to in clauses (a) through (e) of another Person
and all dividends of another
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Person the payment of which, in either case, such Person has guaranteed or for
which such Person is responsible or liable, directly or indirectly, as obligor
or otherwise.
"Default" means any event, act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section 4.01.
"Depositary" means, with respect to Subordinated Debentures issued as a
Global Subordinated Debenture, The Depository Trust Company, New York, New York,
another clearing agency, or any successor registered as a clearing agency under
the Exchange Act, or other applicable statute or regulation, which, in each
case, shall be designated by the Company pursuant to either Section 2.01 or
2.04.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Subordinated Debentures held by the Property Trustee
are to be distributed to the holders of the Trust Securities issued by the Trust
pro rata in accordance with the Trust Agreement.
"Distributions" shall have the meaning set forth in the Trust Agreement.
"Event of Default" shall have the meaning set forth in Section 7.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.01.
"FRB" means the Board of Governors of the Federal Reserve System.
"Global Subordinated Debenture" has the meaning specified in Section
2.04(a) and complying with the form of debenture attached as Exhibit A to this
---------
Indenture, evidencing all Outstanding Subordinated Debentures, issued to and
registered in the name of the Depositary or its nominee, all in accordance with
this Indenture.
"Governmental Obligations" means securities that are (a) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
Governmental Obligation or a specific payment of principal of or interest on any
such Governmental Obligation held by such custodian for the account of the
holder of such depositary receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
4
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"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.
"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 in accordance with the terms hereof.
"Interest Payment Date," when used with respect to any installment of
interest on the Subordinated Debentures, means the date specified in the
Subordinated Debenture as the fixed date on which an installment of interest
with respect to the Subordinated Debentures is due and payable.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Company Event" means the receipt by the Company 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"), there is more than an insubstantial risk that 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 of original issuance of the Preferred
Securities under the Trust Agreement.
"Liquidation Amount" means the stated amount of $10.00 per Trust Security.
"Maturity Date" shall have the meaning set forth in Section 2.02.
"Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.04(a).
"Officers' Certificate" means a certificate signed by the Chief Executive
Officer, the President or a Vice President and by the Chief Accounting Officer
or the Controller or an Assistant Controller or the Secretary or an Assistant
Secretary of the Company that is delivered to the Trustee in accordance with the
terms hereof. Each such certificate shall include the statements provided for in
Section 15.07, if and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who may
be an employee of or counsel for the Company, that is delivered to the Trustee
in accordance with the terms hereof. Each such opinion shall include the
statements provided for in Section 15.07, if and to the extent required by the
provisions thereof.
"Outstanding," when used with reference to Subordinated Debentures means,
subject to the provisions of Section 10.04, as of any particular time, all
Subordinated Debentures theretofore authenticated and delivered by the Trustee
under this Indenture, except (a) Subordinated Debentures theretofore canceled by
the Trustee or any paying agent, or delivered to the Trustee or any paying agent
for cancellation; (b) Subordinated Debentures or portions thereof for the
payment or redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited in trust with the Trustee or with any
paying agent (other than
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<PAGE>
the Company) or shall have been set aside and segregated in trust by the Company
(if the Company shall act as its own paying agent); provided, however, that if
such Subordinated Debentures or portions of such Subordinated Debentures are to
be redeemed prior to the maturity thereof, notice of such redemption shall have
been given as provided in Article III, or provision satisfactory to the Trustee
shall have been made for giving such notice; and (c) Subordinated Debentures in
lieu of or in substitution for which other Subordinated Debentures shall have
been authenticated and delivered pursuant to the terms of Section 2.08.
"Person" means any individual, corporation, partnership, joint venture,
joint-stock company, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Subordinated Debenture" means every previous Subordinated
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Subordinated Debenture; and, for the purposes of this definition, any
Subordinated Debenture authenticated and delivered under Section 2.08 in lieu of
a lost, destroyed or stolen Subordinated Debenture shall be deemed to evidence
the same debt as the lost, destroyed or stolen Subordinated Debenture.
"Preferred Securities" means preferred undivided beneficial interests in
the assets of the Trust which rank pari passu with Common Securities issued by
the Trust; provided, however, that upon the occurrence of an Event of Default,
the rights of holders of Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Certificate" has the meaning set forth in the Trust
Agreement.
"Preferred Securities Guarantee" means any guarantee that the Company may
enter into with the Property Trustee or other Persons that operates directly or
indirectly for the benefit of holders of Preferred Securities of the Trust.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Redemption Price" means the amount equal to 100% of the principal amount
of Subordinated Debentures to be redeemed plus any accrued and unpaid interest
thereon to the date of the redemption of such Subordinated Debentures.
"Responsible Officer" means any officer within the Corporate Trust Office
of the Property Trustee with direct responsibility for the administration of
this Trust Agreement and also means, with respect to a particular corporate
trust matter, any other officer of the Property Trustee to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Scheduled Maturity Date" means _________, 2029.
"Securities" or "Security" means any debt securities or debt, as the case
may be, authenticated and delivered under this Indenture.
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"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 2.07.
"Securityholder," "Holder," "Registered Holder," or other similar term,
means the Person or Persons in whose name or names particular Subordinated
Debentures shall be registered in the Securities Register.
"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 Subordinated Debentures
or to other Debt which is pari passu with, or subordinated to, the Subordinated
Debentures; 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 United States Bankruptcy
Code of 1978, as amended, was without recourse to the Company, (b) any Debt of
the Company to any of its Subsidiaries, (c) any Debt to any employee of the
Company, (d) the Preferred Securities Guarantee, and (e) any other Securities
issued pursuant to this Indenture.
"Special Event" means a Tax Event, an Investment Company Event or a Capital
Treatment Event.
"Subordinated Debentures" means the __% Subordinated Debentures due 2029
authenticated and delivered under this Indenture.
"Subsidiary" means, with respect to any Person, (a) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person, or by one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries, (b) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries, and (c) any limited partnership of which such Person or any
of its Subsidiaries is a general partner.
"Tax Event" means the receipt by the Company and 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 Subordinated Debentures there is more than an insubstantial risk that (a)
interest payable by the Company on the Subordinated Debentures is not, or within
90 days after 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, (b)
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 Subordinated Debentures, or (c)
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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 Bank of the Ozarks Trust, a Delaware statutory business trust
created for the purpose of issuing Trust Securities in connection with the
issuance of Subordinated Debentures under this Indenture.
"Trust Agreement" means the Bank of the Ozarks Trust Amended and Restated
Trust Agreement, dated as of ___________, 1999, as amended from time to time.
"Trustee" means the Person identified as "Trustee" in the preamble to this
Indenture and, subject to the provisions of Article IX, shall also include its
successors and assigns, and, if at any time there is more than one Person acting
in such capacity hereunder, "Trustee" shall mean each such Person.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date of execution of this Indenture; 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.
"Trust Securities" means Common Securities and Preferred Securities of the
Trust.
"Voting Stock" as applied to stock of any Person, means shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person having ordinary voting power for the election of a majority of
the directors (or the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
ARTICLE II
REGISTRATION AND EXCHANGE OF THE SUBORDINATED DEBENTURES
Section 2.01. Designation and Principal Amount. There is hereby authorized
a series of Securities designated the "__% Subordinated Debentures due 2029,"
limited in aggregate principal amount to $________________, which amount shall
be as set forth in any written order of the Company for the authentication and
delivery of Subordinated Debentures pursuant to Section 8.02 of this Indenture.
Section 2.02. Maturity.
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in accordance with
Section 2.02(b), the Accelerated Maturity Date.
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(b) The Company may, at any time before the day which is 90 days
before the Scheduled Maturity Date, elect to shorten the Maturity Date only
once to the Accelerated Maturity Date, provided that the Company has
received the prior approval of the FRB, if then required under applicable
capital guidelines, policies or regulations of the FRB, but in no case
shall such Accelerated Maturity Date be a date before __________, 2004.
(c) If the Company elects to accelerate the Maturity Date in
accordance with Section 2.02(b), the Company shall give notice to the
Registered Holders of the Subordinated Debentures, the Property Trustee and
the Trustee of the acceleration of the Maturity Date and the Accelerated
Maturity Date at least 90 days before the Accelerated Maturity Date.
Section 2.03. Form And Payment. Except as provided in Section 2.04, the
Subordinated Debentures shall be issued in fully registered certificated form
without interest coupons. Principal and interest on the Subordinated Debentures
issued in certificated form will be payable, the transfer of such Subordinated
Debentures will be registrable and such Subordinated Debentures will be
exchangeable for Subordinated Debentures bearing identical terms and provisions
at the office or agency of the Trustee; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the Holder
at such address as shall appear in the Securities Register. Notwithstanding the
foregoing, so long as the Holder of any Subordinated Debentures is the Property
Trustee, the payment of the principal of and interest (including Compounded
Interest and Additional Sums, if any) on such Subordinated Debentures held by
the Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.
Section 2.04. Global Subordinated Debenture.
(a) In connection with a Dissolution Event:
(i) the Subordinated Debentures in certificated form may be
presented to the Trustee by the Property Trustee in exchange for a
Global Subordinated Debenture in an aggregate principal amount equal
to the aggregate principal amount of all outstanding Subordinated
Debentures (a "Global Subordinated Debenture"), to be registered in
the name of the Depositary, or its nominee, and delivered by the
Trustee to the Depositary for crediting to the accounts of its
participants pursuant to the instructions of the Administrative
Trustees. The Company upon any such presentation shall execute a
Global Subordinated Debenture in such aggregate principal amount and
deliver the same to the Trustee for authentication and delivery in
accordance with this Indenture. Payments on the Subordinated
Debentures issued as a Global Subordinated Debenture will be made to
the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Subordinated Debentures in certificated form
may be presented to the Trustee by the Property Trustee and any
Preferred Securities Certificate which represents Preferred Securities
other than Preferred Securities held by the Depositary or its nominee
("Non Book-Entry Preferred Securities") will be
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deemed to represent beneficial interests in Subordinated Debentures
presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate Liquidation Amount of the Non
Book-Entry Preferred Securities until such Preferred Securities
Certificates are presented to the Securities Registrar for transfer or
reissuance at which time such Preferred Securities Certificates will
be canceled and a Subordinated Debenture, registered in the name of
the holder of the Preferred Securities Certificate or the transferee
of the holder of such Preferred Securities Certificate, as the case
may be, with an aggregate principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities Certificate canceled,
will be executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with this Indenture. On
issue of such Subordinated Debentures, Subordinated Debentures with an
equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be deemed to have been canceled.
(b) A Global Subordinated Debenture may be transferred, in whole but
not in part, only to another nominee of the Depositary, or to a successor
Depositary selected or approved by the Company or to a nominee of such successor
Depositary.
(c) If (i)(A) at any time the Depositary notifies the Company that it
is unwilling or unable to continue as Depositary or (B) at any time the
Depositary for such series shall no longer be registered or in good standing
under the Exchange Act or other applicable statute or regulation, and a
successor Depositary for such series is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such condition,
as the case may be, or (ii) there shall have occurred and be continuing an Event
of Default, the Company will execute, and the Trustee, upon written notice from
the Company, will authenticate and deliver in exchange for such Global
Subordinated Debenture the Subordinated Debentures in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Subordinated Debenture. In
addition, the Company may at any time determine that the Subordinated Debentures
shall no longer be represented by a Global Subordinated Debenture. In such event
the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company, will authenticate and
deliver in exchange for such Global Subordinated Debenture the Subordinated
Debentures in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Subordinated Debenture. Upon the exchange of the Global
Subordinated Debenture for such Subordinated Debentures in definitive registered
form without coupons, in authorized denominations, the Global Subordinated
Debenture shall be canceled by the Trustee. Such Subordinated Debentures in
definitive registered form issued in exchange for the Global Subordinated
Debenture shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Subordinated Debentures to the Depositary for delivery to the Persons in
whose names such Subordinated Debentures are so registered.
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Section 2.05. Interest.
(a) Each Subordinated Debenture will bear interest at the rate of
__% per annum (the "Coupon Rate") from the original date of issuance until
the principal thereof becomes due and payable, and on any overdue principal
and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded quarterly, payable (subject to the provisions of Article IV)
quarterly in arrears on March 31, June 30, September 30 and December 31 in
each year, commencing on [June 30], 1999. If any date on which interest is
otherwise payable on the Subordinated Debentures is not a Business Day,
then the payment of such interest shall be on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of
any such delay) except that if such Business Day is in the next succeeding
calendar year, payment of such interest shall be on the immediately
preceding Business Day, in each case with the same force and effect as if
made on such date (each such date, an "Interest Payment Date"). Interest
shall be payable to the Person in whose name such Subordinated Debenture or
any Predecessor Subordinated Debenture is registered at the close of
business on the regular record date for such interest installment, which,
in respect of (i) Subordinated Debentures of which the Property Trustee is
the Holder and the Preferred Securities are in book-entry-only form or (ii)
a Global Subordinated Debenture, shall be the close of business on the
Business Day next preceding that Interest Payment Date. Notwithstanding the
foregoing sentence, if (A) the Subordinated Debentures are held by the
Property Trustee and the Preferred Securities are no longer in book-entry
only form or (B) the Subordinated Debentures are not held by the Property
Trustee and are not represented by a Global Subordinated Debenture, the
record date for such interest installment shall be the first day of the
month in which such payment is to be made. The amount of each interest
payment due with respect to the Subordinated Debentures will include
amounts accrued through the date the interest payment is due.
(b) The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed in such
a quarterly period. In the event that any date on which interest is payable
on the Subordinated Debentures is not a Business Day, then payment of
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), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on such date.
(c) If, at any time while the Property Trustee is the Holder of
any Subordinated Debentures, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States, or any
other taxing authority, then, in any case, the Company will pay as
additional interest ("Additional Sums") on the Subordinated Debentures held
by the Property Trustee such additional amounts as shall be required so
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that the net amounts received and retained by the Trust and the Property
Trustee after paying such taxes, duties, assessments or other governmental
charges will be equal to the amounts the Trust and the Property Trustee
would have received had no such taxes, duties, assessments or other
government charges been imposed.
Section 2.06. Execution, Authentication, Delivery and Dating. The
Subordinated Debentures shall be executed on behalf of the Company by its Chief
Executive Officer, its President or any Vice President and attested by its
Secretary or Assistant Secretary. The signature of any of these officers on the
Subordinated Debentures may be manual or facsimile.
Subordinated Debentures 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 Subordinated
Debentures or did not hold such offices at the date of such Subordinated
Debentures.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Subordinated Debentures executed by the
Company to the Trustee for authentication, together with a Company order for the
authentication and delivery of such Subordinated Debentures. The Trustee in
accordance with such Company order shall authenticate and deliver such
Subordinated Debentures.
Upon the initial issuance, each Subordinated Debenture shall be dated
__________, 1999, and thereafter Subordinated Debentures issued hereunder shall
be dated the date of their authentication.
No Subordinated Debenture shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Subordinated Debenture a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Subordinated Debenture shall be conclusive evidence, and
the only evidence, that such Subordinated Debenture has been duly authenticated
and delivered hereunder and is entitled to the benefits of this Indenture.
Section 2.07. Registration and Transfer. The Company shall cause to be kept
at the Corporate Trust Office of the Trustee a register (the register maintained
in such office or any other office or agency pursuant to Section 5.02 being
herein sometimes referred to as the "Securities Register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of the Subordinated Debentures and transfers of the
Subordinated Debentures. The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering the Subordinated Debentures and transfers of the
Subordinated Debentures as herein provided.
Upon surrender for registration of transfer of any Subordinated Debenture
at an office or agency of the Company designated pursuant to Section 5.02 for
such purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, a new
Subordinated Debenture of the authorized denomination.
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All Subordinated Debentures issued upon any registration of transfer of
Subordinated Debentures shall be valid obligations of the Company, evidencing
the same debt and entitled to the same benefits under this Indenture as the
Subordinated Debentures surrendered upon such registration of transfer.
Every Subordinated Debenture presented or surrendered for registration of
transfer shall be duly endorsed for transfer (if so required by the Company or
the Trustee), or shall 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 such Holder's attorney duly authorized in writing.
No service charge shall be made for any registration of transfer of
Subordinated Debentures, 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 registration of transfer of Subordinated Debentures.
The Company shall not be required to issue or register the transfer of any
Subordinated Debenture during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Subordinated
Debentures selected for redemption pursuant to Article III and ending at the
close of business on the day of such mailing.
Section 2.08. Mutilated, Destroyed, Lost and Stolen Subordinated
Debentures. If any mutilated Subordinated Debenture is surrendered to the
Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Subordinated Debenture of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a) evidence to
their satisfaction of the destruction, loss or theft of any Subordinated
Debenture and (b) 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 Subordinated Debenture has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Subordinated Debenture, a new Subordinated Debenture of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Subordinated
Debenture has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Subordinated Debenture, pay such
Subordinated Debenture.
Upon the issuance of any new Subordinated Debenture 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 Subordinated Debenture issued pursuant to this Section in lieu of
any destroyed, lost or stolen Subordinated Debenture shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Subordinated
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Debenture shall be at any time enforceable by anyone, and shall be entitled to
all of the benefits of this Indenture.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Subordinated Debentures.
Section 2.09. CUSIP Numbers. The Company in issuing the Debentures may use
"CUSIP" numbers (if then generally in use), and, if so, the Indenture Trustee
shall use such "CUSIP" number provided to it by the Company 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 number either as
printed on the Debentures or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Debentures, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Indenture Trustee
of any change in CUSIP numbers.
ARTICLE III
REDEMPTION OF SUBORDINATED DEBENTURES
Section 3.01. Redemption. Subject to the Company having received prior
approval of the FRB, if then required under the applicable capital guidelines,
regulations or policies of the FRB, the Company may redeem the Subordinated
Debentures in accordance with this Article III.
Section 3.02. Special Event Redemption. Subject to the Company having
received the prior approval of the FRB, if then required under the applicable
capital guidelines or policies of the FRB, if a Special Event has occurred and
is continuing, then, notwithstanding Section 3.03, the Company shall have the
right upon not less than 30 days' nor more than 60 days' notice to the Holders
of the Subordinated Debentures to redeem the Subordinated Debentures, in whole
but not in part, for cash within 90 days following the occurrence of such
Special Event (the "90-Day Period") at the Redemption Price, provided that if at
the time there is available to the Company the opportunity to eliminate, within
the 90-Day Period, the Tax Event by taking some ministerial action ("Ministerial
Action"), such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on the Company, the Trust
or the Holders of the Trust Securities issued by the Trust, the Company shall
pursue such Ministerial Action in lieu of redemption, and, provided, further,
that the Company shall have no right to redeem the Subordinated Debentures while
the Trust is pursuing any Ministerial Action to eliminate the Tax Event
(however, the 90-Day Period shall be tolled while the Trust is pursuing any such
Ministerial Action). The Redemption Price shall be paid prior to 1:00 p.m.,
Little Rock, Arkansas, time, on the date of such redemption or such earlier time
as the Company determines, provided that the Company shall deposit with the
Trustee an amount sufficient to pay the Redemption Price by 11:00 a.m., Little
Rock, Arkansas, time, on the date such Redemption Price is to be paid.
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Section 3.03. Optional Redemption by Company.
(a) Except as otherwise may be specified in this Indenture, the
Company shall have the right to redeem the Subordinated Debentures, in
whole or in part, from time to time, on or after ____________, 2004, at the
Redemption Price. Any redemption pursuant to this Section 3.03 will be made
upon not less than 30 days' nor more than 60 days' notice to the Holders of
the Subordinated Debentures, at the Redemption Price. If the Subordinated
Debentures are only partially redeemed pursuant to this Section 3.03, the
Subordinated Debentures will be redeemed pro rata or by lot or by any other
method utilized by the Trustee; provided, that if at the time of redemption
the Subordinated Debentures are registered as a Global Subordinated
Debenture, the Depositary shall determine, in accordance with its
procedures, the principal amount of such Subordinated Debentures held by
each Holder of Subordinated Debentures to be redeemed. The Redemption Price
shall be paid prior to 1:00 p.m., Little Rock, Arkansas time, on the date
of such redemption or at such earlier time as the Company determines
provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 11:00 a.m., Little Rock, Arkansas
time, on the date such Redemption Price is to be paid.
(b) If a partial redemption of the Subordinated Debentures would
result in the delisting of the Preferred Securities issued by the Trust
from the NASDAQ National Market or any national securities exchange or
other organization on which the Preferred Securities may then be listed, if
any, the Company shall not be permitted to effect such partial redemption
and may only redeem the Subordinated Debentures in whole or in part to such
extent as would not cause such delisting.
Section 3.04. Notice of Redemption.
(a) In case the Company shall desire to exercise such right to
redeem all or, as the case may be, a portion of the Subordinated Debentures
in accordance with the right reserved so to do, the Company shall, or shall
cause the Trustee to, give notice of such redemption to Holders of the
Subordinated Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and not more
than 60 days before the date fixed for redemption to such Holders at their
last addresses as they shall appear upon the Securities Register. Any
notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Registered Holder
receives the notice. In any case, failure duly to give such notice to the
Holder of any Subordinated Debenture designated for redemption in whole or
in part, or any defect in the notice, shall not affect the validity of the
proceedings for the redemption of any other Subordinated Debentures. In the
case of any redemption of Subordinated Debentures prior to the expiration
of any restriction on such redemption provided elsewhere in this Indenture,
the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with any such restriction.
Each such notice of redemption shall specify the date fixed for
redemption and the Redemption Price, and shall state that payment of the
Redemption Price of such Subordinated Debentures to be redeemed will be
made at the office or agency of the
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Company in Little Rock, Arkansas, upon presentation and surrender of such
Subordinated Debentures, that interest accrued to the date fixed for
redemption will be paid as specified in said notice, that from and after
said date interest will cease to accrue. If less than all the Subordinated
Debentures are to be redeemed, the notice to the Holders of Subordinated
Debentures to be redeemed in whole or in part shall specify the particular
Subordinated Debentures to be so redeemed. In case any Subordinated
Debenture is to be redeemed in part only, the notice that relates to such
Subordinated Debenture shall state the portion of the principal amount
thereof to be redeemed, and shall state that on and after the redemption
date, upon surrender of such Subordinated Debenture, a new Subordinated
Debenture or Subordinated Debentures in principal amount equal to the
unredeemed portion thereof shall be issued to the Holder.
(b) If less than all the Subordinated Debentures are to be redeemed,
the Company shall give the Trustee at least 45 days' notice in advance of
the date fixed for redemption as to the aggregate principal amount of
Subordinated Debentures to be redeemed, and thereupon the Trustee shall
select, by lot or in such other manner as it shall deem appropriate and
fair in its discretion and that may provide for the selection of a portion
or portions (equal to twenty-five dollars U.S. ($25) or any integral
multiple thereof), the Subordinated Debentures to be redeemed and shall
thereafter promptly notify the Company in writing of the numbers of the
Subordinated Debentures to be redeemed, in whole or in part.
The Company may, if and whenever it shall so elect, by delivery of
instructions signed on its behalf by its Chief Executive Officer, its President
or any Vice President, instruct the Trustee or any paying agent to call all or
any part of the Subordinated Debentures for redemption and to give notice of
redemption in the manner set forth in this Section, such notice to be in the
name of the Company or in the name of the Trustee or the paying agent, as the
Trustee or such paying agent may deem advisable. In any case in which notice of
redemption is to be given by the Trustee or any such paying agent, the Company
shall deliver or cause to be delivered to, or permit to remain with, the Trustee
or such paying agent, as the case may be, such Securities Register, transfer
books or other records, or suitable copies or extracts therefrom, sufficient to
enable the Trustee or such paying agent to give any notice by mail that may be
required under the provisions of this Section.
Section 3.05. Payment Upon Redemption.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Subordinated Debentures or portions of
Subordinated Debentures to be redeemed specified in such notice shall
become due and payable on the date and at the place stated in such notice
at the Redemption Price (which includes interest accrued to the date fixed
for redemption) and interest on such Subordinated Debentures or portions of
Subordinated Debentures shall cease to accrue on and after the date fixed
for redemption, unless the Company shall default in the payment of such
Redemption Price with respect to any such Subordinated Debentures or
portions thereof. On presentation and surrender of such Subordinated
Debentures on or after the date fixed for redemption at the place of
payment specified in the notice, such Subordinated Debentures shall be paid
and redeemed at the Redemption Price (which includes the interest accrued
thereon
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to the date fixed for redemption)(but if the date fixed for redemption is
an Interest Payment Date, the interest installment payable on such date
shall be payable to the Registered Holder at the close of business on the
applicable record date pursuant to Section 2.05(a)).
(b) Upon presentation of any Subordinated Debenture that is to be
redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Subordinated Debenture is
presented shall deliver to the Holder thereof, at the expense of the
Company, a new Subordinated Debenture or Subordinated Debentures of
authorized denominations in principal amount equal to the unredeemed
portion of the Subordinated Debenture so presented.
Section 3.06. No Sinking Fund. The Subordinated Debentures are not
entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.01. Extension of Interest Payment Period. So long as no Event of
Default has occurred and is continuing, the Company shall have the right, at any
time and from time to time during the term of the Subordinated Debentures, to
defer payments of interest by extending the interest payment period of such
Subordinated Debentures for a period not exceeding 20 consecutive quarters
(the"Extended Interest Payment Period"), during which Extended Interest Payment
Period may extend beyond the Maturity Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 4.01, will
bear interest thereon at the Coupon Rate compounded quarterly for each quarter
of the Extended Interest Payment Period ("Compounded Interest"). At the end of
the Extended Interest Payment Period, the Company shall pay all interest accrued
and unpaid on the Subordinated Debentures, including any Additional Sums and
Compounded Interest (together, "Deferred Interest") that shall be payable to
the Holders of the Subordinated Debentures in whose names the Subordinated
Debentures are registered in the Securities Register on the record date for the
Interest Payment Date coinciding with the end of the Extended Interest Payment
Period. Before the termination of any Extended Interest Payment Period, the
Company may further extend such period, provided that such period together with
all such further extensions thereof shall not exceed 20 consecutive quarters,
or extend beyond the Maturity Date. Upon the termination of any Extended
Interest Payment Period and upon the payment of all Deferred Interest then due,
the Company may commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable during an Extended
Interest Payment Period, except at the end thereof, but the Company may prepay
at any time all or any portion of the interest accrued during an Extended
Interest Payment Period.
Section 4.02. Notice of Extension.
(a) If the Property Trustee is the only Registered Holder of the
Subordinated Debentures at the time the Company selects an Extended
Interest Payment Period, the
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Company shall give written notice to the Administrative Trustees, the
Property Trustee and the Trustee of its selection of such Extended Interest
Payment Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions are payable, or (ii) the date the
Trust is required to give notice of the record date, or the date such
Distributions are payable, to the Preferred Securities holders or to the
NASDAQ National Market or other applicable self-regulatory organization, if
any, but in any event at least one Business Day before such record date.
(b) If the Property Trustee is not the only Holder of the Subordinated
Debentures at the time the Company selects an Extended Interest Payment
Period, the Company shall give the Holders of the Subordinated Debentures
and the Trustee written notice of its selection of such Extended Interest
Payment Period at least one Business Day before the earlier of (i) the next
succeeding Interest Payment Date, or (ii) the date the Company is required
to give notice of the record or payment date of such interest payment to
the Holders of the Subordinated Debentures or to the NASDAQ National Market
or other applicable self-regulatory organization, if any.
(c) The quarter in which any notice is given pursuant to paragraph (a)
or paragraph (b) of this Section 4.02 shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period
permitted under Section 4.01.
Section 4.03. Limitation of Transactions During Extension. If (a) the
Company shall exercise its right to defer payment of interest as provided in
Section 4.01; or (b) there shall have occurred any Event of Default, then the
Company shall be subject to the restrictions on payments set forth under Section
5.06.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.01. Payment of Principal and Interest. The Company will duly and
punctually pay or cause to be paid the principal of and interest (including any
Additional Sums) on the Subordinated Debentures at the time and place and in the
manner provided herein and established with respect to such Subordinated
Debentures.
Section 5.02. Maintenance of Agency. So long as any Subordinated Debentures
remain Outstanding, the Company agrees to maintain an office or agency in Little
Rock, Arkansas, or at such other location or locations as may be designated as
provided in this Section 5.02, where (a) Subordinated Debentures may be
presented for payment, (b) Subordinated Debentures may be presented as
hereinabove authorized for registration of transfer and exchange, and (c)
notices and demands to or upon the Company in respect of the Subordinated
Debentures and this Indenture may be given or served, such designation to
continue with respect to such office or agency until the Company shall, by
written notice signed by its Chief Executive Officer, its President or a Vice
President and delivered to the Trustee, designate some other office or agency
for such purposes or any of them. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the
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Company hereby appoints the Trustee as its agent to receive all such
presentations, notices and demands.
Section 5.03. Paying Agents.
(a) If the Company shall appoint one or more paying agents for
the Subordinated Debentures, other than the Trustee, the Company will cause
each such paying agent to execute and deliver to the Trustee an instrument
in which such agent shall agree with the Trustee, subject to the provisions
of this Section:
(i) that it will hold all sums held by it as such agent for
the payment of the principal of or interest on the Subordinated
Debentures (whether such sums have been paid to it by the Company or
by any other obligor) in trust for the benefit of the Persons entitled
thereto;
(ii) that it will give the Trustee notice of any failure by
the Company (or by any other obligor) to make any payment of the
principal of or interest on the Subordinated Debentures when the same
shall be due and payable;
(iii) that it will, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such paying agent; and
(iv) that it will perform all other duties of paying agent
as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with respect
to the Subordinated Debentures, it will on or before each due date of the
principal of or interest on Subordinated Debentures, set aside, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay such principal 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 such action, or any
failure (by it or any other obligor) to take such action. Whenever the
Company shall have one or more paying agents for the Subordinated
Debentures, it will, prior to each due date of the principal of or interest
on the Subordinated Debentures, deposit with the paying agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal or
interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section to the contrary, (i)
the agreement to hold sums in trust as provided in this Section is subject
to the provisions of Section 13.05, and (ii) 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 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 terms and conditions as
those upon which such sums were held by the Company or such paying agent;
and, upon such payment by
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any paying agent to the Trustee, such paying agent shall be released from
all further liability with respect to such money.
Section 5.04. Appointment to Fill Vacancy in Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 9.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.05. Compliance with Consolidated Provisions. The Company will
not, while any of the Subordinated Debentures remain Outstanding, consolidate
with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other company unless the provisions of
Article XII hereof are complied with.
Section 5.06. Restrictions on Certain Payments. If at any time (a) there
shall have occurred any event of which the Company has actual knowledge that (i)
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default and (ii) in respect to which the Company shall not have taken
reasonable steps to cure, or (b) the Company shall have given notice of its
election of an Extended Interest Payment Period as provided herein with respect
to the Subordinated Debentures and shall not have rescinded such notice, or such
Extended Interest Payment Period, or any extension thereof, shall be continuing;
or (c) while the Subordinated Debentures are held by the Trust, the Company
shall be in default with respect to its payment of any obligation under the
Preferred Securities Guarantee, then the Company will not (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 or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including the
Subordinated Debentures) that rank pari passu with or junior in interest to the
Subordinated Debentures 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 ranks pari passu or junior in interest to the Subordinated
Debentures (other than (A) dividends or distributions in shares of common stock,
(B) any declaration of a dividend in connection with any shareholders' rights
plan, or the issuance of rights, stock or other property under any shareholders'
rights plan, or the redemption or repurchase of rights pursuant to the plan, (C)
payments under the Preferred Securities Guarantee and (D) repurchases,
redemptions or other acquisitions of shares of the Company's common stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, or a dividend reinvestment or shareholder stock
purchase plan).
Section 5.07. Covenants as to the Trust. For so long as the Trust
Securities of the Trust remain outstanding, the Company will (a) maintain 100%
direct or indirect ownership of the Common Securities of the Trust; provided,
however, that any permitted successor of the Company under this Indenture may
succeed to the Company's ownership of the Common Securities, (b) use its
reasonable efforts to cause the Trust (i) to remain a business trust, except in
connection with a distribution of Subordinated Debentures, the redemption of all
of the Trust Securities of the Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement, and (ii) to otherwise
continue not to be treated as an association taxable as a corporation or
partnership for United States federal income tax purposes and (c) to use its
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reasonable efforts to cause each Holder of Trust Securities to be treated as
owning an individual undivided beneficial interest in the Subordinated
Debentures.
If the Subordinated Debentures are to be issued as a Global Subordinated
Debenture in connection with the distribution of the Subordinated Debentures to
the holders of the Preferred Securities issued by the Trust upon a Dissolution
Event, the Company will use its reasonable best efforts to list such
Subordinated Debentures on the NASDAQ National Market or on such other exchange
as the Preferred Securities may then be listed.
ARTICLE VI
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 6.01. Company to Furnish Trustee Names and Addresses of
Securityholders. The Company will furnish or cause to be furnished to the
Trustee (a) on each regular record date (as defined in Section 2.05(a)) a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Holders as of such regular record date, provided that the Company shall
not be obligated to furnish or cause to furnish such list at any time that the
list shall not differ in any respect from the most recent list furnished to the
Trustee by the Company 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; provided, however, that, in either case, no such
list need be furnished if the Trustee shall be the Securities Registrar.
SECTION 6.02. Preservation of Information; Communications with
Securityholders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of
the Holders contained in the most recent list furnished to it as provided
in Section 6.01 and as to the names and addresses of Holders received by
the Trustee in its capacity as Securities Registrar (if acting in such
capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.01 upon receipt of a new list so furnished.
(c) Securityholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Securityholders with respect to their
rights under this Indenture or under the Subordinated Debentures.
(d) Every Holder of Subordinated Debentures, 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.
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SECTION 6.03. Reports by the Company.
(a) The Company covenants and agrees to file with the Trustee, within
15 days after the Company is required to file the same with the Commission
(after taking into account any extensions allowed by the Commission), copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from time
to time by rules and regulations prescribe) that the Company may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents or
reports pursuant to either of such sections, then to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from
time to time by the Commission, such of the supplementary and periodic
information, documents and reports that may be required pursuant to any
applicable rules and regulations of the Commission.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail, first class
postage prepaid, or reputable overnight delivery service that provides for
evidence of receipt, to the Securityholders, as their names and addresses appear
upon the Securities Register, within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to be
filed by the Company pursuant to subsections (a) and (b) of this Section as may
be required by rules and regulations prescribed from time to time by the
Commission.
(d) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates).
SECTION 6.04. Reports by the Trustee.
(a) Beginning January 31, 2000, on or before January 31 in each year
in which any of the Subordinated Debentures are Outstanding, the Trustee shall
transmit by mail, first class postage prepaid, to the Securityholders, as their
names and addresses appear upon the Securities Register, a brief report dated as
of the preceding December 31, if and to the extent required under Section 313(a)
of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
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(c) A copy of each such report shall, at the time of such transmission to
Securityholders, be filed by the Trustee with the Company, and also with the
Commission.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 7.01. Events of Default.
(a) Whenever used herein, "Event of Default" means any one or more of
the following events that has occurred and is continuing:
(i) the Company defaults in the payment of any installment of
interest upon any of the Subordinated Debentures, as and when the same
shall become due and payable, and continuance of such default for a period
of 30 days; provided, however, that a valid extension of an interest
payment period by the Company in accordance with the terms of this
Indenture shall not constitute a default in the payment of interest for
this purpose;
(ii) the Company defaults in the payment of the principal of any
of the Subordinated Debentures as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration or otherwise;
(iii) Reserved;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of
an order for relief against it in an involuntary case, (C) consents to the
appointment of a custodian of it or for all or substantially all of its
property or (D) makes a general assignment for the benefit of its
creditors;
(v) a court of competent jurisdiction enters an order under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a custodian of the Company for all or substantially all
of its property, or (C) orders the liquidation of the Company, and the
order or decree remains unstayed and in effect for 90 days; or
(vi) in the event Subordinated Debentures are issued to the Trust
or a trustee of the Trust in connection with the issuance of Trust
Securities by the Trust, the Trust shall have voluntarily or involuntarily
dissolved, wound up its business or otherwise terminated its existence,
except in connection with (A) the distribution of Subordinated Debentures
to holders of Trust Securities in liquidation of their interests in the
Trust, (B) the redemption of all of the outstanding Trust Securities of the
Trust or (C) certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
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(b) In each and every such case, unless the principal of all the
Subordinated Debentures shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Subordinated Debentures then Outstanding hereunder, by notice in writing to the
Company (and to the Trustee if given by such Securityholders) may declare the
principal of all the Subordinated Debentures to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable, notwithstanding anything contained in this Indenture or in the
Subordinated Debentures to the contrary.
(c) At any time after the principal of the Subordinated Debentures
shall have been so declared due and payable, and before any judgment or decree
for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the Holders of a majority in aggregate principal amount of
the Subordinated Debentures then Outstanding, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Subordinated Debentures and
the principal of any and all Subordinated Debentures that shall have become due
otherwise than by acceleration (with interest upon such principal and, to the
extent that such payment is enforceable under applicable law, upon overdue
installments of interest, at the rate per annum expressed in the Subordinated
Debentures to the date of such payment or deposit) and all amounts payable to
the Trustee under Section 9.07, and (ii) any and all Events of Default under
this Indenture, other than the nonpayment of principal on Subordinated
Debentures that shall not have become due by their terms, shall have been
remedied or waived as provided in Section 7.06. Should the Holders fail to annul
such declaration and waive such default, then the holders of a majority in
aggregate Liquidation Amount of the Preferred Securities shall have such right.
No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Subordinated Debentures under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
Section 7.02. Collection of Indebtedness and Suits for Enforcement by Trustee.
(a) The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Subordinated Debentures as
and when the same shall have become due and payable, and such default shall have
continued for a period of 90 Business Days, or (ii) in case it shall default in
the payment of the principal of any of the Subordinated Debentures when the same
shall have become due and payable, whether upon maturity of the Subordinated
Debentures or upon redemption or upon declaration or
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otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the Holders of the Subordinated Debentures, the
whole amount that then shall have become due and payable on all such
Subordinated Debentures for principal or interest, or both, as the case may be,
with interest upon the overdue principal and (to the extent that payment of such
interest is enforceable under applicable law and, if the Subordinated Debentures
are held by the Trust or a trustee of the Trust, without duplication of any
other amounts paid by the Trust or trustee in respect thereof) upon overdue
installments of interest at the rate per annum expressed in the Subordinated
Debentures; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, and all amounts payable to the
Trustee under Section 9.07.
(b) If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the
Subordinated Debentures and collect the moneys adjudged or decreed to be payable
in the manner provided by law out of the property of the Company or other
obligor upon the Subordinated Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affecting the Company or the creditors or property of either, the Trustee shall
have power to intervene in such proceedings and take any action therein that may
be permitted by the court and shall (except as may be otherwise provided by law)
be entitled to file such proofs of claim and other papers and documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
Holders of Subordinated Debentures allowed for the entire amount due and payable
by the Company under this Indenture at the date of institution of such
proceedings and for any additional amount that may become due and payable by the
Company after such date, and to collect and receive any moneys or other property
payable or deliverable on any such claim, and to distribute the same after the
deduction of the amount payable to the Trustee under Section 9.07; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Holders to make such payments to the Trustee, and, in
the event that the Trustee shall consent to the making of such payments directly
to such Securityholders, to pay to the Trustee all amounts due it under Section
9.07.
(d) All rights of action and of asserting claims under this Indenture may
be enforced by the Trustee without the possession of any of the Subordinated
Debentures, or the production thereof at any trial or other proceeding relative
thereto, and any such suit or 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 payment to the Trustee of all amounts due
under Section 9.07, be for the ratable benefit of the Holders of the
Subordinated Debentures.
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In case of an Event of Default hereunder, the Trustee may in its discretion
proceed to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Subordinated Debentures or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Subordinated Debentures, and it shall not be necessary to make any
holders of the Subordinated Debentures parties to any such proceedings.
SECTION 7.03. Application of Moneys Collected. Any moneys collected by the
Trustee pursuant to this Article with respect to the Subordinated Debentures
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such moneys on account of principal
or interest, upon presentation of the Subordinated Debentures, and notation
thereon the payment, if only partially paid, and upon surrender thereof if fully
paid:
FIRST, to the payment of costs and expenses of collection and of all
amounts payable to the Trustee under Section 9.07;
SECOND, to the payment of all Senior and Subordinated Debt of the
Company if and to the extent required by Article XVI; and
THIRD, to the payment of the amounts then due and unpaid upon
Subordinated Debentures for principal and 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 Subordinated Debentures for principal and interest,
respectively.
SECTION 7.04. Limitation on Suits. No Holder shall have any right by virtue
of or by availing any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless (a) such Holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof;
(b) the Holders of not less than 25% in aggregate principal amount of the
Subordinated Debentures then Outstanding shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as
trustee hereunder; (c) such Holder or Holders shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby; and (d) the Trustee for 60 days
after its receipt of such notice,
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request and offer of indemnity shall have failed to institute any such action,
suit or proceeding; and (e) during such 60-day period, the Holders of a majority
in principal amount of the Subordinated Debentures do not give the Trustee a
direction inconsistent with the request.
Notwithstanding any other provisions of this Indenture to the contrary, the
right of any Holder to receive payment of the principal of and interest on the
Subordinated Debentures on or after the respective due dates (or in the case of
redemption, on the redemption date), or to institute suit for the enforcement of
any such payment on or after such respective dates or redemption date, shall not
be impaired or affected without the consent of such Holder; and by accepting a
Subordinated Debenture hereunder it is expressly understood, intended and
covenanted by the Holder thereof with every other such Holder and the Trustee,
that no one or more Holders shall have any right in any manner whatsoever by
virtue of or by availing any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders, or to obtain or seek to obtain
priority over or preference to any such other Holders, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders of Subordinated Debentures. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 7.05. Rights and Remedies Cumulative; Delay or Omission Not Waiver.
(a) Except as otherwise provided in Section 7.02, all powers and
remedies given by this Article to the Trustee or to the Securityholders
shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any other powers and remedies available to the Trustee or the
Holders of the Subordinated Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with
respect to such Subordinated Debentures.
(b) No delay or omission of the Trustee or of any Holder of any
of the Subordinated Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid shall impair any
such right or power, or shall be construed to be a waiver of any such
default or on acquiescence therein; and, subject to the provisions of
Section 7.04, every power and remedy given by this Article or by law to the
Trustee or the Securityholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the
Securityholders.
SECTION 7.06. Control by Securityholders. The Holders of a majority in
aggregate principal amount of the Subordinated Debentures at the time
Outstanding, determined in accordance with Section 10.04, 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; provided, however, that such direction shall not be in conflict with
any rule of law or with this Indenture. Subject to the provisions of Section
9.01, the Trustee shall have the right to decline to follow any such direction
if the Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceeding so directed would involve the Trustee in
personal liability. The Holders of a majority in aggregate principal amount of
the Subordinated Debentures at the time Outstanding affected thereby, determined
in
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accordance with Section 10.04, may on behalf of the Holders of all of the
Subordinated Debentures waive any past default in the performance of any of the
covenants contained herein and its consequences, except (a) a default in the
payment of the principal of or interest on any of the Subordinated Debentures as
and when the same shall become due by its terms otherwise than by acceleration
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal has been deposited with the Trustee in
accordance with Section 7.01(c)), (b) a default in the covenants contained in
Section 5.06 or (c) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the Holder of
each Outstanding Subordinated Debenture affected; provided, however, that if the
Subordinated Debentures are held by the Trust or a trustee of the Trust, such
waiver or modification to such waiver shall not be effective until the Holders
of a majority in Liquidation Amount of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver; provided further, that
if the consent of the Holder of each Outstanding Subordinated Debenture is
required, such waiver shall not be effective until each Holder (as defined in
the Trust Agreement) of the Trust Securities of the Trust shall have consented
to such waiver. Upon any such waiver, the default covered thereby shall be
deemed to be cured for all purposes of this Indenture and the Company, the
Trustee and the Holders of the Subordinated Debentures shall be restored to
their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon.
SECTION 7.07. Undertaking to Pay Costs. All parties to this Indenture
agree, and each Holder of any Subordinated Debentures by such Holder's
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 Securityholder, or group of
Securityholders, holding more than 10% in aggregate principal amount of the
Outstanding Subordinated Debentures, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of or
interest on the Subordinated Debentures on or after the due dates thereof.
ARTICLE VIII
FORM OF SUBORDINATED DEBENTURE AND ORIGINAL ISSUE
SECTION 8.01. Form of Subordinated Debenture. The Subordinated Debenture
and the Trustee's Certificate of Authentication to be endorsed thereon are to be
substantially in the forms contained as Exhibit A to this Indenture, attached
---------
hereto and incorporated herein by reference.
SECTION 8.02. Original Issue of Subordinated Debentures. Subordinated
Debentures in the aggregate principal amount of $__________________ may, upon
execution of this Indenture, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver the Subordinated Debentures to or upon the
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written order of the Company, signed by its Chairman, its Vice Chairman, its
Chief Executive Officer, its President or any Vice President, without any
further action by the Company.
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 9.01. Certain Duties and Responsibilities of the Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Subordinated Debentures such
duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants shall be read into this Indenture
against the Trustee. In case an Event of Default has occurred (that has not
been cured or waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) 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 or bad faith, except that:
(i) prior to the occurrence of an 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 Trustee shall be
determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(B) in the absence of willful misconduct or bad faith
on the part of the Trustee, the 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 Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to
determine only whether or not on their face they conform to
the requirement of this Indenture;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts ;
(iii) 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 the
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Holders of not less than a majority in principal amount of the
Subordinated Debentures at the time Outstanding 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; and
(iv) none of the provisions contained in this Indenture shall
require the 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 Trustee
reasonably believes that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured to it.
SECTION 9.02. Notice of Defaults. Within 90 days after a Responsible
Officer of the Trustee has actual knowledge of the occurrence of any default
hereunder with respect to the Subordinated Debentures, the Trustee shall
transmit by mail to all holders of the Subordinated Debentures, 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 and interest (including
any Additional Sums) on any Subordinated Debenture, the Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the Trustee determines in good faith that the withholding of such notice is in
the interests of the holders of such Subordinated Debentures; and provided,
further, that in the case of any default of the character specified in section
7.01(a)(iii), no such notice to holders of the Subordinated Debentures need be
sent until at least 30 days after the occurrence thereof. For the purposes of
this Section 9.02, 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 the
Subordinated Debentures.
SECTION 9.03. Certain Rights of Trustee. Except as otherwise provided in
Section 9.01:
(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, consent, order, approval,
bond, 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, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board Resolution or
an instrument signed in the name of the Company by the Chief Executive
Officer, the President or any Vice President and by the Secretary or an
Assistant Secretary or the Chief Accounting Officer thereof (unless other
evidence in respect thereof is specifically prescribed herein);
(c) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted hereunder in good faith and in reliance thereon;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the
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Securityholders, pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (that has not been cured or waived) to
exercise such of the rights and powers vested in it by this Indenture, and
to use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs;
(e) the Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(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, consent, order, approval,
bond, security or other papers or documents, unless requested in writing so
to do by the Holders of not less than a majority in principal amount of the
Outstanding Subordinated Debentures (determined as provided in Section
10.04); provided, however, that if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the Trustee,
not reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such costs, expenses or liabilities as a condition to so
proceeding. The reasonable expense of every such examination shall be paid
by the Company or, if paid by the Trustee, shall be repaid by the Company
upon demand; 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 9.04. Trustee not Responsible for Recitals or Issuance of the
Subordinated Debentures.
(a) The recitals contained herein and in the Subordinated Debentures
shall be taken as the statements of the Company and the Trustee assumes no
responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Subordinated Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Company of any of the Subordinated Debentures or of the proceeds of
such Subordinated Debentures, or for the use or application of any moneys
paid over by the Trustee in accordance with any provision of this
Indenture, or for the use or application of any moneys received by any
paying agent other than the Trustee.
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Section 9.05. May Hold Subordinated Debentures. The Trustee or any paying
agent or Securities Registrar, in its individual or any other capacity, may
become the owner or pledgee of Subordinated Debentures with the same rights it
would have if it were not Trustee, paying agent or Securities Registrar.
Section 9.06. Moneys Held in Trust. Subject to the provisions of Section
13.05, all moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
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 moneys received by
it hereunder except such as it may otherwise agree in writing with the Company
to pay thereon.
Section 9.07. Compensation and Reimbursement.
(a) The Company covenants and agrees to pay to the Trustee, and
the Trustee shall be entitled to, such reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), as the Company and the Trustee may from time
to time agree in writing, for all services rendered by it in the execution
of the trusts hereby created and in the exercise and performance of any of
the powers and duties hereunder of the Trustee, and, except as otherwise
expressly provided herein, the Company will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its
employ) except any such expense, disbursement or advance as may arise from
its willful misconduct, negligence or bad faith. To the fullest extent
permitted by law, the Company hereby indemnifies the Trustee (including in
its individual capacity) (and its officers, agents, directors and
employees) for, and holds it harmless against, any loss, liability or
expense to the extent incurred without willful misconduct, negligence or
bad faith on the part of the Trustee and arising out of or in connection
with the acceptance or administration of this Indenture or the performance
of its duties or exercise of its rights or powers 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 rights, powers or
duties hereunder.
(b) The obligations of the Company under this Section to
compensate and indemnify the Trustee and to pay or reimburse the Trustee
for expenses, disbursements and advances shall constitute additional
indebtedness hereunder. Such additional indebtedness shall be secured by a
lien prior to that of the Subordinated Debentures upon all property and
funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the Holders of the Subordinated Debentures.
(c) When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 7.01(a)(iv), (v) or (vi) occurs, the
expenses and compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law or a successor statute.
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(d) Notwithstanding anything in this Indenture or any
Subordinated Debenture to the contrary, the Trustee shall have no
obligation whatsoever to advance funds to pay any principal of or interest
on or other amounts with respect to the Subordinated Debentures or
otherwise advance funds to or on behalf of the Company.
(e) The provisions of this Section 9.07 shall survive the
discharge or termination of this Indenture and shall survive the
resignation or removal of the Trustee.
Section 9.08. Reliance on Officers' Certificate. Except as otherwise
provided in Section 9.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting to take any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of willful misconduct,
negligence or bad faith on the part of the Trustee, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Trustee and
such certificate, in the absence of willful misconduct, negligence or bad faith
on the part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted to be taken by it under the provisions of this
Indenture upon the faith thereof.
Section 9.09. Disqulification; Conflicting Interests. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of Section 310(b) of
the Trust Indenture Act, the Trustee and the Company shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
Section 9.10. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee with respect to the Subordinated Debentures issued hereunder
which shall at all times be a Person organized and doing business under the laws
of the United States of America or any state or territory thereof or of the
District of Columbia, or a corporation or other Person permitted to act as
trustee by the Commission, authorized under such laws to exercise trust powers,
having a combined capital and surplus of at least $500,000 (and its parent
holding company, if any, having a combined capital and surplus of at least
$50,000,000) and subject to supervision or examination by federal, state,
territorial, or District of Columbia authority. If such Person 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, the combined capital and 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. No Affiliate of the Company may serve as Trustee. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 9.11.
Section 9.11. Resignation and Removal; Appointment of Successor.
(a) The Trustee, or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company and by
transmitting notice of resignation by mail, first class postage prepaid, to
the Securityholders, as their names and addresses appear upon the
Securities Register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in
duplicate,
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executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee. If
no successor trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Securityholder who has been a bona fide Holder of
Subordinated Debentures for at least six months may, subject to the provisions
of Section 7.07, on behalf of such Securityholder and all other Holders,
petition any such court for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
9.09 after written request therefor by the Company or by any Securityholder
who has been a bona fide Holder of Subordinated Debentures for at least six
months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 9.10 and shall fail to resign after written request
therefor by the Company or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, 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, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.07, unless the Trustee's duty to resign is stayed as
provided herein, any Securityholder who has been a bona fide Holder of
Subordinated Debentures for at least six months may, on behalf of that Holder
and all other Holders, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Subordinated Debentures at the time Outstanding may at any time remove the
Trustee by so notifying the Trustee and the Company and may appoint a successor
Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 9.12.
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Section 9.12. Acceptance of appointment by Successor
(a) In case of the appointmenthereunder of a successor trustee,
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 its
receipt of all amounts payable for it under Section 9.07, 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. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by
such trustee to secure any amounts then due to it pursuant to the
provisions of Section 9.07.
(b) 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 such rights, powers and trusts
referred to in paragraph (a) of this Section.
(c) 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.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section, the Company shall transmit notice of the
succession of such trustee hereunder by mail, first class postage prepaid,
to the Securityholders, as their names and addresses appear upon the
Securities Register. If the Company fails to transmit such notice within
ten days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be transmitted at the expense
of the Company.
Section 9.13. Merger, Conversion, Consolidation or Succession to Business
Any Person into which the Trustee may be merged or converted or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided that such Person shall be
qualified and eligible under the provisions of this Article IX, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. In case any
Subordinated Debentures 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
Subordinated Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Subordinated Debentures.
Section 9.14. Preferential Collection of Claims Against the Company.
Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding
any creditor relationship described in Section 311(b) of the Trust Indenture
Act. A Trustee who has resigned or been
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removed shall be subject to Section 311(a) of the Trust Indenture Act to the
extent included therein.
Section 9.15. Appointment of Authenticating Agent. At any time when any of
the the Subordinated Debentures remain Outstanding, the Trustee may appoint an
Authenticating Agent or Agents which shall be authorized to act on behalf of the
Trustee to authenticate Subordinated Debentures issued upon original issuance,
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 2.08, and Subordinated Debentures 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 Subordinated
Debentures 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 and a certificate of authentication
executed 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 Person organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to act as Authenticating Agent, having a combined capital and surplus of
not less than $500,000 (and its parent holding company having a combined capital
and surplus of at least $50,000,000) and subject to supervision or 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 such
supervision or examining authority, for the purposes of this Section, 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, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any Person into which an Authenticating Agent 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 Authenticating Agent shall be a party,
or any Person succeeding to the corporate agency or corporate trust business of
an Authenticating Agent, shall continue to be an Authenticating Agent, 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 notice of
resignation or upon such termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section, the Trustee may appoint a successor Authenticating Agent which shall be
acceptable to the Company and shall mail written notice of such appointment by
first class mail, postage prepaid, to all Securityholders as their names and
addresses appear in the Securities Register. 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 the like effect as
if originally named as an Authenticating Agent herein. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
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The Company agrees to pay to each Authenticating Agent such reasonable
compensation as the Company and the Authenticating Agent may from time to time
have agreed to in writing for its services under this Section, and pursuant to
the provisions of Section 9.07 the Trustee shall be entitled to be reimbursed
for such payments, if any, it makes to an Authenticating Agent.
If an appointment is made pursuant to this Section, the Subordinated
Debentures may have endorsed thereon, in lieu of the form of certificate of
authentication set forth in Section 8.01, a certificate of authentication in the
following form:
"This is one of the Subordinated Debentures described in the within
mentioned Indenture."
_______________________________,
as Trustee
By ____________________________,
as Authenticating Agent
By ____________________________,
Authorized Signature
ARTICLE X
CONCERNING THE SECURITYHOLDERS
Section 10.01. Evidence of Action by Securityholders. Whenever in this
Indenture it is provided that the Holders of a majority or specified percentage
in aggregate principal amount of the Subordinated Debentures may take any action
(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action the Holders of such majority or specified percentage
have joined therein may be evidenced by any instrument or any number of
instruments of similar tenor executed by such Holders in Person or by agent or
proxy appointed in writing.
If the Company shall solicit from the Securityholders any request, demand,
authorization, direction, notice, consent, waiver or other action, the Company
may, at its option, as evidenced by an Officers' Certificate, fix in advance a
record date for the determination of Securityholders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of Outstanding Subordinated
Debentures have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action, and for that
purpose the Outstanding Subordinated Debentures shall be computed as of the
record date; provided, however, that no such authorization,
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agreement or consent by such Securityholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
Section 10.02. Proof of Execution by Securityholders. Subject to the
provisions of Sections 6.01, 9.01, 9.03 and 10.05, proof of the execution of any
instrument by a Securityholder (such proof will not require notarization) or his
agent or proxy and proof of the holding by any Person of any of the Subordinated
Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the
Trustee.
(b) The ownership of Subordinated Debentures shall be proved by the
Securities Register or by a certificate of the Securities Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
Section 10.03. Who may be Deemed Owners. Prior to the due presentment for
registration of transfer of any Subordinated Debenture, the Company, the
Trustee, any paying agent and any Securities Registrar may deem and treat the
Person in whose name such Subordinated Debenture shall be registered upon the
Security Register as the absolute owner of such Subordinated Debenture (whether
or not such Subordinated Debenture shall be overdue and notwithstanding any
notice of ownership or writing thereon made by anyone other than the Securities
Registrar) for the purpose of receiving payment of or on account of the
principal of and (subject to Section 2.05) interest on such Subordinated
Debenture and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any Securities Registrar shall be affected by any
notice to the contrary. All such payments so made to any holder shall be valid
and, to the extent of the sum or sums so paid, effective to satisfy and
discharge the liability for monies payable upon any such Subordinated Debenture.
Section 10.04. Certain Subordinated Debentures Owned by Company
Disregarded. In determining whether the Holders of the requisite aggregate
principal amount of Subordinated Debentures have concurred in any direction,
consent or waiver under this Indenture, the Subordinated Debentures that are
owned by the Company or any other obligor on the Subordinated Debentures or by
any Person directly or indirectly controlling or controlled by or under common
control with the Company or any other obligor on the Subordinated Debentures
shall be disregarded and deemed not to be Outstanding for the purpose of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Subordinated Debentures that a Responsible Officer of the Trustee actually
knows are so owned shall be so disregarded. The Subordinated Debentures so owned
that have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section, if the pledgee shall establish to the satisfaction of
the Trustee the pledgee's right to vote such Subordinated Debentures and that
the pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common
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control with the Company or any such other obligor. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee.
Section 10.05. Actions Binding on Future Securityholders. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 10.01,
of the taking of any action by the Holders of the percentage in aggregate
principal amount of the Subordinated Debentures specified in this Indenture in
connection with such action, any Holder who is shown by the evidence to have
consented to such action may, by filing written notice with the Trustee, and
upon proof of holding as provided in Section 10.02, revoke such action so far as
concerns such Holder's Subordinated Debentures. Except as aforesaid any such
action taken by the Holder shall be conclusive and binding upon such Holder and
upon all future Holders and owners of such Holder's Subordinated Debentures, and
of any Subordinated Debentures issued in exchange therefor, on registration of
transfer thereof or in place thereof, irrespective of whether or not any
notation in regard thereto is made upon such Subordinated Debentures. Any action
taken by the Holders of the percentage in aggregate principal amount of the
Subordinated Debentures specified in this Indenture in connection with such
action shall be conclusively binding upon the Company, the Trustee and the
Holders of all the Subordinated Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.01. Supplemental Indentures Without the Consent of
Securityholders. In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect), without
the consent of the Securityholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or
in the Subordinated Debentures, provided that any such action does not
materially adversely affect the interests of the Holders or the holders of
the Preferred Securities so long as they remain outstanding;
(b) to comply with Article XII;
(c) to provide for uncertificated Subordinated Debentures in
addition to or in place of certificated Subordinated Debentures;
(d) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(e) to make any change that does not adversely affect the rights
of any Securityholder in any material respect; or
(f) to establish the form of any certifications required to be
furnished pursuant to the terms of this Indenture or to add to the rights
of the Holders.
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The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to, but may in its discretion, enter into any such supplemental
indenture that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed by the Company and the Trustee without the consent of the Holders of
any of the Subordinated Debentures at the time Outstanding, notwithstanding any
of the provisions of Section 11.02.
Section 11.02. Supplemental Indentures With Consent of Securityholders.
With the consent (evidenced as provided in Section 10.01) of the Holders of not
less than a majority in aggregate principal amount of the Subordinated
Debentures at the time Outstanding, the Company, when authorized by Board
Resolutions, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner not covered by Section 11.01 the rights of the Holders of the
Subordinated Debentures under this Indenture; provided, however, that no such
supplemental indenture shall without the consent of the Holders of each
Subordinated Debenture then Outstanding, (a) change (except as expressly
provided herein pursuant to Section 2.02) the stated maturity of the
Subordinated Debentures or reduce the principal amount thereof; or reduce the
rate or extend (except as expressly provided herein pursuant to Section 4.01)
the time of payment of interest thereon; or (b) reduce the percentage of
principal amount of Subordinated Debentures, the Holders of which are required
to consent to any such supplemental indenture; provided, further, that if the
Subordinated Debentures are held by the Trust or a trustee of the Trust, such
supplemental indenture shall not be effective until the holders of a majority in
aggregate Liquidation Amount of Preferred Securities shall have consented to
such supplemental indenture; provided further, that if the consent of the Holder
of each Outstanding Subordinated Debenture is required, such supplemental
indenture shall not be effective until each Holder of the Trust Securities shall
have consented to such supplemental indenture.
It shall not be necessary for the consent of the Securityholders to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof.
Section 11.03. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article or of Section
12.01, this Indenture shall be and be deemed to be modified and amended in
accordance therewith.
Section 11.04. Subordinated Debentures Affected by Supplemental
Indentures. Subordinated Debentures, affected by a supplemental indenture,
authenticated and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article or of Section 12.01, may bear a
notation in form approved by the Company, as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Subordinated
Debentures so modified as to conform, in the opinion of the Board of Directors,
to any modification of this Indenture contained in any such supplemental
indenture may be prepared
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and executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Subordinated Debentures then
Outstanding.
Section 11.05. Execution of Supplemental Indentures. Upon the request of
the Company, accompanied by Board Resolutions authorizing the execution of any
such supplemental indenture, and upon the filing with the Trustee of evidence of
the consent of Securityholders required to consent thereto as aforesaid, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion but shall not be obligated to enter into such
supplemental indenture. The Trustee, subject to the provisions of Sections 9.01
and 9.03, may receive an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article is authorized or
permitted by, and conforms to, and complies with the requirements of, the Trust
Indenture Act and the terms of this Article and that it is proper for the
Trustee under the provisions of this Article to join in the execution thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Securityholders as their names and addresses appear upon the Securities
Register. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
ARTICLE XII
SUCCESSOR CORPORATION
Section 12.01. Company May Consolidate, Etc. 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
(a) in case the Company 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 the Company's obligations on the Subordinated Debentures
issued under this Indenture; (b) 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 occurred and be continuing; and (c)
such successor Person expressly assumes the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be kept and
performed by the Company by executing and delivering a supplemental indenture in
form and substance satisfactory to the Trustee.
Section 12.02. Successor Substituted.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
Person by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee,
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of the due and punctual payment of the principal of and interest on all of
the Subordinated Debentures Outstanding and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Company, such successor Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named
as the Company herein, and thereupon the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the
Subordinated Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not
in substance) may be made in the Subordinated Debentures thereafter to be
issued as may be appropriate.
Section 12.03. Evidence of Consolidation, Etc., to trustee. The Trustee,
subject to the provisions of Sections 9.01 and 9.03, may receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or other disposition, and any such assumption, comply with
the provisions of this Article.
ARTICLE XIII
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture. If at any time: (a)
the Company shall have delivered to the Trustee for cancellation all
Subordinated Debentures theretofore authenticated (other than any Subordinated
Debentures that shall have been destroyed, lost or stolen and that shall have
been replaced or paid as provided in Section 2.08) and not theretofore cancelled
and Subordinated Debentures for whose payment money or Governmental Obligations
have theretofore been deposited in trust or segregated and held in trust by the
Company (and thereupon repaid to the Company or discharged from such trust, as
provided in Section 13.05); or (b) all such Subordinated Debentures not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit or cause to be deposited with the Trustee as trust funds the entire
amount in moneys or Governmental Obligations sufficient or a combination thereof
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay at maturity or upon redemption all Subordinated Debentures not
theretofore delivered to the Trustee for cancellation, including principal and
interest due or to become due to such date of maturity or date fixed for
redemption, as the case may be, and if the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company; then this Indenture shall
thereupon cease to be of further effect except for the provisions of Sections
2.02, 2.03, 2.04, 2.05, 4.01, 4.02, 4.03 and 9.11, that shall survive until the
date of maturity or redemption date, as the case may be, and Sections 9.07 and
13.05, that shall survive to such date and thereafter, and the Trustee, on
demand of the Company accompanied by an Officer's Certificate and Opinion of
Counsel, and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture.
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Section 13.02. Discharge of Obligations. If at any time all such
Subordinated Debentures not theretofore delivered to the Trustee for
cancellation or that have not become due and payable as described in Section
13.01 shall have been paid by the Company by depositing irrevocably with the
Trustee, as trust funds, moneys or an amount of Governmental Obligations
sufficient to pay at maturity or upon redemption all such Subordinated
Debentures not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then after the
date such moneys or Governmental Obligations, as the case may be, are deposited
with the Trustee the obligations of the Company under this Indenture shall cease
to be of further effect except for the provisions of Sections 2.02, 2.03, 2.04,
2.05, 4.01, 4.02, 4.03, 9.07, 9.11 and 13.05 hereof that shall survive until
such Subordinated Debentures shall mature and be paid. Thereafter, Sections 9.07
and 13.05 shall survive.
Section 13.03. Deposited Moneys to be Held in Trust. All moneys or
Governmental Obligations deposited with the Trustee pursuant to Sections 13.01
or 13.02 shall be held in trust and shall be available for payment as due,
either directly or through any paying agent (including the Company acting as its
own paying agent), to the Holders of the Subordinated Debentures for the payment
or redemption of which such moneys or Governmental Obligations have been
deposited with the Trustee.
Section 13.04. Payment of Moneys held by Paying Agents. In connection with
the satisfaction and discharge of this Indenture all moneys or Governmental
Obligations then held by any paying agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee and thereupon such
paying agent shall be released from all further liability with respect to such
moneys or Governmental Obligations.
Section 13.05. Repayment to Company. Any moneys or Governmental
Obligations deposited with any paying agent or the Trustee, or then held by the
Company in trust for payment of principal of or interest on the Subordinated
Debentures that are not applied but remain unclaimed by the Holders of such
Subordinated Debentures for at least two years after the date upon which the
principal of or interest on such Subordinated Debentures shall have respectively
become due and payable, shall be repaid to the Company on the second annual
anniversary of when such payment was originally due or (if then held by the
Company) shall be discharged from such trust; and thereupon the paying agent and
the Trustee shall be released from all further liability with respect to such
moneys or Governmental Obligations, and the Holder of any of the Subordinated
Debentures entitled to receive such payment shall thereafter, as an unsecured
general creditor, look only to the Company for the payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.01. No Recourse. No recourse under or upon any obligation,
covenant or agreement of this Indenture, or of any Subordinated Debenture, or
for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer or
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director as such, past, present or future, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Subordinated Debentures or implied therefrom; and that any and all such
personal liability of every name and nature, either at common law or in equity
or by constitution or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer or director as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any of the Subordinated Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of such Subordinated Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.01. Effect on Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Indenture contained by or on
behalf of the Company or the Trustee shall bind their respective successors and
assigns, whether so expressed or not.
Section 15.02. Actions by Successor. Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by
any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the corresponding board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.
Section 15.03. Surrender of Company Powers. The Company by instrument in
writing executed by authority of two-thirds of its Board of Directors and
delivered to the Trustee may surrender any of the powers reserved to the
Company, and thereupon such power so surrendered shall terminate both as to the
Company and as to any successor corporation.
Section 15.04. Notices. Except as otherwise expressly provided herein any
notice or demand that by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the Holders of Subordinated
Debentures to or on the Company may be given or served by being deposited first
class postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows: c/o
Bank of the Ozarks, Inc., 12615 Chenal Parkway, Little Rock, Arkansas 72231,
Attention: Chief Executive Officer. Any notice, election, request or demand by
the Company or any Securityholder to or upon the Trustee shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the Corporate Trust Office of the Trustee.
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Section 15.05. Governing Law. This Indenture and each Subordinated
Debenture shall be deemed to be a contract made under the internal laws of the
State of Maryland and for all purposes shall be construed in accordance with the
laws of said state.
Section 15.06. Treatment of Subordinated Debentures as Debt. It is
intended that the Subordinated Debentures will be treated as indebtedness and
not as equity for federal income tax purposes. The provisions of this Indenture
shall be interpreted to further this intention.
Section 15.07. Compliance Certificates and Opinions.
(a) Upon any application or demand by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent 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 have been
complied with, except that in the case of any such application or demand as
to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or
demand, no additional certificate or opinion need be furnished.
(b) Every certificate or opinion delivered to the Trustee with
respect to compliance with a condition or covenant in this Indenture shall
include (i) a statement that the Person making such certificate or opinion
has read such covenant or condition; (ii) 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;
(iii) a statement that, in the opinion of such Person, such Person has made
such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and (iv) a statement as to whether or not, in the
opinion of such Person, such condition or covenant has been complied with.
Section 15.08. Payments on Business Days. In any case where the date of
maturity of interest or principal of the Subordinated Debentures or the date of
redemption of the Subordinated Debentures shall not be a Business Day, then
payment of interest or principal will be made on the next succeeding Business
Day (without any additional interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable.
Section 15.09. Conflict with Trust Indenture Act. If and to the extent
that any provision of this Indenture 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 15.10. Counterparts. This Indenture may be executed in any number
of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
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Section 15.11. Separability. In case any one or more of the provisions
contained in this Indenture or in the Subordinated Debentures shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Indenture or of the Subordinated Debentures, but this Indenture and the
Subordinated Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
Section 15.12. Assignment. The Company will have the right at all times to
assign any of its respective rights or obligations under this Indenture to a
direct or indirect wholly owned Subsidiary of the Company, provided that, in the
event of any such assignment, the Company will remain liable for all such
obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties hereto.
Section 15.13. Acknowledgment of Rights. The Company acknowledges that,
with respect to any Subordinated Debentures held by the Trust or a trustee of
the Trust, if the Property Trustee of the Trust fails to enforce its rights
under this Indenture as the Holder of the Subordinated Debentures held as the
assets of the Trust, any holder of Preferred Securities may institute legal
proceedings either in law or equity directly against the Company to enforce such
Property Trustee's rights under this Indenture without first instituting any
legal proceedings against such Property Trustee or any other Person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Subordinated Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company acknowledges that a holder of Preferred Securities
may directly institute a proceeding for enforcement of payment to such holder of
the principal of or interest on the Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Preferred Securities of
such holder on or after the respective due date specified in the Subordinated
Debentures. This Section 15.13 may not be amended without the prior written
consent of the holders of all of the Preferred Securities.
ARTICLE XVI
SUBORDINATION OF SUBORDINATED DEBENTURES
Section 16.01. Agreement to Subordinate. The Company covenants and agrees,
and each Holder of Subordinated Debentures issued hereunder by such Holder's
acceptance thereof likewise covenants and agrees, that all Subordinated
Debentures shall be issued subject to the provisions of this Article XVI; and
each Holder, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of and interest on all
Subordinated Debentures issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full of all Senior and Subordinated Debt, whether outstanding
at the date of this Indenture or thereafter incurred.
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No provision of this Article XVI shall prevent the occurrence of any
default or Event of Default hereunder.
Section 16.02. Default on Senior and Subordinated Debt. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Senior and
Subordinated Debt of the Company or in the event that the maturity of any Senior
and Subordinated Debt of the Company has been accelerated because of a default,
then, in either case, no payment shall be made by the Company with respect to
the principal of or interest on the Subordinated Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 16.02, and a Responsible Officer of the Trustee has
actual knowledge of such prohibition prior to the disposition of such payment by
the Trustee pursuant to a provision of this Indenture, such payment shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior and Subordinated Debt or their respective representatives, or
to the trustee or trustees under any indenture pursuant to which any of such
Senior and Subordinated Debt may have been issued, as their respective interests
may appear, but only to the extent that the holders of the Senior and
Subordinated Debt (or their representative or representatives or a trustee)
notify the Trustee in writing within 90 days of such payment of the amounts then
due and owing on the Senior and Subordinated Debt and only the amounts specified
in such notice to the Trustee shall be paid to the holders of Senior and
Subordinated Debt.
Section 16.03. Liquidation; Dissolution; Bankruptcy. Upon any payment by
the Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due upon all Senior and Subordinated Debt of the Company shall first be
paid in full, or payment thereof provided for in money in accordance with its
terms, before any payment is made by the Company on account of the principal or
interest on the Subordinated Debentures; and upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Holders or the Trustee would be entitled to
receive from the Company, except for the provisions of this Article XVI, shall
be paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders or by the Trustee under the Indenture if received by them or it,
directly to the holders of Senior and Subordinated Debt of the Company (pro rata
to such holders on the basis of the respective amounts of Senior and
Subordinated Debt held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior and
Subordinated Debt may have been issued, as their respective interests may
appear, to the extent necessary to pay such Senior and Subordinated Debt in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of such Senior and Subordinated Debt,
before any payment or distribution is made to the Holders or to the Trustee.
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In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior and Subordinated Debt of the Company is paid in full,
or provision is made for such payment in money in accordance with its terms,
such payment or distribution shall be held in trust for the benefit of and shall
be paid over or delivered to the holders of such Senior and Subordinated Debt or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior and
Subordinated Debt may have been issued, and their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior and Subordinated Debt of the Company, as the case may be, remaining
unpaid to the extent necessary to pay such Senior and Subordinated Debt in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such Senior and
Subordinated Debt.
For purposes of this Article XVI, the words "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, the payment of which is
subordinated at least to the extent provided in this Article XVI with respect to
the Subordinated Debentures to the payment of all Senior and Subordinated Debt
of the Company, as the case may be, that may at the time be outstanding,
provided that (a) such Senior and Subordinated Debt is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(b) the rights of the holders of such Senior and Subordinated Debt are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII of this Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 16.03 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article XII
of this Indenture. Nothing in Section 16.02 or in this Section 16.03 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
9.07 of this Indenture.
Section 16.04. Subrogation. Subject to the payment in full of all Senior
and Subordinated Debt of the Company, the rights of the Holders of the
Subordinated Debentures shall be subrogated to the rights of the holders of such
Senior and Subordinated Debt to receive payments or distributions of cash,
property or securities of the Company, as the case may be, applicable to such
Senior and Subordinated Debt until the principal of and interest on the
Subordinated Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior and
Subordinated Debt of any cash, property or securities to which the Holders of
the Subordinated Debentures or the Trustee would be entitled except for the
provisions of this Article XVI, and no payment over pursuant to the provisions
of this Article XVI to or for the benefit of the holders of such Senior and
Subordinated Debt by Holders of the Subordinated Debentures or the Trustee,
shall, as between the Company, its creditors other than holders of Senior and
Subordinated Debt of the Company, and the Holders of the Subordinated
Debentures, be deemed to be a payment by the Company to or on account of such
Senior and Subordinated Debt. It is understood that the provisions of this
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Article XVI are and are intended solely for the purposes of defining the
relative rights of the Holders of the Subordinated Debentures, on the one hand,
and the holders of such Senior and Subordinated Debt on the other hand.
Nothing contained in this Article XVI or elsewhere in this Indenture or in
the Subordinated Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior and Subordinated Debt of
the Company, and the Holders of the Subordinated Debentures, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Subordinated Debentures the principal of and interest on the Subordinated
Debentures as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Subordinated Debentures and creditors of the Company, other than
the holders of Senior and Subordinated Debt of the Company, nor shall anything
herein or therein prevent the Trustee or the Holder of any Subordinated
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XVI of the holders of such Senior and Subordinated Debt in respect of
cash, property or securities of the Company, as the case may be, received upon
the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article XVI, the Trustee and the Holders of the Subordinated Debentures
shall be entitled to conclusively rely upon any order or decree made by any
court of competent jurisdiction in which such dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Subordinated Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior and
Subordinated Debt and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XVI.
Section 16.05. Trustee to Effectuate Subordination. Each Holder of
Subordinated Debentures by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XVI and appoints the Trustee such Holder's attorney-in-fact for any and
all such purposes.
Section 16.06. Notice by the Company. The Company shall give prompt
written notice to a Responsible Officer of the Trustee of any fact known to the
Company that would prohibit the making of any payment of moneys to or by the
Trustee in respect of the Subordinated Debentures pursuant to the provisions of
this Article XVI. Notwithstanding the provisions of this Article XVI or any
other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment of moneys to or by the Trustee in respect of the Subordinated Debentures
pursuant to the provisions of this Article XVI, unless and until a Responsible
Officer of the Trustee shall have received written notice thereof from the
Company or a holder or holders of Senior and Subordinated Debt or from any
trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Sections 9.01 and 9.03, shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
the Trustee shall not have received the notice
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provided for in this Section 16.06 at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Subordinated Debenture), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purposes for which it was received, and shall
not be affected by any notice to the contrary that may be received by it within
two Business Days prior to such date.
The Trustee, subject to the provisions of Sections 9.01 and 9.03, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior and Subordinated Debt of
the Company (or a trustee on behalf of such holder), to establish that such
notice has been given by a holder of such Senior and Subordinated Debt or a
trustee on behalf of any such holder or holders. 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 such Senior and Subordinated Debt to
participate in any payment or distribution pursuant to this Article XVI, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such 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 XVI, 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 16.07. Rights of the Trustee; Holders of Senior and Subordinated
Debt. The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XVI in respect of any Senior and Subordinated
Debt at any time 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.
With respect to the holders of Senior and Subordinated Debt of the Company,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XVI, and no implied
covenants or obligations with respect to the holders of such Senior and
Subordinated Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior and Subordinated Debt and, subject to the provisions of Sections 9.01 and
9.03, the Trustee shall not be liable to any holder of such Senior and
Subordinated Debt if it shall pay over or deliver to Holders of Subordinated
Debentures, the Company or any other Person money or assets to which any holder
of such Senior and Subordinated Debt shall be entitled by virtue of this Article
XVI or otherwise.
Section 16.08. Subordination May Not be Impaired. No right of any present
or future holder of any Senior and Subordinated Debt of the Company 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 otherwise
be charged with.
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Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior and Subordinated Debt of the Company may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Subordinated Debentures, without incurring responsibility to the Holders of
the Subordinated Debentures and without impairing or releasing the subordination
provided in this Article XVI or the obligations hereunder of the Holders of the
Subordinated Debentures to the holders of such Senior and Subordinated Debt, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such Senior and
Subordinated Debt, or otherwise amend or supplement in any manner such Senior
and Subordinated Debt or any instrument evidencing the same or any agreement
under which such Senior and Subordinated Debt is outstanding; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior and Subordinated Debt; (c) release any Person
liable in any manner for the collection of such Senior and Subordinated Debt;
and (d) exercise or refrain from exercising any rights against the Company and
any other Person.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
BANK OF THE OZARKS, INC.
By__________________________________________
George G. Gleason, II
Chairman and Chief Executive Officer
FMB TRUST COMPANY, NATIONAL ASSOCIATION, as
Trustee
By__________________________________________
Name________________________________________
Title_______________________________________
STATE OF _______________ )
) ss.
COUNTY OF ______________ )
On the _______ day of ____________, 1999, before me personally came George
G. Gleason, II, to me known, who, being by me duly sworn, did depose and say
that he is the Chairman and Chief Executive Officer of BANK OF THE OZARKS, INC.,
one of the corporations described in and which executed the above instrument;
and that he signed his name thereto on behalf of said corporation by authority
of the Board of Directors of said corporation.
Witness my hand and official seal:
_____________________________________
Notary Public
My Commission Expires:
__________________________
52
<PAGE>
STATE OF MARYLAND )
) ss.
COUNTY OF _____________ )
On the _______ day of ___________, 1999, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that he/she is the _______________________ of FMB Trust Company, National
Association, one of the corporations described in and which executed the above
instrument; and that he/she signed his/her name thereto on behalf of said
corporation by authority of the Board of Directors of said corporation.
Witness my hand and official seal:
_____________________________________
Notary Public
My Commission Expires:
__________________________
53
<PAGE>
EXHIBIT A
(FORM OF FACE OF SUBORDINATED DEBENTURE)
This Subordinated Debenture is a [Global] Subordinated Debenture 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
Subordinated Debenture is exchangeable for Subordinated Debentures registered in
the name of a person other than [____________] [the Depositary or its nominee]
only in the limited circumstances described in the Indenture, and no transfer of
this Subordinated Debenture [(other than a transfer of this Subordinated
Debenture 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)] may be registered except in such limited circumstances.
[Unless this Subordinated Debenture is presented by an authorized
representative of FMB Trust Company, National Association, 25 Charles Street,
Baltimore, Maryland 22201, Attention: Corporate Trust Services, to the issuer or
its agent for registration of transfer, exchange or payment, and any
Subordinated Debenture issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of FMB Trust Company,
National Association (and any payment hereon is made to Cede & Co. or to such
other entity as is requested by an authorized representative of FMB Trust
Company, National Association), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner
hereof, Cede & Co., has an interest herein.]
Registered Principal Amount
Registered No. _______________ $__________
[CUSIP No. _______________]
BANK OF THE OZARKS, INC.
____% SUBORDINATED DEBENTURE
DUE ________________, 2029
Bank of the Ozarks, Inc., an Arkansas corporation (the "Company," which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to TRUSTEE or registered
assigns, the principal sum of __________________________________________________
Dollars ($__________) on ________________, 2029 (which date may be shortened as
provided in the Indenture, the "Stated Maturity"), and to pay interest on said
principal sum from ________________, 1999, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, quarterly (subject to deferral as set forth
herein) in arrears on March 31, June 30, September 30 and December 31 in each
year commencing __________, 1999, at the rate of ____% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law)
<PAGE>
on any overdue installment of interest at the same rate per annum compounded
quarterly. The amount of each interest payment due with respect to the
Subordinated Debentures will include amounts accrued through the date the
interest payment is due. The amount of interest payable on any Interest Payment
Date shall 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 this Subordinated
Debenture is not a Business Day (as defined in the Indenture), then payment of
interest 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), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. 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 Subordinated Debenture (or one or more Predecessor
Subordinated Debentures, as defined in the Indenture) is registered at the close
of business on the regular record date for such interest installment, which
shall be the close of business on the business day next preceding such Interest
Payment Date unless otherwise provided in the Indenture. The principal of and
the interest on this Subordinated Debenture shall be payable at the office or
agency of the Trustee (as defined in the Indenture) maintained for that purpose
in any coin or currency of the United States of America that at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the Registered Holder (as defined in the Indenture) at such
address as shall appear in the Securities Register (as defined in the
Indenture). Notwithstanding the foregoing, so long as the Holder of this
Subordinated Debenture is the Property Trustee (as defined in the Indenture),
the payment of the principal of and interest on this Subordinated Debenture will
be made at such place and to such account as may be designated by the Property
Trustee.
The Stated Maturity may be shortened at any time by the Company to any date
not earlier than ________________, 2004, subject to the Company having received
prior approval of the FRB (as defined in the Indenture) if then required under
applicable capital guidelines or policies of the FRB.
The indebtedness evidenced by this Subordinated Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior and Subordinated Debt (as defined in the
Indenture), and this Subordinated Debenture is issued subject to the provisions
of the Indenture with respect thereto. Each Holder of this Subordinated
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) 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 so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes. Each Holder hereof, by his or her acceptance
hereof, hereby 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.
This Subordinated Debenture shall not be entitled to any benefit under the
Indenture, be valid or become obligatory for any purpose until the Certificate
of Authentication hereon shall have been signed by or on behalf of the Trustee.
A-2
<PAGE>
The provisions of this Subordinated Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated: _______________ BANK OF THE OZARKS, INC.
By_____________________________________
George G. Gleason, II
Chairman and Chief Executive Officer
Attest:
By__________________________
Donna Quandt, Secretary
A-3
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Subordinated Debentures described in the within-
mentioned Indenture.
Dated: FMB Trust Company, National Association,
as Trustee
By_____________________________________
Authorized Signature
A-4
<PAGE>
[FORM OF REVERSE OF SUBORDINATED DEBENTURE]
____% SUBORDINATED DEBENTURE
(CONTINUED)
This Subordinated Debenture is one of the Subordinated Debentures of the
Company (herein sometimes referred to as the "Subordinated Debentures"),
specified in the Indenture, all issued under and pursuant to a Subordinated
Indenture dated as of ________________, 1999 (the "Indenture") duly executed and
delivered between the Company and FMB Trust Company, National Association, as
Trustee (the "Trustee"), to which Indenture reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Subordinated Debentures. The Subordinated Debentures are limited in aggregate
principal amount as specified in the Indenture.
Because of the occurrence and continuation of a Special Event (as defined
in the Indenture), in certain circumstances, this Subordinated Debenture may
become due and payable at the option of the Company at the principal amount
together with any interest accrued thereon (the "Redemption Price"). The
Redemption Price shall be paid prior to 1:00 p.m. Little Rock, Arkansas time, on
the date of such redemption or at such earlier time as the Company determines.
The Company shall have the right to redeem this Subordinated Debenture at
the option of the Company, in whole or in part, from time to time, on or after
________________, 2004, at a redemption price equal to 100% of the principal
amount to be redeemed plus any accrued but unpaid interest thereon to the date
of such redemption. Any redemption pursuant to this paragraph will be made upon
not less than 30 days' nor more than 60 days' notice. If the Subordinated
Debentures are only partially redeemed by the Company pursuant to this
paragraph, the Subordinated Debentures will be redeemed pro rata or by lot or by
any other method utilized by the Trustee; provided that if, at the time of
redemption, the Subordinated Debentures are registered as a Global Subordinated
Debenture (as defined in the Indenture), the Depositary (as defined in the
Indenture) shall determine the principal amount of such Subordinated Debentures
held by each Subordinated Debenture Holder to be redeemed in accordance with its
procedures.
In the event of redemption of this Subordinated Debenture in part only, a
new Subordinated Debenture for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any prepayment of the Subordinated
Debentures by the Company shall be subject to the prior approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve System"), if such
approval is then required under applicable capital guidelines or policies of the
Federal Reserve, and the receipt of any other required regulatory approvals.
In case an Event of Default (as defined in the Indenture), shall have
occurred and be continuing, the principal of all of the Subordinated Debentures
may be declared, and upon such
A-5
<PAGE>
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Subordinated Debentures at the time Outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Subordinated Debentures; provided,
however, that no such supplemental indenture shall (i) change the stated
maturity of the Subordinated Debentures except as provided in the Indenture, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, without the consent of the Holder of each
Subordinated Debenture so affected, or (ii) reduce the aforesaid percentage of
Subordinated Debentures, the Holders of which are required to consent to any
such supplemental indenture, without the consent of the Holders of each
Subordinated Debenture then Outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Subordinated Debentures at the time Outstanding, on behalf of all
of the Holders of the Subordinated Debentures, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or interest on any of the Subordinated Debentures. Any such
consent or waiver by the registered Holder of this Subordinated Debenture
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future Holders and owners of this Subordinated
Debenture and of any Subordinated Debenture issued in exchange herefor or in
place hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this
Subordinated Debenture.
No reference herein to the Indenture and no provision of this Subordinated
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Subordinated Debenture at the time and place and at the rate
and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Subordinated Debentures and from time to time to extend the interest payment
period of such Subordinated Debentures for up to 20 consecutive quarters (an
"Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest then accrued and unpaid (together with interest thereon
at the rate specified for the Subordinated Debentures to the extent that payment
of such interest is enforceable under applicable law). Before the termination of
any such Extended Interest Payment Period, the Company may further extend such
Extended Interest Payment Period, provided that such Extended Interest Payment
Period together with all such further extensions thereof shall not exceed 20
consecutive quarters or extend beyond the Stated Maturity. At the termination of
any such Extended Interest Payment Period and upon the payment of all accrued
and unpaid interest and any additional amounts then due, the Company may
commence a new Extended Interest Payment Period.
The Company has agreed that if at any time (a) there shall have occurred
any event of which the Company has actual knowledge that (i) with the giving of
notice or the lapse of time,
A-6
<PAGE>
or both, would constitute an Event of Default and (ii) in respect to which the
Company shall not have taken reasonable steps to cure, or (b) the Company shall
have given notice of its election of an Extended Interest Payment Period as
provided herein and shall not have rescinded such notice, or such Extended
Interest Payment Period, or any extension thereof, shall be continuing; or (c)
while the Subordinated Debentures are held by the Trust, the Company shall be in
default with respect to its payment of any obligation under the Preferred
Securities Guarantee, then the Company will not (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 or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company (including the Subordinated Debentures) that rank
pari passu with or junior in interest to the Subordinated Debentures 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 ranks pari passu
or junior in interest to the Subordinated Debentures (other than (A) dividends
or distributions in common stock, (B) any declaration of a dividend in
connection with the implementation of a shareholders' 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 Preferred
Securities Guarantee 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).
As provided in the Indenture and subject to certain limitations therein set
forth, this Subordinated Debenture is transferable by the registered Holder
hereof on the Securities Register of the Company, upon surrender of this
Subordinated Debenture for registration of transfer at the office or agency of
the Trustee accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company or the Trustee duly executed by the registered
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Subordinated Debentures of authorized denominations
and for the same aggregate principal amount will be issued to the designated
transferee or transferees. No service charge will be made for any such transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Subordinated
Debenture, the Company, the Trustee, any paying agent and the Securities
Registrar (as defined in the Indenture) may deem and treat the Registered Holder
hereof as the absolute owner hereof (whether or not this Subordinated Debenture
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Securities Registrar) for the purpose of receiving
payment of or on account of the principal hereof and interest due hereon and for
all other purposes, and neither the Company nor the Trustee nor any paying agent
nor any Securities Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Subordinated Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
A-7
<PAGE>
The Subordinated Debentures are issuable only in registered form without
coupons in denominations of $_____ and any integral multiple thereof. [This
Global Subordinated Debenture is exchangeable for Subordinated Debentures in
definitive form only under certain limited circumstances set forth in the
Indenture. Subordinated Debentures so issued are issuable only in registered
form without coupons in denominations of $_____ and any integral multiple
thereof.]
All terms used in this Subordinated Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
A-8
<PAGE>
EXHIBIT 4.8
================================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BANK OF THE OZARKS, INC.
and
FMB TRUST COMPANY, NATIONAL ASSOCIATION
Dated: ________________, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions and Interpretations............................................................. 1
ARTICLE II
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application............................................................ 5
Section 2.02. Lists of Holders of Securities.............................................................. 5
Section 2.03. Reports by the Preferred Guarantee Trustee.................................................. 5
Section 2.04. Periodic Reports to Preferred Guarantee Trustee............................................. 6
Section 2.05. Evidence of Compliance with Conditions Precedent............................................ 6
Section 2.06. Events of Default; Waiver................................................................... 6
Section 2.07. Event of Default; Notice.................................................................... 6
Section 2.08. Conflicting Interests....................................................................... 6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
Section 3.01. Powers and Duties of the Preferred Guarantee Trustee........................................ 7
Section 3.02. Certain Rights of Preferred Guarantee Trustee............................................... 8
Section 3.03. Not Responsible for Recitals or Issuance of Guarantee....................................... 10
Section 3.04. Compensation and Reimbursement.............................................................. 11
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
Section 4.01. Preferred Guarantee Trustee; Eligibility.................................................... 11
Section 4.02. Appointment, Removal and Resignation of Preferred Guarantee Trustees........................ 12
ARTICLE V
GUARANTEE
Section 5.01. Guarantee................................................................................... 13
Section 5.02. Waiver of Notice and Demand................................................................. 13
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 5.03. Obligations Not Affected................................................................... 13
Section 5.04. Rights of Holders.......................................................................... 14
Section 5.05. Guarantee of Payment....................................................................... 14
Section 5.06. Subrogation................................................................................ 14
Section 5.07. Independent Obligations.................................................................... 14
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.01. Limitation of Transactions................................................................. 15
Section 6.02. Ranking.................................................................................... 15
ARTICLE VII
TERMINATION
Section 7.01. Termination................................................................................ 15
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Exculpation................................................................................ 16
Section 8.02. Indemnification............................................................................ 16
ARTICLE IX
MISCELLANEOUS
Section 9.01. Successors and Assigns..................................................................... 17
Section 9.02. Amendments................................................................................. 17
Section 9.03. Notices.................................................................................... 17
Section 9.04. Benefit.................................................................................... 18
Section 9.05. Governing Law.............................................................................. 18
</TABLE>
<PAGE>
CROSS REFERENCE TABLE
Section of Trust Indenture Act of 1939, Section of Guarantee Agreement
as Amended
310(a) 4.01(a)
310(b) 4.01(c), 2.08
310(c) Inapplicable
311(a) 2.02(b)
311(b) 2.02(b)
311(c) Inapplicable
312(a) 2.02(a)
312(b) 2.02(b)
313 2.03
314(a) 2.04
314(b) Inapplicable
314(c) 2.05
314(d) Inapplicable
314(e) 1.01, 2.05, 3.02
314(f) 2.01, 3.02
315(a) 3.01(d)
315(b) 2.07
315(c) 3.01(c)
315(d) 3.01(d)
316(a) 1.01, 2.06, 5.04
316(b) 5.03
316(c) 2.02
317(a) 3.01(b)
317(b) Inapplicable
318(a) 2.01(a)
318(b) 2.01
318(c) 2.01(b)
Note: This Cross Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of ______________, 1999, is executed and delivered by BANK OF THE OZARKS, INC.,
an Arkansas corporation (the "Guarantor"), and FMB TRUST COMPANY, NATIONAL
ASSOCIATION, as trustee (the "Preferred Guarantee Trustee"), for the benefit of
the Holders (as defined herein) from time to time of the Preferred Securities
(as defined herein) of OZARK CAPITAL TRUST, a Delaware statutory business trust
("the Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement") dated as of __________________, 1999 among the trustees of the Trust
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof _____ preferred securities, having an aggregate liquidation
amount of $______ designated the __% Cumulative Trust Preferred Securities (the
"Preferred Securities"); and
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, 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 Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions and Interpretations. In this Preferred
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to
them in this Section 1.01;
(b) a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee
as modified, supplemented or amended from time to time;
<PAGE>
(d) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined
in this Preferred Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the State of Delaware are authorized or
required by law or executive order to remain closed, or (c) a day on which the
Preferred Guarantee Trustee's Corporate Trust Office is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at 25 Charles Street, Baltimore,
Maryland 21201, Attention: Corporate Trust Services.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"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: (a) every
obligation of such person for money borrowed; (b) 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; (c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (d) 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); (e) every capital lease obligation of such person; and (f) every
obligation of the type referred to in clauses (a) through (e) of another person
and all dividends of another person the payment of which, in either case, such
person has guaranteed or for which such person is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (a) any accrued and unpaid Distributions (as defined in the
Trust Agreement) that are required to be paid on such Preferred Securities to
the extent the Trust shall have funds available therefor, (b) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
2
<PAGE>
(the "Redemption Price") to the extent the Trust has funds available therefor,
with respect to any Preferred Securities called for redemption by the Trust, and
(c) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Subordinated
Debentures to the Holders in exchange for Preferred Securities as provided in
the Trust Agreement), the lesser of (i) the aggregate of the liquidation amount
and all accrued and unpaid Distributions on the Preferred Securities to the date
of payment, to the extent the Trust shall have funds available therefor, and
(ii) the amount of assets of the Trust remaining available for distribution to
Holders in liquidation of the Trust (in either case, the "Liquidation
Distribution").
"Holder" shall mean 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, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee (including in
its individual capacity), any Affiliate of the Preferred Guarantee Trustee, or
any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Preferred Guarantee
Trustee.
"Indenture" means the Subordinated Indenture dated as of ____________,
1999, among the Guarantor (the "Debenture Issuer") and FMB Trust Company,
National Association, as trustee, and any indenture supplemental thereto
pursuant to which the Subordinated Debentures are to be issued to the Property
Trustee (as defined in the Trust Agreement) of the Trust.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by Holders of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definition 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
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(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"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.
"Preferred Guarantee Trustee" means FMB Trust Company, National
Association, until a Successor Preferred Guarantee Trustee has been appointed
and has accepted such appointment pursuant to the terms of this Preferred
Securities Guarantee and thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
in the Corporate Trust Office of the Preferred Guarantee Trustee, with direct
responsibility for the administration of this Preferred Securities Guarantee and
also means, with respect to a particular corporate trust matter, any other
officer of the Preferred Guarantee Trustee to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Subordinated Debentures" means the series of subordinated deferrable
interest debt securities of the Guarantor designated the __% Subordinated
Debentures due 2029 held by the Property Trustee of the Trust.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.01.
"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 Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Guarantor, 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 Preferred Securities
Guarantee or to other Debt which is pari passu with, or subordinated to, the
Preferred Securities Guarantee; provided, however, that Senior and Subordinated
Debt shall not be deemed to include (a) any Debt of the Guarantor 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 the
Guarantor, (b) any Debt of the Guarantor to any of its subsidiaries, (c) any
Debt to any employee of the Guarantor, (d) any Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Subordinated Debentures as a result of the
subordination provisions of the Indenture would be greater than they otherwise
would have been as a result of any obligation of such holders to pay amounts
over to the obligees on such trade accounts payable or accrued
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liabilities arising in the ordinary course of business as a result of the
subordination provisions to which such Debt is subject, (e) the Subordinated
Debentures, and (f) any other debt securities issued pursuant to the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the provisions
of the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by
such provisions; and
(b) If and to the extent that any provision of this Preferred
Securities Guarantee 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 2.02. Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with
a list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") (i) on or before January 15 and July 15 of
each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders, as of a date no more
than 14 days before such List of Holders is given to the Preferred
Guarantee Trustee provided, that the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not
differ from the most recent List of Holders given to the Preferred
Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture
Act.
Section 2.03. Reports by the Preferred Guarantee Trustee. On or before
July 15 of each year, the Preferred Guarantee Trustee shall provide to the
Holders of the Preferred Securities 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 Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
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Section 2.04. Periodic Reports to Preferred Guarantee Trustee. The
Guarantor shall provide to the Preferred Guarantee 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 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture. Delivery of such reports, information and documents
to the Preferred Guarantee Trustee is for informational purposes only and the
Preferred Guarantee Trustee's receipt of Guarantor's compliance with any of its
covenants hereunder (as to which the Preferred Guarantee Trustee is entitled to
rely exclusively on Officer's Certificates).
Section 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Preferred Guarantee Trustee such evidence of
compliance with the conditions precedent, if any, provided for in this Preferred
Securities Guarantee 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 2.06. Events of Default; Waiver. The Holders of a Majority in
liquidation amount of Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, 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 Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.07. Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default with respect to this Preferred Securities
Guarantee actually known to a Responsible Officer of the Preferred
Guarantee Trustee, transmit by mail, first class postage prepaid, to the
Holders of the Preferred Securities, notices of all such Events of Default
actually known to a Responsible Officer of the Preferred Guarantee Trustee,
unless such defaults have been cured before the giving of such notice,
provided, that, the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the
Preferred Guarantee Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders of the Preferred
Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee
shall have received a properly addressed written notice, or of which a
Responsible Officer of the Preferred Guarantee Trustee charged with the
administration of the Trust Agreement shall have obtained actual knowledge.
Section 2.08. Conflicting Interests. The Trust Agreement shall be deemed
to be specifically described in this Preferred Securities Guarantee for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
Section 3.01. Powers and Duties of the Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising such Holder's rights pursuant to Section 5.04(b) or
to a Successor Preferred Guarantee Trustee on acceptance by such Successor
Preferred Guarantee Trustee of its appointment to act as Successor
Preferred Guarantee Trustee. The right, title and interest of the Preferred
Guarantee Trustee shall automatically vest in any Successor Preferred
Guarantee Trustee, 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 Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities
Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred 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 Preferred Securities Guarantee, and no
implied covenants shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06) and
is actually known to a Responsible Officer of the Preferred Guarantee
Trustee, the Preferred Guarantee Trustee shall exercise such of the rights
and powers vested in it by this Preferred Securities Guarantee, 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 such
person's own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred 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 Preferred Guarantee
Trustee shall be determined solely by the express provisions of
this Preferred Securities Guarantee, and the Preferred Guarantee
Trustee shall not be
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liable except for the performance of such duties and obligations
as are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants or obligations shall be read
into this Preferred Securities Guarantee against the Preferred
Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred 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 Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required
to be furnished to the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred 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 Preferred Guarantee Trustee, or exercising any trust
or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred 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 Preferred 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
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
Section 3.02. Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) The Preferred Guarantee Trustee may conclusively rely upon,
and shall be fully protected in acting or refraining from acting upon,
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction,
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consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document 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
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any re-
recording, re-filing or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect to
legal matters 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 accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustee's agents, nominees or custodians) 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 Preferred Guarantee Trustee; provided that, nothing
contained in this Section 3.02(a)(vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall have no obligation or
duty to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction,
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consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Preferred Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee 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.
(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities,
and the signature of the Preferred Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority of the
Preferred Guarantee Trustee to so act or as to its compliance with any
of the terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (A) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (B) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (C) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(xi) The Preferred Guarantee Trustee shall not be liable for
any action taken, suffered or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Preferred
Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred 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 Preferred 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 Preferred Guarantee Trustee
shall be construed to be a duty.
Section 3.03. Not Responsible for Recitals or Issuance of Guarantee. The
recitals contained in this Preferred Securities Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness.
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The Preferred Guarantee Trustee makes no representation as to the validity or
sufficiency of this Preferred Securities Guarantee.
Section 3.04. Compensation and Reimbursement. The Guarantor covenants and
agrees to pay to the Preferred Guarantee Trustee, and the Preferred Guarantee
Trustee shall be entitled to, such reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), as the Guarantee and the Preferred Guarantor Trustee may from
time to time agree in writing, for all services rendered by it in the execution
of the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Preferred Guarantee Trustee, and, except as
otherwise expressly provided herein, the Guarantor will pay or reimburse the
Preferred Guarantee Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Preferred Guarantor Trustee
in accordance with any of the provisions of this Preferred Securities Guarantee
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its willful misconduct, negligence or
bad faith. The Guarantor hereby indemnifies and holds harmless the Preferred
Guarantor Trustee (and its officers, agents, directors and employees) for, and
against, any loss, liability or expense incurred without willful misconduct,
negligence or bad faith on the part of the Preferred Guarantor Trustee and
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claims
of liability in the premises.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
Section 4.01. Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be organized and doing business under the laws of the United
States of America or any state or territory thereof or of the District
of Columbia, or a Person permitted by the Securities and Exchange
Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least with respect
to the initial Trustee $500,000 (and its principal parent holding
company having a combined capital and surplus of at least $50,000,000)
and with respect to any successor Trustee $50,000,000, and subject to
supervision or examination by federal, state, territorial or District
of Columbia authority. If such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the
purposes of this Section 4.01(a)(ii), the combined capital and 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.
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(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in
Section 4.02(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
Section 4.02. Appointment, Removal and Resignation of Preferred Guarantee
Trustees.
(a) Subject to Section 4.02(b), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.02(a) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take
effect until a Successor Preferred Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor Preferred Guarantee Trustee and delivered to the Guarantor and
the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within
60 days after delivery to the Guarantor of an instrument of resignation,
the resigning Preferred Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any,
as it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.02, the Guarantor shall pay to the Preferred Guarantee Trustee
all amounts accrued to the date of such termination, removal or
resignation.
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ARTICLE V
GUARANTEE
Section 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert. 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 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Preferred Securities 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 Trust or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Preferred Securities Guarantee
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, 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 (other than
an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Subordinated Debentures or
any extension of the maturity date of the Subordinated Debentures permitted
by the Indenture) ;
(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;
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(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 5.03 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
consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.04. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
Person. The Guarantor waives any right or remedy to require that any action
be brought first against the Trust or any other person or entity before
proceeding directly against the Guarantor.
Section 5.05. Guarantee of Payment. This Preferred Securities Guarantee
creates a guarantee of payment and not of collection.
Section 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders of Preferred Securities against the Trust in respect
of any amounts paid to such Holders by the Guarantor under this Preferred
Securities Guarantee; provided, however, that the Guarantor shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Preferred Securities Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Preferred Securities 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 5.07. 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 Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (g), inclusive, of Section
5.03.
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ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.01. Limitation of Transactions. So long as any Preferred
Securities remain outstanding, if there shall have occurred and be continuing an
Event of Default or an event of default under the Trust Agreement, then (a) the
Guarantor shall not declare or pay any dividend or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of its
capital stock, (b) the Guarantor shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Guarantor (including other Subordinated Debentures)
which rank pari passu with or junior in interest to the Subordinated Debentures
or (c) the Guarantor shall not make any guarantee payments with respect to any
guarantee by the guarantor of the debt securities of any subsidiary of the
Guarantor if such guarantee ranks pari passu or junior in interest to the
Subordinated Debentures (other than (i) dividends or distributions in common
stock, (ii) any declaration of a dividend in connection with the implementation
of a shareholders' 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,
(iii) payments under this Preferred Securities Guarantee and (iv) purchases of
common stock related to the issuances of common stock or rights under any of the
Guarantor's benefit plans for its directors, officers or employees).
Section 6.02. Ranking. This Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior in right of payment to all Senior and Subordinated Debt
of the Guarantor, and (ii) pari passu with the Subordinated Debentures.
ARTICLE VII
TERMINATION
Section 7.01. Termination. This Preferred Securities Guarantee shall
terminate upon (a) full payment of the Redemption Price of all Preferred
Securities, (b) upon full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Trust or (c) upon distribution of the
Subordinated Debentures to the Holders of the Preferred Securities.
Notwithstanding the foregoing, this Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or under this Preferred Securities Guarantee.
15
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on
such Indemnified Person by this Preferred Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified Person's bad faith,
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as
to matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which Distributions to Holders of Preferred
Securities might properly be paid.
Section 8.02. Indemnification.
(a) The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss, liability
or expense incurred without willful misconduct, negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
(b) The Guarantor agrees to pay the Preferred Guarantee Trustee, from
time to time, such compensation for all services rendered by the Preferred
Guarantee Trustee hereunder as may be mutually agreed upon in writing by
the Guarantor and the Preferred Guarantee Trustee, and except as otherwise
expressly provided herein, to reimburse the Preferred Guarantee Trustee
upon its request for all reasonable expenses (including counsel fees and
expenses), disbursements and advances incurred or made by the Preferred
Guarantee Trustee in accordance with the provisions of this Preferred
Securities Guarantee, except any such expense, disbursements or advance as
may arise from its willful misconduct, negligence or bad faith.
16
<PAGE>
(c) The provisions as set forth in this Section 8.02 shall survive
the termination of this Preferred Securities Guarantee and shall survive
the resignation or removal of the Preferred Guarantee Trustee.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Successors and Assigns. All guaranties and agreements
contained in this Preferred Securities Guarantee 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.
Section 9.02. Amendments. Except with respect to any changes that do not
materially adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Preferred Securities Guarantee may only be
amended with the prior approval of the Holders of at least a Majority in
liquidation amount of the Preferred Securities. The provisions of Article VI of
the Trust Agreement with respect to meetings of Holders of the Securities apply
to the giving of such approval.
This Preferred Securities Guarantee may not be amended, and no amendment
hereof that affects the Preferred Guarantee Trustee's rights, powers, duties or
immunities hereunder or otherwise, shall be effective, unless such amendment is
executed by the Preferred Guarantee Trustee (which shall have no obligation to
execute any such amendment, but may do so in its sole discretion).
Section 9.03. Notices. All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address
as the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
FMB Trust Company, National Association
25 Charles Street
Baltimore, Maryland 21201
Attention: Corporate Trust Services
Facsimile: (410) 244-4236
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
17
<PAGE>
BANK OF THE OZARKS, INC.
12615 Chenal Parkway
Little Rock, Arkansas 72231
Attention: Chief Executive Officer
Facsimile: (501) 978-2205
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Trust.
All such notices 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 9.04. Benefit. This Preferred Securities Guarantee is solely for
the benefit of the Holders of the Preferred Securities and, subject to Section
3.01(a), is not separately transferable from the Preferred Securities.
Section 9.05. Governing Law. THIS PREFERRED SECURITIES GUARANTEE,
INCLUDING THE IMMUNITIES AND THE STANDARD OF CARE OF THE TRUSTEE, SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND WITH REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
[Signature Page Follows]
18
<PAGE>
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
BANK OF THE OZARKS, INC., as Guarantor
By _________________________________________
George G. Gleason, II
Chairman and Chief Executive Officer
FMB TRUST COMPANY, NATIONAL ASSOCIATION, as
Preferred Guarantee Trustee
By _________________________________________
Name _______________________________________
Title ______________________________________
By _________________________________________
Name _______________________________________
Title ______________________________________
19
<PAGE>
Exhibit 5.1
May 26, 1999
Board of Directors
Bank of the Ozarks, Inc.
12615 Chenal Parkway
Little Rock, Arkansas 72211
The Administrative Trustees
Ozark Capital Trust
c/o Paul Moore
12615 Chenal Parkway
Little Rock, Arkansas 72211
Re: Guarantee and Subordinated Debentures of Bank of the Ozarks, Inc.
Ladies and Gentlemen:
You have requested our opinion as special counsel to Bank of the Ozarks,
Inc. (the "Company") and Ozark Capital Trust (the "Trust") in connection with
securities to be offered pursuant to the Registration Statement on Form S-1 to
be filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Registration Statement"). The Registration Statement
relates to the registration of 1,725,000 preferred securities of the Trust (the
"Preferred Securities") in connection with the proposed offer and sale of such
Preferred Securities by the Trust.
The Preferred Securities will be guaranteed by the Company with respect to
distributions and payments upon liquidation, redemption, and otherwise to the
extent the Trust has sufficient funds to satisfy those payments pursuant to the
guarantee agreement (the "Guarantee Agreement"), to be entered into, between the
Company and FMB Trust Company, N.A., as trustee, for the benefit of the holders
of the Preferred Securities.
The proceeds from the sale of the Preferred Securities and the Common
Securities are to be used by the Trust to purchase subordinated debentures (the
"Subordinated Debentures"), to be issued by the Company.
In rendering this opinion, we understand that the Preferred Securities, the
Subordinated Debentures and the Guarantee will be offered and issued in the
manner described in the Prospectus, which is a part of the Registration
Statement. We have examined such records and documents and made such
examination as we have deemed relevant in connection with this opinion.
<PAGE>
May 26, 1999
Page 2
Based upon the foregoing, it is our opinion that the Guarantee, when
executed and delivered as contemplated by the Registration Statement, and the
Subordinated Debentures, when issued and paid for as contemplated by the
Registration Statement, will be validly issued and binding obligations of the
Company enforceable in accordance with their terms except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general principles of
equity.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the Prospectus under
the heading "Legal Matters."
Very truly yours,
Kutak Rock
<PAGE>
Exhibit 5.2
May 26, 1999
Ozark Capital Trust
c/o Bank of the Ozarks, Inc.
12615 Chenal Parkway
P.O. Box 8811
Little Rock, Arkansas 72231-8811
Re: Ozark Capital Trust
-------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Ozark Capital Trust, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. This opinion letter is being furnished to you at your request.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies
furnished to us of the following:
(a) The Trust Agreement of the Trust, dated as of May 14, 1999, between
Bank of the Ozarks, Inc., an Arkansas corporation (the "Company"), and the
trustees of the Trust named therein;
(b) The Certificate of Trust of the Trust, as filed in the office of the
Secretary of State of the State of Delaware (the "Secretary of State") on May
14, 1999 (the "Certificate");
<PAGE>
Ozark Capital Trust
May 26, 1999
Page 2
(c) The Registration Statement (the "Registration Statement") on Form S-1,
including a prospectus (the "Prospectus") relating to, among other things,
Cumulative Trust Preferred Securities (Liquidation Amount $10.00 per Preferred
Security) of the Trust representing preferred undivided beneficial interests in
the assets of the Trust (each, a "Preferred Security", and collectively, the
"Preferred Securities"), to be filed by the Company, the Trust and others as set
forth therein with the Securities and Exchange Commission on or about May 26,
1999;
(d) A form of Amended and Restated Trust Agreement, to be entered into
among the Company, as Depositor, the trustees of the Trust named therein, and
the holders, from time to time, of undivided beneficial interests in the assets
of the Trust (the "Agreement"), attached as an exhibit to the Registration
Statement; and
(e) A Certificate of Good Standing for the Trust, dated May 25, 1999,
obtained from the Secretary of State.
Unless otherwise defined herein, all capitalized terms used in this opinion
letter shall have the respective meanings provided in the Agreement, except that
reference herein to any document shall mean such document as in effect on the
date hereof.
For the purposes of this opinion letter, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (e) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, (iii) the genuineness of all signatures, and (iv) such documents
submitted to us in final or execution form have not been and will not be altered
or amended in any respect material to our opinions as expressed in this letter
and conform in all material respects to the final, executed originals of such
documents.
For purposes of this opinion letter, we have assumed (i) that the Agreement
constitutes the entire agreement among the parties thereto with respect to the
creation, operation, and termination of the Trust, and that the Agreement and
the Certificate are in full force and effect and have not been amended, (ii)
that there are no proceedings, pending or contemplated, for the merger,
<PAGE>
Ozark Capital Trust
May 26, 1999
Page 3
consolidation, liquidation, dissolution or termination of the Trust, (iii)
except to the extent provided in paragraph 1 below, the due creation, due
formation or due organization, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, formation or organization, (iv) the legal
capacity of each natural person who is a party to the documents examined by us,
(v) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (vi) that each of the parties to the documents examined by us has
duly authorized, executed and delivered such documents, (vii) the receipt by
each Person to whom a Preferred Security is to be issued by the Trust
(collectively, the "Preferred Securities Holders") of an appropriate certificate
for such Preferred Security, and the payment for the Preferred Security acquired
by it, in accordance with the Agreement and the Registration Statement, and
(viii) that the Preferred Securities are issued to the Preferred Securities
Holders in accordance with the Agreement and the Registration Statement. We
have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
The opinions in this letter are limited to the laws of the State of
Delaware (excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction,
including the federal laws of the United States of America and rules and
regulations relating thereto.
Based upon the foregoing, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing in good standing
as a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801,
---- --
et seq).
- ------
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Securities Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Securities
Holders may be obligated to make payments as provided in the Agreement.
<PAGE>
Ozark Capital Trust
May 26, 1999
Page 4
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion letter may not be furnished or quoted
to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ Morris, James, Hitchens & Williams
RLS:jmw
<PAGE>
Exhibit 8.1
May 26, 1999
Bank of the Ozarks, Inc.
12615 Chenal Parkway
Little Rock, AR 72211
Ozark Capital Trust
c/o Bank of the Ozarks, Inc.
12615 Chenal Parkway
Little Rock, AR 72211
Re: Preferred Securities of Ozark Capital Trust
-------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel for Bank of the Ozarks, Inc. (the
"Company"), an Arkansas corporation, and Ozark Capital Trust (the "Trust"), a
statutory business trust organized under the Business Trust Act of the State of
Delaware, in connection with the sale, pursuant to an underwriting agreement
(the "Underwriting Agreement") to be entered into among the Company, the Trust,
and the underwriters (the "Underwriters") named therein, of trust preferred
securities (the "Preferred Securities") (liquidation amount $10 per Preferred
Security), which will represent undivided beneficial interests in the assets of
the Trust.
The Preferred Securities will be guaranteed by the Company with respect to
distributions and payments upon liquidation, redemption, and otherwise to the
extent the Trust has sufficient funds to satisfy those payments pursuant to the
guarantee agreement (the "Guarantee Agreement"), to be entered into, between the
Company and FMB Trust Company, N.A., as trustee (the "Guarantee Trustee"), for
the benefit of the holders of the Preferred Securities.
In connection with the issuance of the Preferred Securities, the Trust will
also issue common securities (the "Common Securities") (liquidation amount $10
per Common Security), which will represent undivided beneficial interests in the
assets of the Trust.
The proceeds from the sale of the Preferred Securities and the Common
Securities are to be used by the Trust to purchase subordinated debentures (the
"Subordinated Debentures"), to be issued by the Company. The Preferred
Securities and the Common Securities are to be issued
<PAGE>
Bank of the Ozarks, Inc.
Ozark Capital Trust
May 26, 1999
Page 2 of 3
pursuant to the Amended and Restated Trust Agreement (the "Trust Agreement"), to
be entered into among the Company, as depositor, First Omni Bank, National
Association, as Delaware trustee (the "Delaware Trustee"), FMB Trust Company,
National Association, as property trustee (the "Property Trustee"), and the
administrative trustees (the "Administrative Trustees") named therein. The
Subordinated Debentures are to be issued pursuant to an indenture (the
"Indenture"), to be entered into, between the Company and FMB Trust Company,
National Association, as indenture trustee.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the preliminary
Prospectus dated May 26, 1999; (ii) the Certificate of Trust filed with the
Secretary of State of the State of Delaware as of May 14, 1999, by the
Administrative Trustees and the Delaware Trustee; (iii) the form of the Trust
Agreement including the designation of the terms of the Preferred Securities;
(iv) the form of the Preferred Securities and a specimen certificate thereof;
(v) the form of the Guarantee Agreement; (vi) the form of the Indenture; (vii)
the form of Subordinated Debentures and a specimen certificate thereof; (viii)
the form of Common Securities and a specimen certificate thereof; and (ix) the
form of the Underwriting Agreement. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company and the Trust and such agreements, certificates of public officials,
certificates of officers, trustees or other representatives of the Company, the
Trust and others, as applicable, and such other documents, certificates and
records as we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies, and the
authenticity of the originals of such latter documents. In making our
examination of documents executed, or to be executed by parties other than the
Company or the Trust, we have assumed that such parties had, or will have, the
power, corporate or other, to enter into and perform all obligations thereunder,
and we have also assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such documents
and that such documents constitute, or will constitute, valid and binding
obligations of such parties. As to any facts material to the opinions expressed
herein which were not independently established or verified, we have relied upon
oral or written statements and representations of officers, trustees and other
representatives of the Company, the Trust, and others.
In rendering our opinion, we have participated in the preparation of the
preliminary Prospectus. Our opinion is conditioned on, among other things, the
initial and continuing accuracy of the facts, information, covenants,
representations, and assumptions set forth in the documents referred to above
and the statements and representations made by the Company and the Trust. In
rendering our opinion, we have considered the provisions of the Internal Revenue
<PAGE>
Bank of the Ozarks, Inc.
Ozark Capital Trust
May 26, 1999
Page 3 of 3
Code of 1986, as amended, Treasury regulations (proposed, temporary, and final)
promulgated thereunder, judicial decisions, and Internal Revenue Service rulings
all as of the date hereof, and all of which are subject to change, which changes
may be retroactively applied. A change in the authorities upon which our
opinion is based could affect our conclusions. There can be no assurance,
moreover, that any of the opinions expressed herein will be accepted by the
Internal Revenue Service or, if challenged, by a court.
Based solely upon the foregoing, we are of the opinion that the statements
set forth in the Prospectus under the caption "United States Federal Income Tax
Consequences", to the extent they constitute matters of law or legal
conclusions, as qualified therein, accurately describe the material United
States federal income tax consequences to holders of the purchase, ownership and
disposition of the preferred securities.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether United States federal, state, local or foreign, of the
issuance of the Subordinated Debentures, the Preferred Securities, the Common
Securities, or any transactions related to or contemplated by such issuance. In
connection with the sale of the Preferred Securities pursuant to the
Registration Statement of the Company dated May 26, 1999, as filed with the
Securities and Exchange Commission on May 26, 1999 (the "Registration
Statement"), we are furnishing this opinion to you solely for your benefit.
This opinion is not to be used, circulated, quoted, or otherwise referred to for
any other purpose without our written permission.
We consent to the filing of this opinion as Exhibit 8.1 to the Registration
Statement and to the reference to Kutak Rock therein under the caption "Legal
Matters."
Very truly yours,
/s/ Kutak Rock
<PAGE>
Exhibit 12.1
Bank of the Ozarks, Inc.
Ratio of earnings to fixed charges
<TABLE>
<CAPTION>
Including interest on Deposits: Quarter
-------------------
1994 1995 1996 1997 1998 3/31/98 3/31/99
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Pretax income $ 4,633 $ 3,124 $ 5,033 $ 7,047 $ 8,250 $ 2,102 $ 2,199
Add:Fixed charges from below 4,653 7,428 10,087 13,208 20,873 3,924 6,449
Less: Interest capitalized - - - (145) (275) (60) (14)
----------------------------------------------------------------------------------
Earnings for fixed charges ratio 9,286 10,552 15,120 20,110 28,848 5,966 8,634
----------------------------------------------------------------------------------
FIXED CHARGES:
Add: Interest expense 4,651 7,391 10,031 12,979 20,158 3,836 6,421
Interest capitalized - - - 145 275 60 14
Interest portion of rental
expense 2 37 56 84 80 28 14
----------------------------------------------------------------------------------
Fixed charges 4,653 7,428 10,087 13,208 20,873 3,924 6,449
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Ratio of earnings to fixed
charges 2.00 1.42 1.50 1.52 1.38 1.52 1.34
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Excluding interest on deposits: Quarter
--------------------
1994 1995 1996 1997 1998 3/31/98 3/31/99
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Pretax income $ 4,633 $ 3,124 $ 5,033 $ 7,047 $ 8,250 $ 2,102 $ 2,199
Add:Fixed charges from below 140 71 1,082 1,382 2,755 436 732
Less: Interest capitalized - - - (145) (275) (60) (14)
----------------------------------------------------------------------------------
Earnings for fixed charges ratio 4,773 3,195 6,115 8,284 10,730 2,478 2,917
----------------------------------------------------------------------------------
FIXED CHARGES:
Add: Interest expense 4,651 7,391 10,031 12,979 20,518 3,836 6,421
Interest capitalized - - - 145 275 60 14
Interest portion of rental
expense 2 37 56 84 80 28 14
Less: Deposit interest expense (4,513) (7,357) (9,005) (11,826) (18,118) (3,488) (5,717)
----------------------------------------------------------------------------------
Fixed charges 140 71 1,082 1,382 2,755 436 732
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Ratio of earnings to fixed 34.09 45.00 5.65 5.99 3.89 5.68 3.98
----------------------------------------------------------------------------------
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
represent income from continuing operations before income taxes, extraordinary
items and cumulative effect of changes in accounting principle plus fixed
charges. Fixed charges represent total interest expense, including and excluding
interest on deposits, as applicable, as well as the interest component of rental
expense.
1
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
A. Bank of the Ozarks, Inc. has the following subsidiaries:
1. Bank of the Ozarks, wca, an Arkansas state chartered bank, which also does
business as Bank of the Ozarks.
2. Bank of the Ozarks, nwa, an Arkansas state chartered bank, which also does
business as Bank of the Ozarks.
3. Ozark Capital Trust, a Delaware business trust.
B. Ozark Capital Trust has no subsidiaries.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the Registration Statement on Form S-1,
pertaining to the registration of 1,725,000 trust preferred securities by Ozark
Capital Trust and the registration of the related subordinated debentures and
guaranty by Bank of the Ozarks, Inc. (the "Company"), of our report dated
January 28, 1998 on our audit of the consolidated financial statements of the
Company for the years ended December 31, 1997 and 1996. We also consent to the
reference to our firm under "EXPERTS" in the Form S-1.
/s/ Moore Stephens Frost
Moore Stephens Frost
Little Rock, Arkansas
May 21, 1999
<PAGE>
EXHIBIT 23.3
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and the use
of our report dated January 20, 1999 in the Registration Statement Form S-1 and
related Prospectus for the registration of 1,725,000 cumulative trust preferred
securities by Ozark Capital Trust and the registration of the related
subordinated debentures and guaranty by Bank of the Ozarks, Inc.
/s/ Ernst & Young LLP
Little Rock, Arkansas
May 21, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a director or
officer, or both, of Bank of the Ozarks, Inc. ("Ozark"), acting pursuant to
authorization of the Board of Directors of Ozark, hereby appoints George G.
Gleason, II and Paul E. Moore, or any of them, attorneys-in-fact and agents for
me and in my name and on my behalf, individually and as a director or officer,
or both, of Ozark, to sign a Registration Statement on Form S-1 with respect to
registration of (i) up to $20,000,000 aggregate principal amount (plus over-
allotment issuances) of trust preferred or similar securities of Ozark or any
newly formed subsidiary of Ozark (as such amount may be increased subsequent to
the date hereof pursuant to authority granted by the Board of Directors), (ii)
any guarantees of Ozark relating to such securities and (iii) any pass-through,
conduit or similar securities required to be issued in connection therewith by
Ozark or any newly formed subsidiary of Ozark, any and all amendments to the
Registration Statement (including post-effective amendments), and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, and generally to do and perform all
things necessary to be done in connection with the foregoing as fully in all
respects as I could do personally.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of April
1999.
Signed: /s/ Roger Collins
-------------------------
Name: Roger Collins
Title: Director
Signed: /s/ Jerry W. Davis
-------------------------
Name: Jerry W. Davis
Title: Director
Signed: /s/ C.E. Dougan
-------------------------
Name: C.E. Dougan
Title: Director
Signed: /s/ Robert C. East
-------------------------
Name: Robert C. East
Title: Director
Signed: /s/ Linda D. Gleason
-------------------------
Name: Linda D. Gleason
Title: Director
Signed: /s/ Porter Hillard
-------------------------
Name: Porter Hillard
Title: Director
<PAGE>
Signed: /s/ Henry Mariani
-------------------------
Name: Henry Mariani
Title: Director
Signed: /s/ R.L. Qualls
-------------------------
Name: R.L. Qualls
Title: Director
Signed: /s/ Kennith Smith
-------------------------
Name: Kennith Smith
Title: Director
<PAGE>
Exhibit 25.1
Registration No. 333-_________
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
____________________
FMB TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
United States of America 54-1834572
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or formation)
25 South Charles Street
Baltimore, Maryland 21201
(Address of principal (Zip code)
executive offices
Thomas R. Rus, Vice President and Trust Counsel
FMB TRUST COMPANY, National Association
25 South Charles Street
Baltimore, Maryland 21201
(410) 545-2038
(Name, address and telephone number of agent
for service of process)
Bank of the Ozarks, Inc.
(Exact name of obligor as specified in its charter)
Arkansas 71-0556208
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or formation)
OZARK CAPITAL TRUST
(Exact name of obligor as specified in its charter)
Delaware 71-6176636
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or formation)
12615 Chenal Pkwy
Little Rock, Arkansas 72231-8811
(Address of principal executive offices) (Zip code)
Preferred Securities of Ozark Capital Trust
Subordinated Debentures of Bank of the Ozarks ,Inc.
Guaranty of Bank of the Ozarks, Inc.
(Title of the indenture securities)
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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.
Office of Comptroller of the Currency, Northeastern District, New York NY
10036
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of eligibility.
Exhibit
- -------
1 A copy of the articles of association of the trustee as now in
effect is attached as Exhibit 1 hereto.
2 A copy of the letter authorizing the trustee to commence business is
attached as Exhibit 2 hereto.
3 The authorization of the trustee to exercise corporate trust powers
is contained in Exhibit 1 hereto.
4 A copy of the existing bylaws of the trustee attached as Exhibit 4
hereto.
5 Not applicable
6 The consent of the trustee required by Section 321(b) of the Act
7 A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority
8 Not applicable
9 Not applicable
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, FMB Trust Company, National Association, organized and existing under
the laws of the United States, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Baltimore and State of Maryland, on May 21, 1999.
FMB Trust Company, National
Association
By: /s/Donald C. Hargadon
-----------------------
Donald C. Hargadon
Assistant Vice President
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Exhibit 1
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ARTICLES OF ASSOCIATION
For the purpose of organizing an association to perform any lawful activities of
national banks, the undersigned do enter into the following articles of
association:
FIRST. The title of this association shall be FMB Trust Company, National
Association.
SECOND. The main office of the association shall be in McLean, Virginia.
The business of the association will be limited to the operations of a trust
department, and to support activities incidental thereto.
The association will not expand or alter its business beyond that stated in this
article without the prior approval of the Comptroller of the Currency.
THIRD. The board of directors of this association shall consist of not less
than five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director shall own common or preferred stock of
the association or of a holding company owning the association, with an
aggregate pair, fair market or equity value of not less than $1,000, as of
either (i) the date of purchase, (ii) the date the person became a director, or
(iii) the date of that person's most recent election to the board of directors,
whichever is more recent. Any combination of common or preferred stock of the
association or holding company may be used.
Any vacancy in the board of directors may be filled by action of a majority of
the remaining directors between meetings of shareholders. The board of
directors may not increase the number of directors between meetings of
shareholders to a number which: (1) exceeds by more than two the number of
directors last elected by shareholders where the number was 15 or less; or (2)
exceeds by more than four the number of directors last elected by shareholders
where the number was 16 or more, but in no event shall the number of directors
exceed 25.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
Honorary or advisory members of the board of directors, without voting power or
power of final decision in matters concerning the business of the association,
may be appointed by resolution of a majority of the full board of directors, or
by resolution of shareholders at any annual or special
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meeting. Honorary or advisory directors shall not be counted to determine the
number of directors of the association or the presence of a quorum in connection
with any board action, and shall not be required to own qualifying shares.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It
shall be held at the main office or any other convenient place the board of
directors may designate, on the day of each year specified therefore in the
bylaws, or if that day falls on a legal holiday in the sate in which the
association is located, on the next following business banking day. If no
election is held on the day fixed or in event of a legal holiday, on the
following banking day, an election may be held on any subsequent day within 60
days of the day fixed, to be designated by the board of directors, or, if the
directors fail to fix the day, by shareholders representing two-thirds of the
shares issued and outstanding. In all cases, at least 10 days advance notice of
the meeting shall be given to the shareholders by first class mail.
In all elections of directors, the number of votes each common shareholder may
cast will be determined by multiplying the number of shares he or she owns by
the number of directors to be elected. Those votes may be cumulated and case
for a single candidate or may be distributed among two or more candidates in the
manner selected by the shareholder. On all other questions, each common
shareholder shall be entitled to one vote for each share of stock held by him or
her.
Nominations for election to the board of directors may be made by the board of
directors or by any stockholder of any outstanding class of capital stock of the
association entitled to vote for election of directors. Nominations other than
those made by or on behalf of the existing management shall be made in writing
and be delivered or mailed to the president of the association not less than 14
days nor more than 50 days prior to any meeting of stockholders called for the
election of directors; provided, however, that if less than 21 days notice of
the meeting is given to shareholders, such nominations shall be mailed or
delivered to the president of the association not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder:
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the association that will be
voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the chairperson of the meeting, and the vote tellers may
disregard all votes cast for each such nominee.
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No bylaw may unreasonably restrict the nomination of directors by shareholders.
A director may resign at any time by delivering written notice to the board of
directors, its chairperson, or to the association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause, provided, however,
that a director may not be removed if the number of votes sufficient to elect
him or her under cumulative voting is voted against his or her removal.
FIFTH. The authorized amount of capital stock of this association shall be
4,000,000 shares of common stock of the par value of five dollars ($5.00) each;
but said capital stock may be increased or decreased from time to time,
according to the provisions of the laws of the United States.
The shares of common stock shall (i) have, except as otherwise provided in
respect of any class of stock hereafter classified or reclassified, exclusive
voting rights; (ii) be entitled to receive such dividends as the board of
directors may lawfully declare; and (iii) be entitled to receive the net assets
of the association upon dissolution.
Shares of the same class or series may be issued as a dividend on a pro rata
basis and without consideration. Shares of another class or series may be
issued as share dividends in respect of class or series of stock if approved by
a majority of the votes entitled to be cast by the class or series to be issued
unless there are no outstanding shares of the class or series to be issued.
Unless otherwise provided by the board of directors, the record date for
determining shareholders entitled to a share dividend shall be the date the
board of directors authorizes the share dividend.
No holders of shares of the capital stock of any class of the association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the association, or to any obligations convertible into stock
of the association, issued, or sold, nor any right of subscription to any
thereof, other than such, if any, as the board of directors, in its discretion
may from time to time determine and at such price as the board of directors may
from time to time fix.
Unless otherwise specified in the articles of association or required by law,
(1) all matters requiring shareholder action, including amendments to the
articles of association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
Unless otherwise specified in the articles of association or required by law,
all shares of voting stock shall be voted together as a class, on any matters
requiring shareholder approval. If a proposed amendment would affect two or
more classes or series in the same or a substantially similar way, all the
classes or series so affected, must vote together as a single voting group on
the proposed amendment.
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The board of directors may classify and reclassify any unissued shares of
capital stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions and dividends, qualifications or terms or
conditions of redemption of such shares of stock.
Unless otherwise provided in the bylaws, the record date for determining
shareholders entitled to notice of and to vote at any meeting is the close of
business on the day before the first notice is mailed or otherwise sent to the
shareholders, provided that in no event may a record date be more than 70 days
before the meeting.
The association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders. Obligations classified as debt, whether or not subordinated,
which may be issued by the association without the approval of shareholders, do
not carry voting rights on any issue, including an increase or decrease in the
aggregate number of the securities, or the exchange of reclassification of all
or part of securities into securities of another class or series.
SIXTH. The board of directors shall appoint one of its members president of
this association, and one of its members chairperson of the board and shall have
the power to appoint one or more vice presidents, a secretary who shall keep
minutes of the directors' and shareholders' meetings and be responsible for
authenticating the records of the association, and such other officers and
employees as may be required to transact the business of this association. A
duly appointed officer may appoint one or more officers or assistant officers if
authorized by the board of directors in accordance with the bylaws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with
applicable law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and to fix the penalty thereof.
(6) Ratify written policies authorized by the association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of the
association shall
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be made, provided that nothing herein shall restrict the power of
shareholders to increase or decrease the capital of the association in
accordance with law, and nothing shall raise or lower from two-thirds the
percentage required for shareholder approval to increase or reduce the
capital.
(8) Manage and administer the business and affairs of the association.
(9) Adopt initial bylaws, not inconsistent with law or the articles of
association, by managing the business and regulating the affairs of the
association.
(10) Amend or repeal bylaws, except to the extent that the articles of
association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
The association reserves the right to make any amendment of the charter, now or
hereafter authorized by law, including any amendment which alters the contract
rights, as expressly set forth in the charter, of any shares of outstanding
stock. No amendment to any provision of this charter shall be made unless the
amendment has been first proposed by the board of directors of the association
and thereafter approved by the shareholders of the association by the
affirmative vote of the holders of at least two-thirds of the shares entitled to
vote thereon.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place without the approval of the shareholders, and
shall have the power to establish or change the location of any branch or
branches of the association to any other location permitted under applicable
law, without the approval of the shareholders subject to approval by the Office
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this association shall continue until
termination according to the laws of the United States.
NINTH. A special meeting of shareholders may be called in accordance with the
association's bylaws.
TENTH: (a) To the maximum extent that applicable law in effect from time to
time permits limitation of the liability of directors and officers, no director
or officer of the association shall be liable to the association or its
stockholders for money damages. Neither the amendment nor repeal of this
Article TENTH, nor the adoption or amendment of any other provision of the
charter or bylaws of the association inconsistent with this Article Tenth, shall
apply to or affect in any respect the applicability of the preceding sentence
with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
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(b) The association shall have the power, to the maximum extent
permitted by its bylaws, as amended from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, the individuals specified in the bylaws.
ELEVENTH: These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The association's board of directors may
propose one or more amendments to the articles of association for submission to
the shareholders.
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IN WITNESS WHEREOF, we have hereunto set our hands this ____ day of
_____________, 19____.
_______________________________ _____________________________
Charles G. Cusic, Jr. Kathy A. Jackson
_______________________________ _____________________________
Walter R. Fatzinger, Jr. Diana M. Kalin
_______________________________ _____________________________
Timothy J. Hynes, III Jennifer W. Lambdin
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Exhibit 2
COMPTROLLER OF THE CURRENCY
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
Whereas, satisfactory evidence has been presented by the Comptroller of the
Currency that FMB Trust Company, National Association located in McLean, State
of Virginia, has complied with all provisions of the statutes of the United
States required to be complied with before being authorized to commence the
business of banking as a National Banking Association.
Now, therefore, I hereby certify that the above-named association is
authorized to commence the business of banking as a National Banking
Association.
In testimony whereof, witness my signature and seal
of office this 21/st/ day of January, 1997
(SEAL) Charter No. 23196 /s/ Comptroller of the Currency
District Administrator
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Exhibit 4
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FMB TRUST COMPANY, NATIONAL ASSOCIATION
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Article 1
Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders to
elect directors and transfer whatever other business may properly come before
the meeting, shall be held at the main office of the association, 8300
Greensboro Drive, McLean, Virginia or such other place as the board of directors
may designate, at 11:00 A.M., on the third Thursday in April of each year, or if
that date is a legal holiday in the State in which the association is located,
on the next following banking day, provided, that the board of directors may
designate any other date as the annual meeting date in any year. Notice of the
meeting shall be mailed, postage prepaid, at least 10 days and no more than 60
days prior to the date thereof, addressed to each shareholder at his/her address
appearing on the books of the association. If, for any cause, an election of
directors is not made on that date, or in the event of a legal holiday, on the
next following banking day, an election may be held on any subsequent day within
60 days of the date fixed, to be designated by the board of directors, or, if
the directors fail to fix the date, by shareholders representing two thirds of
the shares.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by the board of directors or by any one or more shareholders owning, in
the aggregate, not less than 100 percent of the stock of the association. Every
such special meeting, unless otherwise provided by law, shall be called by
mailing, postage prepaid, not less than 10 days nor more than 60 days prior to
the date fixed for the meeting, to each shareholder at the address appearing on
the books of the association a notice stating the purpose of the meeting.
The board of directors may fix a record date for determining
shareholders entitled to notice and to vote at any meeting, in reasonable
proximity to the date of giving notice to the shareholders of such meeting. If
an annual or special shareholders' meeting is adjourned to a different date,
time or place, notice need not to be given of the new date, time or place, if
the new date, time or place is announced at the meeting before adjournment,
unless any additional items of business are to be considered, or the association
becomes aware of an intervening event materially affecting any matter to be
voted on more than 10 days prior to the date to which the meeting is adjourned.
Section 1.3 Nominations of Directors. Nominations for election to the board of
directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the association, shall be made in writing and shall be
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delivered or mailed to the president of the association and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided, however, that if less than 21 days' notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the president of
the association and to the Comptroller of the Currency not later than the close
of business on the seventh day following the day on which the notice of meeting
was mailed. Such notification shall contain the following information to the
extent known to the notifying shareholder:
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the association that will be
voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
Section 1.4. Proxies. Shareholders may vote at any time meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and filed with the records of the meeting. Proxies with rubber
stamped facsimile signatures may be used and unexecuted proxies may be counted
upon receipt of a confirming telegram or facsimile from the shareholder. Proxies
meeting the above requirements submitted at any time during a meeting shall be
accepted.
Section 1.5. Quorum. A majority of the outstanding capital stock, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 9.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
articles of association, or by the shareholders or directors pursuant to Section
9.2.
Article II
Directors
Section 2.1. Board of Directors. The board of directors (board) shall have the
power to manage
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and administer the business and affairs of the association. Except as expressly
limited by law, all corporate powers of the association shall be vested in and
may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor more than
twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof.
Section 2.3. Organization Meeting. The secretary or cashier, upon tabulation of
the result of any election, shall notify the directors-elect of their election
and of the time at which they are required to meet at the main office of the
association to organize the new board and elect and appoint officers of the
association for the succeeding year. Such meeting shall be held on the day of
the election or as soon thereafter as practicable, and, in any event, within 30
days thereof. If, at the time fixed for such meeting, there shall not be a
quorum, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
Section 2.4. Regular Meetings. The regular meetings of the board of directors
shall be held, with prior written or telephonic notice, at the time specified in
such notice at the main office or other such place as the board may designated.
When any regular meeting of the board falls upon a holiday, the meeting shall be
held on the next banking business day unless the board shall designate another
day.
Section 2.5. Special Meetings. Special meetings of the board of directors may be
called by the chairman of the board of the association, or at the request of two
or more directors. Each member of the board of directors shall be given notice
stating the time and place by telegram, letter, or in person, or each special
meeting.
Section 2.6. Quorum. A majority of the director positions on the board shall
constitute a quorum at any meeting, except when otherwise provided by law, or
the bylaws, but a less number may adjourn any meeting, from time to time, and
the meeting may be held, as adjourned, without further notice. If the number of
directors is reduced below the number that would constitute a quorum, no
business may be transacted, except selecting directors to fill vacancies in
conformance with Section 2.7.
Section 2.7. Vacancies. When any vacancy occurs among the directors, a majority
of the remaining members of the board, according to the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose at which a quorum is
present, or if the directors remaining in office constitute fewer than a quorum
of the board, by the affirmative vote of a majority of all the directors
remaining in office, or by shareholders at a special meeting called for that
purpose, in conformance with Section 2.2 of this article. At any such
shareholder meeting, each shareholder entitled to vote shall have the right to
multiply the number of votes he or she is entitled to cast by the number of
vacancies being filled and cast the product for a single candidate or distribute
the product among two or more candidates.
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Section 2.8. Telephone Meetings. Directors may participate in a meeting by means
of a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means shall constitute presence in person at the meeting.
Section 2.9. Informal Action. Any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if a
consent in writing to such action is signed by each director and such written
consent is filed with the minutes of proceedings of the board.
A vacancy that will occur at a specific later date (by reason of a resignation
effective at a later date) may be filled before the vacancy occurs but the new
director may not take office until the vacancy occurs.
Article III
Committees of the Board
Section 3.1. Number, Tenure and Qualifications. The board of directors may
appoint from among its members an Executive Committee and other committees,
composed of one or more directors, to serve at the pleasure of the board of
directors.
Section 3.2. Powers. The board of directors may delete to committees appointed
under Section 1 of this Article any of the powers of the board of directors,
except as prohibited by law.
Section 3.3. Meetings. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a director to act in the place of such absent member.
Section 3.4. Ratification of Written Policies. The board of directors must
formally ratify written policies authorized by committees of the board before
such policies become effective. Provisions of the articles and bylaws governing
place of meetings, notice of and attendance at meetings, quorum and voting
requirements of the board of directors, apply to committees and their members as
well. The creation of a committee and appointment of members to it must be
approved by the board of directors.
Section 3.5. Other Committees. The board of directors may appoint, from time to
time, from its own members, compensation, audit, special litigation and other
committees of one or more persons, for such purposes and with such powers as the
board may determine.
However, a committee may not:
(1) Authorize distributions of assets or dividends.
(2) Approve action required to be approved by shareholders.
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(3) Fill vacancies on the board of directors or any of its committees.
(4) Amend articles of association.
(5) Adopt, amend or repeal bylaws.
(6) Authorize or approve issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences and limitations
of a class or series of shares.
Article IV
Officers and Employees
Section 4.1. Chairperson of the Board. The board of directors shall appoint one
or more of its members to be the chairperson of the board to serve at its
pleasure. Such person shall preside at all meetings of the board of directors.
The chairperson of the board shall supervise the carrying out of the policies
adopted or approved by the board; shall be the principal executive officer of
the association and shall manage, supervise and direct all fiduciary activities
of the association; shall have general executive powers, as well as the specific
powers conferred by these bylaws; and shall also have and may exercise such
further powers and duties as from time to time may be conferred upon, or
assigned by the board of directors.
Section 4.2. President. The board of directors shall appoint one of its members
to be the president of the association. In the absence of the chairperson, the
present shall preside at any meeting of the board. The president shall have
general executive powers and shall be the principal trust officer of the
association, and shall have and may exercise any and all other powers and duties
pertaining by law, regulation, or practice, to the office of president, or
imposed by these bylaws. The president shall also have and may exercise such
further powers and duties as from time to time may be conferred, or assigned by
the board of directors.
Section 4.3 Vice President. The board of directors may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned by the board of directors. One vice president shall be designated by
the board of directors, in the absence of the president, to perform all the
duties of the president.
Section 4.4. Secretary. The board of directors shall appoint a secretary,
cashier, or other designated officer who shall be secretary of the board and of
the association, and shall keep accurate minutes of all meetings. The secretary
shall attend to the giving of all notices required by these bylaws; shall be
custodian of the corporate seal, records, documents and papers of the
association; shall provide for the keeping of proper records of all transactions
of the association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of cashier, or
imposed by these bylaws; and shall also perform such other duties as may be
assigned from time to time, by the board of directors.
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Section 4.5 Other Officers. The board of directors may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, one or more managers and assistant
managers of branches and such other officers and attorneys in fact as from time
to time may appear to the board of directors to be required or desirable to
transact the business of the association. Such officers shall respectively
exercise such powers and perform such duties as pertain to their several
offices, or as may be conferred upon, or assigned to, them by the board of
directors, the chairperson of the board, or the president. The board of
directors may authorize an officer to appoint one or more officers or assistant
officers.
Section 4.6. Tenure of Office. The present and all other officers shall hold
office for the current year for which the board was elected, unless they shall
resign, become disqualified, or be removed; and any vacancy occurring in the
office of present shall be filled promptly by the board of directors.
Section 4.7. Resignation. An officer may resign at any time by delivering notice
to the association. A resignation is effective when the notice is given unless
the notice specifies a later effective date.
Article V
Indemnification
To the maximum extent permitted by the laws of the State of Maryland in
effect from time to time with respect to the directors of corporations, subject
to any limitation or qualification required under applicable Federal law, the
association, without requiring a preliminary determination of the ultimate
entitlement to indemnification, shall indemnify and shall pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (i) any
individual who is a present or former director or officer of the association or
(ii) any individual who, while a director of the association and at the request
of the association, services or has serviced another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. The association may,
within the approval of its board of directors, provide such indemnification and
advancement of expenses to a person who served a predecessor of the association
in any of the capacities described in (i) or (ii) above and to any employee or
agent of the corporation or a predecessor of the association.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the bylaws or articles of association of the
association inconsistent with this Article, shall apply to or affect in any
respect the applicability of the preceding paragraph with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
<PAGE>
Article VI
Stock and Stock Certificates
Section 6.1. Transfers. Shares of stock shall be transferrable on the books of
the association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall in proportion to his or her shares, succeed to all rights of the prior
holder of such shares. The board of directors may impose conditions upon the
transfer of the stock reasonably calculated to simplify the work of the
association with respect to stock transfers, voting at shareholder meetings, and
related matters and to protect it against fraudulent transfers.
Section 6.2. Stock Certificates. Certificates of stock shall bear the signature
of the president (which may be engraved, printed or impressed), and shall be
signed manually or by facsimile process by the secretary, assistant secretary,
cashier, assistant cashier or any other officer appointed by the board of
directors for that purpose, to be known as an authorized officer, and the seal
of the association shall be engraved thereon. Each certificate shall recite on
its face that the stock represented thereby is transferable only upon the books
of the association properly endorsed.
The board of directors may adopt or use procedures for replacing lost, stolen,
or destroyed stock certificates as permitted by law.
The association may establish a procedure through which the beneficial owner of
shares that are registered in the name of a nominee may be recognized by the
association as the shareholder. The procedure may set forth:
(1) The types of nominees to which it applies.
(2) The rights or privileges that the association recognizes in a beneficial
owner.
(3) How the nominee may request the association to recognize the beneficial
owner as the shareholder.
(4) The information that must be provided when the procedure is selected.
(5) The period over which the association will continue to recognize the
beneficial owner as the shareholder.
(6) Other aspects of the rights and duties created.
Article VII
Corporate Seal
The president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board of directors,
shall have authority to affix the corporate seal to any document requiring such
seal, and to attest the same. Such seal shall be substantially in
<PAGE>
the following form:
( Impression )
( of )
( Seal )
Article VIII
Miscellaneous Provisions
Section 8.1. Fiscal Years. The fiscal year of the association shall be the
calendar year.
Section 8.2. Execution of Instruments. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the association by the chairperson of the board, or the president, or any vice
president, or the secretary, or the cashier, or, if in connection with exercise
of fiduciary powers of the association, by any of those officers or by any trust
officer. Any such instruments may also be executed, acknowledged, verified,
delivered or accepted on behalf of the association in such other manner and by
such other officers as the board of directors may from time to time direct. The
provisions of this section 8.2 are supplementary to any other provision of these
bylaws.
Section 8.3. Records. The articles of association, the bylaws and the
proceedings of all meetings of the shareholders, the board of directors, and
standing committees of the board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary, cashier or other officer appointed to act as secretary of the
meeting.
Section 8.4. Fiduciary Files. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
Section 8.5 Trust Investments. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
applicable law. Where such instrument does not specify the character and class
of investments to be made and does not vest in the association a discretion in
the matter, funds held pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under applicable law.
Article IX
Bylaws
Section 9.1. Inspection. A copy of the bylaws, with all amendments, shall at all
times be kept in a convenient place at the main office of the association, and
shall be open for inspection to all shareholders during banking hours.
<PAGE>
Section 9.2. Amendments. The bylaws may be amended, altered or repealed, at any
regular meeting of the board of directors, by a vote of a majority of the total
number of the directors except as provided below. The association's shareholders
may amend or repeal the bylaws even though the bylaws may be amended or repealed
by its board of directors.
I, ________________________________, certify that: (1) I am the duly constituted
secretary of FMB Trust Company, National Association and secretary of its board
of directors, and as such officer am the official custodian of its records; (2)
the foregoing bylaws are the bylaws of the association, and all of them are now
lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the association,
in the city of ___________________, on this ____ day of______________________,
19___.
_________________________________
(Secretary)
<PAGE>
Exhibit 6
---------
Consent of Trustee
------------------
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, in connection with the issuance by Ozark Capital Trust, we hereby
consent that reports of examination by Federal, state, territorial or district
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
FMB Trust Company, National
Association
By: /s/ Donald C. Hargadon
------------------------------
Donald C. Hargadon
Assistant Vice President
<PAGE>
Exhibit 7
---------
Report of Condition Consolidating Domestic and Foreign Subsidiaries of FMB Trust
Company, National Association, at the close of business on December 31, 1998
published in response to call made by Comptroller of the Currency, under Title
12, United States Code, Section 161, Charter No. 04822, Comptroller of the
Currency, Richmond District.
CONSOLIDATED REPORT OF CONDITION
(Dollars in Thousands)
ASSETS
Interest Bearing Checking in other banks $ 210,000
Interest Bearing Checking with FNB $ 6,663,087
Grand Cayman Deposit with FNB $ 5,500,000
Federal Reserve Stock - AFS $ 180,000
Property & Equipment,Net:
Furniture & Equipment $ 2,457,736
Computer Hardware & Software $ 2,486,784
Progress Payments - Land 0
Accumulated Depreciation ($ 2,834,259)
Total Property & Equipment, Net $ 2,110,261
Customer Acceptances $ 1,249,945
Accrued Interest Receivable $ 17,766
CSV - Split Dollar Life Insurance $ 831,039
Trust Fees Rec - Auto Billings $ 2,650,687
Trust Receivable - SEI $ 255,922
------------
Total Assets $ 19,668,707
============
Liabilities and Stockholder Equity
Due to Affiliates $ 379,849
Acceptances Outstanding $ 1,249,945
Accrued Taxes Payable $ 2,490,946
Accrued Expense $ 666,959
------------
Total Liabilities $ 4,787,699
------------
Common Stock $ 3,000,000
Surplus $ 3,000,000
Retained Earnings $ 8,881,008
------------
Total Stockholders Equity $ 14,881,008
------------
Total Liabilities & Stockholder's Equity $ 19,668,707
============
